Tuesday, May 21, 2002

Ohio lawmakers close to budget deal

Higher taxes to help offset $1.9B deficit

By Spencer Hunt shunt@enquirer.com
Enquirer Columbus Bureau

        COLUMBUS — Ohio Republicans haggled into the night Monday over proposals that would raise taxes on cigarettes and some businesses to help balance Ohio's $44 billion budget.

        Faced with a $1.9 billion deficit, Senate Republicans were expected to vote today on a bill that would feature a significant increase in Ohio's 24-cent tax on a pack of cigarettes. Just how much more remained a matter of debate with House Republicans. The GOP controls both chambers of the General Assembly.

        House Speaker Larry Householder, R-Glenford, said Monday he hoped to roll back a 50-cent per pack hike that senators and Republican Gov. Bob Taft support. A smaller, 36-cent increase was proposed.

        “We're trying to strike a fair balance where we can raise substantial revenues, curb smoking and be fair to retailers,” Mr. Householder said.

        While it was clear House and Senate Republicans haven't signed off on every detail, Mr. Householder and Senate President Richard Finan, R-Evendale, predicted a bill would pass the Senate today.

        “We don't have any time,” Mr. Finan said.

        The state could collect up to $30 million in new cigarette tax revenues this fiscal year if Gov. Bob Taft signs the bill by Friday. The fiscal year ends June 30.

        The state's budget woes stem from a national recession that's cost Ohio 40,000 manufacturing jobs and millions in lost tax revenues.

        With the general election looming in November, moderate and conservative Republicans are sparring over the least politically painful way to balance the books.

        That's why private talks among the House speaker, Senate president and the governor's office stretched into the evening Monday.

        In the House, Republicans were weighing different options with a reduced cigarette tax increase as their starting point.

        A 50-cent cigarette tax increase would let the state collect $400 million over the next 13 months. A 36-cent tax hike could bring in $315 million.

        Cigarette taxes aside, lawmakers are expected to drain the state's $607 million rainy day fund. Mr. Taft will be asked to make up to $400 million in new spending cuts at different state agencies.

        Another $175 million would be saved by separating Ohio's income tax from federal tax changes in the national economic stimulus program.

        An increased tax on nursing home beds from $1 to $2 would bring in about $18 million in federal Medicaid funds.

        Talks also continued to dwell on proposed cuts to local governments and on two tax increases aimed at Ohio businesses.

        Mr. Householder said he hoped to reduce a proposed 6 percent cut in local government funds. He did not say by how much.

        Where business tax increases are concerned, one would eliminate a passive investment credit corporations can use to pay lower taxes. The other would place a tax on financial trusts.

        The state would collect between $100 million and $255 million from these two taxes, depending on how lawmakers decide to structure the increases.

        Another option would raid the state's tobacco settlement lawsuit fund, bringing in between $30 million and $50 million.

        “Things are pretty fluid right now,” said Rep. Jim Trakas, R-Independence, a member of the House Finance Committee. “We've got different (lawmakers) who are violently opposed to different things.”

        Mr. Trakas said House Republicans were trying to find the right balance of cuts and increases that would gain the 51 votes needed to pass a bill in the 99-member chamber.

        Mr. Taft is ready to support many of the options lawmakers are discussing, said Brian Hicks, the governor's chief of staff. He said the governor would support a 36-cent cigarette tax increase.

        “We could certainly live with that,” Mr. Hicks said.

        Retailers oppose any type of tax hike, fearing the loss of sales to border states where cigarette taxes are already much lower than Ohio. Indiana has 15.5-cent per-pack tax, while Kentucky charges only 3 cents per pack.

        Anti-smoking groups that pushed for a 50-cent increase say they won't support anything lower. Chris Schulte, spokeswoman for Tobacco-Free Ohio, said a smaller increase won't do as much to stop teens and adults from taking up smoking or produce a substantial drop in Ohio's smoking-related Medicaid costs.

        “They will lose the health benefit,” Ms. Schulte said.


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