COLUMBUS — Weeks of grueling debate ended Thursday with Senate passage of a $1.9 billion budget — a fix that will raise cigarette taxes, drain the reserve fund and impose new spending cuts.

        The measure was sent to Gov. Bob Taft, who promised to sign it next week, although he can veto line items.

        But even with the crisis behind them, lawmakers said they may be debating a new round of agency cuts and tax increases before the start of 2003 if the economy fails to improve or if the Ohio Supreme Court requires more spending for schools.

        “If the economy does not continue to grow like I believe it's going to, yeah, we can continue to be in trouble,” said Senate President Richard Finan, R-Evendale.

        Heavy borrowing and use of one-time money to balance the budget twice in the last six months has left lawmakers facing a deficit to start the 2004-05 budget.

        “I expect the next budget cycle to be extremely difficult,” Sen. Jim Carnes, R-St. Clairsville, chairman of the Senate Finance Committee. Some estimate that budget is already $2 billion to $4 billion in the red.

        The Senate voted 18-15 Thursday to accept House-approved changes to the current budget fix, although Mr. Finan said he did not agree with many of the changes.

        It includes a 31-cent tax increase on each pack of cigarettes, a new tax on trust fund income, draining all $607 million from the state's rainy day fund, cutting $270 million from state agencies, and borrowing $345 million from the state's share of the national tobacco settlement.

        The Senate originally passed a 50-cent cigarette tax increase, but the House refused to go along. The House also inserted a clause that eliminates the trust fund tax after 2004, contrary to the Senate's wishes.

        “If we had left those two in, we would have had a significant jump on putting a budget together the next time around,” Mr. Finan said.

        Three Senate Republicans and all 12 Democrats voted against the measure. Passage in the House earlier this week also came without a single Democrat vote.

        “What is our plan for the future of the state of Ohio?” Sen. Eric Fingerhut, D-Cleveland, asked his GOP colleagues, adding that additional cuts to higher education and social services appear imminent.

        Mr. Taft has promised not to veto three items: the exemption of local government funds from further cuts; the elimination of the trust tax on Dec. 31, 2004; and the indexed personal income tax rates that, starting in 2005, will prevent people from moving into higher tax brackets after getting cost-of-living pay raises.

        He will veto a provision inserted by Rep. Tom Brinkman, R-Cincinnati, that allows the legislature to veto Ohio's participation in a multistate compact on sales tax collection on Internet purchases, said Mary Anne Sharkey, Mr. Taft's spokeswoman.

        Some will be watching to see whether Mr. Taft eliminates caps on future state revenue collections, and a cap at current spending levels for many state agencies in the 2004-05 budget.

        Dan Schneider, director of national operations for the Public Children Services Association of Ohio, predicts the revenue cap will blow an even bigger hole in the state budget in 2004-2005.

        With education, debt service and property tax relief exempt from spending caps, and Medicaid costs skyrocketing, Mr. Schneider predicts social services will bear the brunt of future cuts.

        "You've got a major train wreck coming,” he said. “The cuts will have to be borne by a social service system targeted to needy Ohioans and children and families.”

        But Mr. Taft apparently isn't too concerned about the budget caps, because the governor and legislature next year can ignore them, Ms. Sharkey said.

        “The next General Assembly will have to decide whether to do that or not do that,” she said. “This General Assembly cannot legally bind the next one.”

        Debra Jasper of the Enquirer contributed to this report.
       

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