Taft Signs Bill To Balance Budget With Cigarette Tax Increase

By ANDREW WELSH-HUGGINS, AP Statehouse Correspondent

COLUMBUS, Ohio (AP) - Gov. Bob Taft on Wednesday signed a bill to balance Ohio's budget by increasing the state cigarette tax 31 cents per pack.

The bill, which closes a $1.9 billion gap in state revenue, also taxes the undistributed income of trusts in Ohio-based banks through Dec. 31, 2004.

Taft vetoed provisions of the bill that attempted to limit the growth of state government and spending.

He said the measures don't take into account increases in Medicaid and court-ordered spending on schools and would tie the state's hands in spending on economic development.

"As Ohio begins to move beyond the national recession, we must have budgetary flexibility in order to offer competitive economic development incentives and allow Ohio to create more jobs and successfully compete in our complex global economy," Taft said.

The bill also drains the remaining $600 million from the state's rainy day fund and borrows $345 million from Ohio's school construction program.

The state had to balance its budget for the second time in a year because the recession produced lower-than-expected revenue.

"I am confident that Ohio remains strong and our economy will rebound," Taft said. "But during this interim period we had to take these difficult measures to continue to deliver quality services to our citizens."

The bill includes about $390 million in spending cuts.

The legislation also includes a plan to ensure that Ohioans won't pay more state income tax if they receive small increases in pay.

Known as income tax indexing, the plan keeps tax brackets increasing with percentages found in the Gross Domestic Product index.

The provision was part of a compromise reached with conservative Republicans who opposed the cigarette and trust taxes.

The bill also creates a prescription drug discount program for seniors and the disabled through Ohio's Golden Buckeye Card and provides $7.8 million to PASSPORT, a program that allows seniors to receive care at home instead of entering a nursing home.

Sen. Jeff Jacobson, a Dayton-area Republican who pushed a provision to limit state spending to 3 percent, said his proposal was "a moderate amendment" that he continues to support.

"Basically, it required we stop and look before spending every dollar we get our hands on," Jacobson said. "A lot of the reason we have the problems of today is we didn't follow those principles when we wrote the last budget."

(Copyright 2002 by The Associated Press. All Rights Reserved.)