By Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - A temporary, 1-cent increase in the state's sales tax appears to be the consensus choice of lawmakers desperate to fill a $4 billion deficit in the Ohio budget.

The only remaining questions about the proposed increase, which would slap an extra penny per dollar on top of most purchases, involve how and when lawmakers will allow the tax to expire.

A Senate-GOP drafted plan, to be unveiled today, would eliminate the sales tax hike roughly two years from now, on June 30, 2005. That's a big change from a House-passed plan that would let voters replace the sales tax after a year with video slot machines at Ohio racetracks.

CURRENT RATES

Ohio's sales tax could soon match taxes charged in neighboring states if lawmakers here pass a temporary 1-cent increase. State Sales tax* Ohio 5 cents Kentucky 6 cents Indiana 6 cents West Virginia 6 cents * State sales tax rates do not include local rates, which in Ohio generally add another 1 to 2 cents on the dollar. Source: Federation of Tax Administrators

Senate GOP leaders say slot machines can't raise enough money to feed a budget that could exceed $49 billion. A two-year sales tax increase would also provide more than $700 million that would otherwise be cut from schools and universities.

"To do all the things that need to be done, you're going to need those dollars," said Sen. Bill Harris, R-Ashland, chairman of the Senate Finance Committee.

Harris said a slot machine question would still appear on the November ballot, but it would no longer be linked to the sales tax.

New tax dollars have become scarce in Ohio and in many other states still reeling from the recession. After draining the state's rainy day fund and other reserves to meet expenses over the past 18 months, lawmakers must now either raise or cut up to $4 billion over the next two years.

Increasing the state sales tax rate from 5 cents to 6 cents would provide about $2.5 billion. That amount, combined with cuts to health care and child-care services for the poor, disabled and elderly would help balance the books.

Extending the sales tax to two years also lets lawmakers spend another $728 million that slot machines couldn't provide. Estimates show slots could bring in $500 million in 2005.

Harris said the sales tax money would restore all or most of the $600 million that House lawmakers planned to cut from schools and universities.

Schools figured to lose more than $300 million under a House plan that would change the way the state uses student attendance estimates to dole out money. Ohio colleges and universities faced losses of more than $300 million.

Senators are also considering a separate proposal that would beef up corporate taxes, raising the state's minimum tax from $50 to $300.

Large corporations doing business in Ohio could pay up to $1,000.

It was not clear Tuesday how much money the higher corporate taxes would raise. Specific spending amounts for state agencies and programs also weren't available.

Gov. Bob Taft's original budget proposal, unveiled in February, called for $49.2 billion - a 10 percent increase over current spending. The Senate's budget bill could come very close to that amount.

That's too much for several Senate Republicans, like Sen. Jay Hottinger of Newark.

"If you're for spending, this is going to be a good budget," said Hottinger, who's expected to vote against the plan.

For that reason, Democrat lawmakers could play a key role, providing votes Senate President Doug White, R-Manchester, must have to pass the plan out of the 33-member chamber next week.

As many as six Democratic senators could vote for the budget, if Republicans include measures that improve funding for education, health care and social services, said Senate Minority Leader Greg DiDonato of Dennison.

DiDonato said he approves of measures already taken to restore money to schools and universities. He said he's looking to see if Republicans will increase funding for day-care subsidies and for other programs that offer health-care coverage for working poor families.

"We need to find ways to keep these services going," DiDonato said.

In a related issue, Senate lawmakers appear to have no plans for a surprise $770 million windfall from the federal government. That amount is Ohio's share of $20 billion federal lawmakers set aside for states in a compromise tax-cut bill.

Half of the money could be spent on the health-care services DiDonato mentioned. But Harris said the money should be placed in the state's rainy day and Medicaid reserve funds, where it would be spent only in case of emergencies.

"That's one-time money," Harris said. "We want to be very careful until we understand what strings are attached by the federal government."

Harris acknowledged lawmakers will face considerable pressure to spend that money to restore cuts to Medicaid services.

"There will be lots of people with lots of ideas to spend it," he said.