State cuts may cause service cutbacks in city

By Frank Lewis

September 17, 2013

Frank Lewis

PDT Staff Writer

First Ward Councilman Kevin W. Johnson says when Wendy Patton, senior project director of Policy Matters Ohio, testified before the state legislature last month, she spoke about an issue that has greatly affected the city of Portsmouth.

Patton spoke on the issue of the cutting of state funding for local governments and municipalities.

“Ohio’s state government has historically provided flexible aid to localities through property tax relief and revenue sharing. In our analysis, we consider the estate tax, enacted in 1893, divided between state and local government and eliminated in the last state budget. We look at the Local Government Fund, cut in half in the last state budget, created with the sales tax in the Depression and shared among the counties to help provide locally targeted relief,” Patton told legislators. “We look at tax reimbursements, promised when the state did away with certain local taxes during the past decade, mostly eliminated in the last budget. We look at the property tax rollback, created when the income tax was established in the 1970s and eliminated in House Bill 59 for new and replacement levies. In our studies, we also look at casino revenues, not because they are discretionary state aid (they are not, they are constitutionally mandated for distribution to specific entities and for specific uses) but because there is a distribution, and many local officials hoped this distribution of casino revenues would replace what they are losing. They have not.”

The impact is being felt at home.

“Bottom line - it has hurt us big time,” Johnson said. “Not just us, but every municipality in the state.”

Johnson said City Council planned to go before voters for a 6/10 of a percent income tax increase and the city had certain income from the state they had counted on, so they dedicated the increase to police and fire in order to make up the use of General Fund money for those two departments. The plan was predicated on all other incomes remaining the same.

“But between the state eliminating the inheritance tax, cutting back on the state aid and government services, it almost put us back to where we began,” Johnson said. “We have a little bit extra between the amount we’re raising with the increase in income tax and what we lost from the state, but not enough to quickly get us out of the hole, which was our original plan. Our original plan would have immediately gotten us out of the hole.”

Johnson said, add to that scenario other things the state did in justifying the cuts by saying they needed to cut their budget, but in fact, the reason the state cut its budget was that they added more exemptions that amount to approximately $7 billion over the next 10 years.

“With those additional exemptions, and unlike some states, they don’t put a sunset provision on these exemptions,” Johnson said. “Some of them have existed since the ’20s and ’30s, and make absolutely no sense, but the state does not go back and review all these exemptions to see, are they applicable? Have they served their purpose? Are they making us money? Nothing. They just keep on adding exemptions, and when you get up into the billions of dollars, that’s real money.”

He said one thing that occurred when the state started cutting aid to communities, many municipalities turned around and started increasing their taxes such as property taxes for schools and income taxes.

“We had done ours prior to these cuts, but now others have put all these ballot issues on especially property taxes,” Johnson said. “So in order to punish those municipalities, that have increased taxes to make up what the state cut, the state then punishes us with saying, ‘if you put a new tax on or you renew a property tax, the state will no longer cover the 12 percent.’”

Johnson said, in the past, the state had always picked up 12 percent of the property taxes, an agreement made in the ’70s when the state implemented an income tax.

“This legislature decided decided to do away with that, ‘who cares what we promised back in the ’70s?’” Johnson said.

Johnson said during last Thursday’s community leaders meeting, members of Governor Kasich’s staff talked about the governor’s budget. And when he talked with them about the affect the cuts had on local economies, the response was that cities needed to get more creative. Johnson said, in reality, the state is forcing municipalities to eliminate services in order to balance their budgets.

“And that’s what we’re going to have to get to,” Johnson said. “Cities, counties and municipalities are required under the law to provide certain services. That’s the unfunded mandates. But there are other services we are not required to provide at all. That could be everything like mowing. We’re not required to do trash pick up. The city is not required to do 911 services. There’s a lot of things we’re not required to do, so all of this will force us in the future to start looking at those services we provide that are not mandated by the state under the Constitution - public service - public safety - that kind of thing, and, quite honestly, given the crunch that the state has put all of us municipalities in, we’re all going to be looking at services that we can simply no longer afford to do on behalf of the public because we don’t have the money. And the public is in no mood to put up any more taxes for any more services.”

Frank Lewis may be reached at 740-353-3101, ext. 252, or at flewis@civitasmedia.com. For breaking news, follow Frank on Twitter @FrankLewisPDT.