By Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - Ohio is once again short on cash, eight months after lawmakers and Gov. Bob Taft raised taxes to balance the state budget.

Taft's budget office reported Monday that sluggish income tax collections will sink the state's finances $300 million in the red by June 30, 2005. Officials linked the new deficit to the lingering effects of the national recession, which has cost thousands of Ohio manufacturing jobs.

The governor ordered immediate spending cuts at state agencies to make up the difference. Basic funding for schools and universities would not be harmed.

It was just last May when the Legislature and the governor agreed to temporarily raise the state sales tax by a penny on the dollar. That tax increase was supposed to raise $2.5 billion to balance the state's $49.2 billion, two-year budget.

Tim Keen, Taft's assistant budget director, said the sales tax isn't the problem. Income tax revenues that were torpedoed by the national recession haven't recovered as fast as he and other budget officials had hoped.

"There's still a hangover from the last two years of hardship," Keen said.

Basic funding for Ohio's public schools and universities, job creation programs and a program that offers in-home care for seniors will not be cut, said Taft spokesman Orest Holubec.

The state's prison, mental health and mental retardation programs will lose 1 percent of their funding over the next four months and 2 percent in the fiscal year starting July 1.

A 1 percent cut at the Department of Mental Retardation amounts to a loss of about $3.5 million said spokesman Robert Jennings. With only four months left in the current fiscal year, finding places and programs to cut will be difficult.

"It's going to be a challenge," Jennings said. "We're going to be looking at our programs across the board."

All other agencies must find ways to cut 4 percent of their current fiscal year's budget through June 30. They must also take another 6 percent off the top starting July 1.

That includes the Department of Education and the Board of Regents, which oversees public universities and colleges. Even though basic aid to schools and universities will not be cut, officials in both agencies must cut other programs to save money.

Keen said he believes most leaders will balance their budgets by delaying new hires, holding off on new contracts and delaying or cutting some grants that go to schools and local governments.

The state's biggest single agency, the Department of Job and Family Services, must make the biggest cuts - including about $15 million over the next four months. Agency spokesman Jon Allen said he doesn't yet know where the budget ax will fall.

Job and Family Services oversees most of the state welfare programs, including the $9 billion per year Medicaid program, which pays for the health-care needs of the state's poor, elderly and disabled.

"We'll be making those decisions as soon as possible," Allen said. "One thing we try to do is to make sure programs that benefit families and children are held harmless."

Holubec stressed that no new tax increases will be needed to keep state funding in the black. He said Taft and lawmakers did the best job they could when they put the state budget together in May.

"They used the best estimates they had at the time," Holubec said.

Ohio has lost more than 200,000 jobs, most of them in manufacturing, over the last three years.

Those job losses spurred huge drops in state sales and income tax revenues. Lawmakers were forced to reopen the last two-year budget three times to keep spending in line.

Keen said he thinks this most recent budget correction could be the last. While income from last year's tax returns are off, he said money the state currently collects through payroll withholding is close to estimates.

"It's just going to take a while longer for things to catch up," he said.

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E-mail shunt@enquirer.com