COLUMBUS - Skyrocketing Medicaid costs and a slowing economy in Ohio are draining hundreds of millions of dollars from state coffers at a time when lawmakers are searching for more money to improve public schools.

        “Times are not as rosy in Ohio as they once were,” said Sen. Roy Ray, R-Akron, chairman of the Senate Finance Committee. “Obviously, if Medicaid costs continue to escalate, it's going to get more difficult for us to come up with additional money for education.”

        Increased caseloads, higher prescription drug costs and other medical expenses have driven Medicaid costs up 18 percent this fiscal year, which began in July. Medicaid is a state-federal program that helps low-income people meet health care expenses.

        With costs far outpacing predictions, lawmakers in December are expected to pass a bill allocating $248.6 million to cover the state's share of the Medicaid budget shortfall.

        The bill, sponsored by Sen. Ray, also requires Gov. Bob Taft to make $125 million in spending cuts in other areas of the budget this fiscal year, a move which officials say will make school reforms even tougher to accomplish.

        “The mandated spending for Medicaid, flattened sales tax revenues and a general slowing of the economy leave state leaders with a trickier puzzle,” acknowledged Kevin Kellems, spokesman for Gov. Bob Taft.

        Still, he said Mr. Taft remains committed to his promise to overhaul Ohio's school-funding system, as required by the Ohio Supreme Court — without raising taxes.

        Mr. Taft and other state leaders are under intense pressure by the court to devise a plan by June 15 to make the school-funding formula more equitable. The court-imposed deadline means officials have just six months to come up with a way to provide at least some of the billions of dollars educators say are needed to bring poor school districts up to par with wealthier ones.

        Mr. Kellems said the governor has asked agency officials to search for ways to cut their budgets.

        He declined to say which departments might get hit, but Tom Johnson, director of the Office of Budget and Management, said only judicial budgets and primary and secondary education budgets are exempt from cuts.

        “Everything else is on the table,” he said. Because school-funding reforms are to be paid for without a tax increase, Mr. Johnson said “next year's budget will be much tighter than it has been for the last eight years for all other areas of state government.”

        Mr. Johnson said he doesn't think Ohio is headed into a recession, but added, “We haven't seen anything like this since the early 1990s. Tougher choices will have to be made.”

        While public schools won't face budget cuts, they also aren't likely to get the increases they had hoped for, he said.

        “In the next budget I think there will be less dollars available than we would like to put into primary and secondary education,” he said.

        Mr. Johnson said that the state took in $80 million less in sales tax revenue than estimated in the first four months of this fiscal year, although personal income tax revenues helped offset that loss.

        Meanwhile, Medicaid spending started to explode. Between fiscal years 1994 and 1999, Medicaid grew at an average rate of 3 percent each year. . But that rate increased to 6 percent in fiscal year 2000 and costs are projected to reach $6.5 billion in this fiscal year — an 18.1 percent increase over fiscal year 2000.

        The state pays for about 42 percent of Medicaid costs and the federal government picks up the rest.

        Despite the increases, Mr. Johnson and other officials say there is good news on Ohio's Medicaid front. They note that enrollment in the Medicaid program is up, in part, because the Department of Job and Family Services has been working hard to provide insurance to more children.

        “More and more people are getting enrolled and that's a good thing in terms of making sure people get access to medical care,” said Kelly McGivern, executive director of the Ohio Association of Health Plans. “You have a huge population of children and low-income families below a certain poverty level and they represent a big portion of the caseload.”

        Barbara Edwards, director of the state Medicaid program, said her office underestimated costs this year because they failed to predict that people who left the Medicaid program when they left welfare would later sign back up.

        “The jobs they got didn't have benefits and they found out they were still eligible for Medicaid,” she said.

        “It's not that it is a runaway program,” Ms. Edwards added. “It's just that we had a dramatic drop in the caseload in the early days of welfare reform that skewed how we budgeted.”

        She said enrollment estimates are now back on track and her bigger concern is the cost of insuring the aged, blind and disabled. While those members represents just 34 percent of the Medicaid caseload, they account for 80 percent of the costs.

        And rates for their coverage are soaring. Since 1994, the average cost per person in the aged, blind or disabled category has grown by 54 percent compared to 17 percent for families and children on Medicaid.

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