Taft on budget: 'The day of reckoning has arrived'

COLUMBUS, Ohio (AP) - Gov. Bob Taft proposed tax increases and additional budget cuts to address the state's latest budget woes while offering lawmakers few details in Wednesday's State of the State speech.

He said the state must raise taxes now and in the next two-year budget cycle, empty its rainy-day fund, close prisons and centers for the mentally retarded to fix Ohio's third budget deficit in two years. The deficit is about $720 million.

"Unfortunately, the day of reckoning has arrived," he said in his fifth State of the State speech.

Taft (pictured, above) set out two goals made necessary by the sluggish economy and both difficult to sell to lawmakers: raise $160 million in taxes on alcohol and cigarettes over the next two months, then increase a variety of additional taxes on July 1.

Those taxes include increasing the number of services covered by sales taxes while broadening the state's business taxes by eliminating some exemptions.

Taft wouldn't say what services would be covered or which exemptions are being considered. A briefing is planned next week.

"If last year's budget gap felt like a gale force wind, this year's budget crisis will feel like the 'Perfect Storm,'" Taft said near the beginning of his 32-minute speech, a relatively somber address interrupted by applause only 13 times, including one standing ovation for first lady Hope Taft and a short ovation at the end of the speech.

Last year's speech, which began and ended with references to the Sept. 11 attacks, was interrupted by applause 24 times, including seven standing ovations.

Taft cited the double-barreled problems of an eroding tax base and soaring health care costs, factors camouflaged in the 1990s during explosive economic growth.

"The actions I'm asking you to take will be painful," Taft said. "Indeed, they are painful for me to propose. But the consequences of inaction are unacceptable."

About an hour before the speech, Taft ordered $121 million in state spending cuts to help fix Ohio's third budget deficit in two years.

The governor's executive order exempted a few areas of spending, such as school funding, basic aid for higher education, job development and a program that allows senior citizens to live at home instead of entering a nursing home.

With Wednesday's announcement, Taft will have ordered about $1 billion in state cuts in the past two years.

Taft said he needed to raise cigarette taxes to $1 a pack and double the state's alcohol taxes by the end of February or he would have to cut funding to schools, colleges and the elderly.

House and Senate leaders said they were still waiting for details from the governor. House Speaker Larry Householder, a Glenford Republican, called the timeline an "aggressive schedule" and said lawmakers were up to the challenge.

But he also warned, "You never know what bumps in the road you're going to face."

A Taft proposal to raise cigarette taxes by 50 cents last spring met with strong opposition by conservative Republican lawmakers.

They delayed work on a $1.9 billion deficit for at least two weeks before finally whittling the increase to 31 cents a pack.

Sen. Jim Jordan, who opposed the last cigarette tax increase, said he can't support Taft's new proposal.

Jordan, an Urbana Republican, noted that Taft said more than a year ago there was no more room to cut in the state budget, but then proceeded to trim spending, most recently on Wednesday.

"He has proven we can do additional cuts that he first thought we couldn't do. I think we can do more," Jordan said. "I come from the premise that families are overtaxed and the government's too big."

Even as he doled out bad news, Taft asked lawmakers to support his Third Frontier initiative to boost the number of high-tech jobs in Ohio and hopefully improve the state's future economy.

He asked lawmakers to act quickly to place a $500 million bond issue on the November ballot to fund further high-tech initiatives.

The Third Frontier program "is not a luxury, even in our most difficult budget hour," Taft said. "We must make this investment today to make Ohio better tomorrow."

With less than six months left in the fiscal year, lawmakers may have little choice but to go along with Taft's plan for the current $720 million deficit, said Rick Yocum, director of the Ohio Public Expenditure Council, a nonpartisan budget think tank.

"We are so deep in right now, they can't cut their way out and they can't tax their way out," Yocum said. "They have to do both."

(Copyright 2003 by The Associated Press. All Rights Reserved.)