Obm And Ohio Department Of Taxation Report Impact Of Sales Tax Repeal To Governor Taft

COLUMBUS (January 13, 2004) -- The Ohio Department of Taxation (ODT) reported that, if successful, the repeal of the additional penny on the sales tax enacted in HB 95 would create an almost $800 million budget hole in the FY 2005 state budget.

If the repeal is placed on the November 2004 ballot, and voters approve the repeal, the penny increase on the sales tax would end on December 2. ODT estimates that the general revenue fund loss for the remainder of FY 2005 would be $798.4 million. ODT bases this estimate on historical sales tax collection patterns and noted the state would lose sales tax revenue on a large amount of holiday sales.

The Office of Budget and Management (OBM) reported that it would be very difficult to make the cuts necessary to balance the budget with a gap that large and only seven months remaining in FY 2005.

OBM noted that state government staffing and administration is only 11 percent of the state's budget. All other monies are sent outside of Columbus and to local providers and communities. Consequently, one of the areas in which the state can make significant cuts quickly is in local government funds distributed to counties, cities, townships and libraries; and because of that, local governments could potentially bear the brunt of the revenue loss. Cuts in primary, secondary and higher education would also have to be considered. State debt service and property tax relief payments would not be cut.

According to OBM, state operating agencies, which have been cut by more than $1 billion in the past three years, could be cut again, but would not be able to carry the majority of the burden without jeopardizing public health and safety. Medicaid would likely be cut as well, but OBM stressed that it is very difficult to cut the program significantly in a seven-month timeframe, due to federal procedural and matching fund requirements.