Ohio Revenue Forecast Takes A Dive

COLUMBUS, Ohio—Gov. Ted Strickland’s budget director confirmed state lawmakers’ gloomy expectations Thursday, saying they would have $2.3 billion less in revenue to use to craft the upcoming two-year budget.

The fall in tax receipts could produce a budget gap of up to $3.2 billion, depending on whether the revenue expectation is compared to the House or Senate version of the spending plan, Budget Director Pari Sabety told lawmakers Thursday.

“Because of the exceptional circumstances that have accompanied the national recession, Ohio, like every other state in the country, is suffering significant and historic losses in revenues,“ Sabety said.

Both the Republicans who control the Senate and the Democrats who control the House have said they are against a tax increase, leaving lawmakers very few options to deal with the budget gap other than making painful cuts to the roughly $54 billion plan. Proposals to expand gambling have floated around the Statehouse in recent months but also haven’t gained much traction.

House Republicans have criticized Strickland’s budget department and called for Sabety’s resignation for issuing faulty revenue forecasts. Strickland made three rounds of cuts and budget adjustments in the current fiscal year totaling about $2 billion.

“The Strickland administration has continually failed to provide accurate numbers on which to craft a budget, making the Senate’s task that much more difficult,“ House Minority Leader Bill Batchelder said in a statement Wednesday.

But data from the National Association of State Budget Directors shows that Ohio was not at all unique in its inability to foresee just how far the economy would fall, particularly after the collapse of former investment firm Lehman Brothers last fall.

For the 2009 fiscal year, two states exceeded projections, 10 states were on target, and 30 - including Ohio - fell below, according to a survey of states conducted by the budget directors association and the National Governors Association.

Of the 41 states that reported budget gaps for the fiscal year, Ohio has the sixth largest gap. But that ranking is based on a total figure of cuts and does not take into account the size of the states or budgets involved.

Ohio also doesn’t stand out among other Great Lakes states in the inaccuracy of its revenue forecasts. Ohio’s current estimates for sales tax, personal income tax and corporate tax receipts for the 2009 fiscal year were below original estimates by 6 percent, 10 percent and 5 percent, respectively. In Illinois, for example, current estimates were off from original estimates by 8.5 percent, 9.7 percent and 25 percent.

Georgia’s forecasts performed considerably better than the Great Lakes states, while South Carolina’s current estimates were off from original forecasts by 15 percent, 13 percent and 49 percent.

“In past downturns you always had a good dozen or so states that were anomalies,“ said Scott Pattison, executive director of the budget directors association. “This was pretty universal.“

Pattison also said economic modeling methodology is “pretty consistent” among the states because there are only a few different economic forecasting firms used by the states.

Ohio got more bad news on Wednesday, when credit rating agency Fitch downgraded $7 billion in outstanding state general obligation bonds from “AA+“ to “AA.“ The move, which the agency said was a result of Ohio’s continuing economic deterioration, could make it more expensive for the state to borrow money.

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