By Spencer Hunt
Enquirer Columbus Bureau

Gov. Bob Taft rehearses his State of the State speech in his Riffe Center office in downtown Columbus. (Michael E. Keating photo) | ZOOM |

COLUMBUS - Saddled with falling income and rising bills? Looking for ways to cut costs and earn more money? You're not alone.

State government has a lot in common with the thousands of Ohioans who are struggling to cope with layoffs, stale job prospects and a roller coaster stock market that's overly fond of steep plunges.

When more people are looking for work and their stock portfolios post big losses instead of gains, the state collects fewer income tax dollars - $4.4 million less over the past six months.

When families cut back on spending, sales tax revenues plummet. That cost budget officials another $38 million they thought they could spend.

As the money dries up, the cost of the state's basic commitments to care for the poor and elderly, educate school children, fund colleges and lock up criminals are going up.

Put it all together, and the state will owe $720 million more than it takes in over the next six months. Things only get worse from there, with a $4 billion deficit looming in the next two-year budget that starts on July 1.

TUNING IN

Gov. Bob Taft will deliver his State of the State speech at noon today to a joint session of the Ohio General Assembly in Columbus. The Ohio News Network will carry the speech live. The speech will be re-broadcast at 8 p.m. today. ONN is carried on Time Warner-Cincinnati (Channel 105); TV Middletown (Channel 17); City of Lebanon (Channel 69) and Adelphia-Amelia (Channel 17).

So starting today, and again in February, it's Gov. Bob Taft's job to show the state's 132 lawmakers the checking account is overdrawn and to offer a plan to balance the books.

In his State of the State address this afternoon, he's expected to call for more spending cuts and higher "sin" taxes on cigarettes and alcohol to help fill the $720 million hole in the budget.

On Feb. 3, Mr. Taft will hand out a two-year budget proposal that's likely to require new sales and business taxes and deeper spending rollbacks.

What's the bottom line for Ohioans? Expect to pay more taxes for fewer government services.

"It's a situation that poses very ugly questions that have very ugly answers," said Rick Yocum, president of the non-partisan Ohio Public Expenditure Council, a group that studies state finances.

Mr. Yocum said state officials have to focus on cutting Medicaid, Ohio's health insurance program for the poor; prisons; and then school funding.

"That's where the costs are going up," he said. "If you want to cut expenses you have to look there, because that's where you get the biggest bang for your buck."

And that's where things get politically ugly.

"Do you want to take wheelchairs and crutches away from people on Medicaid? Of course, you don't," Mr. Yocum said. "Do you want to release prisoners? No.

"It sounds mean as all get out," he said. "But bankrupting the state is pretty heartless, too."

The other option, raising taxes, will force Ohioans to give more to government at a time when they have less to give.

Zach Schiller, research director for Policy Matters Ohio in Cleveland, said the burden of higher taxes on cigarettes and alcohol, and an expanded sales tax, would fall heaviest on poor and working class families because they would consume a greater percentage of their income.

"I think it would be just reprehensible for us to simply impose, without real serious discussion, the most regressive taxes without considering ones that will be fairer for most Ohioans," Mr. Schiller said.

Lawmakers could impose increases on cigarettes, beer, and alcohol and see the new dollars flow into the state treasury months before the June 30 end of the current fiscal year.

For the $4 billion deficit in the upcoming two-year budget, Mr. Taft is likely to urge lawmakers to expand the state sales tax to cover new products and services and to eliminate existing exemptions.

Among a list of items that aren't currently taxed but could be are fees charged by attorneys and tax preparers, health club memberships, used-car trade-ins, newspapers and magazine subscriptions.

Lawmakers could also tighten up a corporate tax loophole many Ohio businesses use to lower or escape paying state franchise taxes. A "combined reporting" law could raise up to $200 million more a year in franchise taxes, Mr. Schiller estimates.

Where budget cuts are concerned, Mr. Taft is expected to encourage lawmakers to freeze annual increases in Medicaid payments to hospitals and nursing homes.

Those guaranteed pay increases for health services are among the biggest reasons why Medicaid is projected to cost state government an extra $2 billion more over the next two years if nothing changes.

The governor and lawmakers may also cut "optional" Medicaid services that include ambulance trips, dental care and eye care.

Conservative lawmakers, many of whom reluctantly voted for a 31-cent cigarette tax hike in July, are already weighing in against more new taxes.

"If (the governor's) talking about temporary taxes, I'll be very receptive," said Sen. Scott Nein, R-Middletown. "If he's talking about permanent taxes, then I'm not interested."

Mr. Nein said any bill that raises taxes or creates new ones should also include a provision that eliminates them in two years.

Democrats appear unwilling to help.

House Minority Leader Chris Redfern, D-Catawba Island, said Republicans want to raise taxes on the low- and middle-income families that are the backbone of the Democratic Party. Democrats, he said, "will be hesitant to support increasing taxes for anyone, let alone our constituency."

E-mail shunt@enquirer.com