Strickland Shouldn’t Count on Federal Bailout

By Marc Kilmer

Governor Strickland and the General Assembly last week agreed on a tax hike to close this fiscal year’s budget deficit. When they return in January, though, they will have to deal with a projected deficit of roughly $5 billion for next fiscal year. The governor is hoping the federal government will send some money Ohio’s way to make this deficit disappear. While a federal bailout is unlikely, even if it happens Ohio’s budget problems won’t go away.

The seemingly endless debate in the General Assembly this year over closing the deficit clearly illustrates that Ohio has budget problems. The spending obligations made by politicians can’t be funded with the money being paid by state taxpayers. Politicians of both parties were unwilling to cut state spending to close the gap. Instead, they supported a federal “stimulus” bill that papered over part of the difference and then raised taxes.

Since the next fiscal year will also have a deficit, we can count on similar tactics in the 2010 legislative session. Trimming a little spending, “delaying” tax cuts, or hoping for a federal bailout won’t address the fundamental problem: Ohio’s politicians simply spend too much.

From 1998 to 2008, Ohio’s budget grew by 41%. New government programs were created, existing government programs were expanded, and various interest groups were given tax dollars for their desired projects. Republicans as well as Democrats were happy handing out tax dollars at ever-increasing rates and there was little fiscal discipline in Columbus.

When tax revenue was flowing in, it was easy to sustain the growth of Big Government. When tax revenue declines, though, those who now count on the new government spending fiercely resist seeing it stop or even decrease. Legislators and the governor are faced with an uncomfortable situation.

That seems to be why Governor Strickland has expressed his hope for another round of federal money to alleviate the state budget woes. Most other states are in a similar budget predicament, and they, too, would like to see the feds help them cover up their fiscal mismanagement. With estimates that state budget deficits could total $180 billion in the next fiscal year, a hefty federal bailout would be necessary at a time when even the big spenders in DC are blanching at adding to the record-high federal deficit.

Of course, whether the money comes from Columbus or Washington, DC, it comes from our pocketbook. Government can’t spend what it doesn’t first tax or borrow. Ultimately taxpayers will be paying for any federal bailout funds that come to Ohio. The only difference is whether it is funneled through the U.S. Treasury or the Ohio Department of Taxation.

Instead of hoping for an unlikely federal bailout, Ohio policymakers should learn from this year’s budget debacle and get serious about enacting reforms that will provide a more permanent solution to the state’s problems. Eliminating useless government programs, cutting the bloated state workforce and trimming its wages and benefits, and finding more efficient ways to provide necessary services is a good start. It’s also necessary to enact tax and regulatory reforms that will make Ohio an attractive place for businesses, which will increase tax revenue without the need to hike tax rates.

A federal bailout may make politicians’ jobs easier, but it’s not what Ohio really needs.

Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.

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