Kasich budget to cut local government fund

Ohio Gov. John Kasich released his proposed 774-page state budget this past Tuesday. As expected, the Local Government Fund (LGF) is being cut in order to close an $8 billion budget gap through program restructuring, budget cuts, privatization of certain public assets, and the sale of five prisons.

Also, the plan will retain the $800 million, two-year income tax cut that went into effect in January and add an additional $34 million in tax incentives designed to create jobs.

The Kasich budget plans a 50 percent cut in the state's LGF -- which produced $641.4 million for Ohio's counties, cities, villages and townships in 2009. The fund would be reduced by 25 percent in 2012 and another 25 percent in 2013. Since 2008, 3.68 percent of the state's tax collections were earmarked for the LGF.

Additionally, Kasich’s budget makes reforms in procurements and other changes, as well as projected savings from the passage of Senate Bill 5, that will save local governments a comparable amount to the expected LGF cuts.

The LGF was enacted into Ohio law in 1935, with the beginning of the sales tax. The revenue sharing program sends a portion of sales tax collections — from the income tax, sales and use tax, corporate franchise tax, cigarette tax and others — back to counties, cities, townships and villages for their operating expenses.

The LGF amount local governments receive varies. Kettering received $1.34 million in 2010 representing 1.7 percent of the overall city budget. According to the 2011 City of Kettering budget, Kettering is expected to receive $1.1 million for 2011 from LGF and has an overall operating budget this year of $60.9 million.

Kasich is proposing for Kettering to take a 25 percent cut of the $1.1 million the city receives from the LGF. The cut is estimated to be about $275,000 for 2012 budget cycle and 25 percent cut to the expected LGF allotment to Kettering in the 2013 budget cycle.

Critics of Kasich’s budget claim the plan is just rearranging tax increases from state to local governments. The criticism certainly will be justified if local governments simply raise taxes on their citizens in order to replace the LGF loss. Local governments must be part of Ohio’s solutions to job creation and attraction of Ohio’s brightest.

There has never been a state or local government that has taxed their way to economic prosperity. According to the Buckeye Institute, a Columbus-based think tank, Ohio currently has the 18th highest state and local tax burden. Last year, Ohio ranked 7th.

If local governments simply raise taxes for a simple solution, then Ohio will continue its regression. Regardless, Gov. Kasich’s budget will be debated and voted on in the next several months by the Ohio General Assembly. The deadline for the budget to be passed is before Ohio’s start of the upcoming fiscal year in July.