Election Won’t Solve Budget Problems

By Marc Kilmer

Last Tuesday’s election saw a few local tax hikes approved, others fail, and a majority of voters approve statewide gambling. While these ballot questions were an attempt by local and state policymakers to help fund government, they offer no solutions to the long-term problems faced by Ohio’s governments. Only through fundamental reform can local and state politicians tame government growth that is outpacing the ability of taxpayers to fund it.

This year politicians have faced dramatic drops in tax revenue. Ohio’s economy is one of the worst in the nation and this means fewer people and businesses paying taxes. The state government has tried to trim spending and has used budget gimmicks to cover its deficit. Governor Ted Strickland also proposed new ways to raise revenue, such as raising taxes and introducing gambling.

Local governments, too, don’t have enough revenue to spend on their desired projects and services. So they have also proposed new taxes or bond issues, many of which were up for voter approval on Tuesday.

These attempts to raise revenue are misguided. The problem isn’t that Ohioans are undertaxed. In fact, the nonpartisan Tax Foundation rates Ohio’s tax burden as one of the heaviest in the nation. And to a level seen in almost no other state, Ohioans face taxes from a number of different government entities, from the state government down to local school and library districts. No, Ohioans don’t need taxed more.

Instead, Ohio’s governmental entities need to find different ways to use the revenue they receive. For instance, instead of accepting that Medicaid will continue to consume tax dollars at an unpredictable level, policymakers should look to reform the program to bring spending down. Education spending has consistently expanded over the past few decades and yet students don’t seem to be any better educated. Instead of throwing more money at failing schools, policymakers should look at different ways of educating students.

Innovative policymaking is one piece of the puzzle. The other is to rein in the growing bureaucracy at both the state and local levels. The number of government employees continues to increase and so do their pay and benefits. Reducing government employment and bringing bureaucrats’ salaries and benefits more into line with the private sector is a necessity if government spending is ever to be controlled.

If these steps aren’t taken, we will continue to see destructive tax-and-spend patterns repeat themselves. During recessions tax revenue declines so politicians raise taxes. Good economic times follow the recessions and increased tax revenue leads to an explosion in spending. Then another recession hits and this new spending can’t be sustained, leading to even more tax increases. This is a poor way to run a government.

This current recession has hit Ohioans harder than most other Americans. The state faces higher-than-average unemployment and foreclosures. High taxes burden citizens and, as a result of Tuesday’s elections, some in the state are facing even higher tax bills. Instead of following the failed policies of the past, politicians should try to salvage something good from this recession and use it as an opportunity to restructure state and local finances so during the next economic downturn Ohio will be in a better position than that in which it finds itself now.

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