Like Many States, Ohio Reaches for A Lifeline
Official Says Stimulus Is 'Essential to the Salvation of America'

By Peter Slevin
Washington Post Staff Writer
Saturday, December 27, 2008

COLUMBUS, Ohio -- As the economy sputters and tax revenue plummets, governors and mayors across the United States are lining up to ask President-elect Barack Obama and the new Congress for hundreds of billions of dollars to plug holes in their budgets, arguing that services will suffer and joblessness will rise if Washington does not come to the rescue.

In Ohio, which has shed 100,000 jobs in the past year, Gov. Ted Strickland (D) and his budget team spend a lot of time delivering bad news to constituents and plotting ways to wring money from the federal government. He announced $640 million in cuts for the budget year ending June 30, for a total of $1.9 billion since the economic crisis began.

"We're not crying wolf. This is real," Strickland said in an interview in his statehouse office, pointing to charts that project the most serious erosion of state income in 40 years and a two-year budget deficit of $7.3 billion. Revenue shortfalls in the upcoming two-year budget could amount to about 25 percent of the state's discretionary spending.

Strickland recently picked up the telephone and called Rahm Emanuel, the incoming White House chief of staff. When he heard the recorded voice of his former congressional colleague, he left a message: "Rahm, it's Ted. You've never failed me and I need $5 billion."

Obama has promised money, contending that the need for a stimulus justifies an expansion of the record federal deficit. Vice President-elect Joseph R. Biden Jr. last week promised a down payment on a middle-class tax cut, plus spending to improve roads, bridges and water systems. He called the package the new administration's "most urgent order of business."

"There is no question about it," said John Habat, a budget specialist at Cleveland's Center for Community Solutions. "At this point in the financial crisis, federal aid is the only lifeline left for Ohio."

As negotiators prepare to gather shortly after New Year's Day to weigh competing claims and figure out what could work, months of worsening news has expanded the sense of urgency in Ohio, while limiting hopes that an infusion will do much to brighten the economy. Strickland said the stimulus is foremost a matter of stopping the bleeding.

Many things Ohio spends money on are becoming more expensive, Medicaid most prominently. In the 2007 budget year, Medicaid costs devoured 24.2 percent of the state's general fund, or $4.3 billion. Four years earlier, the figures were 20.5 percent and $3.7 billion. While Strickland hopes a 6 percent increase in Medicaid will be part of a federal stimulus package, the relentless math of a balanced-budget mandate forces cuts.

One emblematic conundrum was the decision to rescind a $930,000 annual tobacco settlement grant from 16 central Ohio centers where 1,100 smokers got help quitting last year.

"We're going to have a long-term impact of sicker people who are going to need increased Medicare and Medicaid, which the state will pay," warned Marie Collart, president of the nonprofit Breathing Association, who recognized Strickland's dilemma and supported his choice. "Yes, we need the money for the stimulus package. Yes, we need the centers to get addicted people off drugs."

Strickland said he and budget director J. Pari Sabety met 15 corporate leaders at the governor's residence this month, "just to pick their brains." The guests favored spending that would produce long-term benefits, from transportation projects and training programs to a campaign to insulate thousands of drafty old homes, reducing energy use and utility bills.

Strickland, who has recently looked for inspiration and historical analogies in Franklin D. Roosevelt's depression-era speeches, is preparing a pitch for three chunks of money for the states.

First, he is angling for a $250 billion increase in federal payments for food stamps and Medicaid, the government health program for impoverished Americans and, increasingly, the working poor. Second, he favors a $250 billion national investment in infrastructure projects. Ohio has a list of "shovel-ready" projects, including roads, water and sewer improvements and "green economy" investments.

Third, in search of a palatable pitch to a Congress and nation numbed by the parade of rescue packages, Strickland is teaming with a handful of other Democratic governors to seek a $250 billion infusion for education. The group includes Jennifer M. Granholm (Mich.), Jon S. Corzine (N.J.), David A. Paterson (N.Y.), Jim Doyle (Wis.) and Deval L. Patrick (Mass.).

So far, Strickland said, Ohio's school money has largely been spared the budget knife, but if revenue projections are accurate, cuts will be required in the balanced budget that he must submit by Feb. 2.

The idea is to plug federal dollars into the education budget, preventing layoffs and preserving programs. Otherwise, Strickland warned, "we're talking about real job loss and significant reduction of support for K-12 and higher education." The effects of sharply shrinking budgets are typically felt most deeply close to home, both in Ohio's cities and rural communities.

"Almost everybody is facing some kind of service disruption," Columbus finance director Joel Taylor said in his office at City Hall, a few blocks down West Broad Street from the statehouse. He pointed to cuts in yard-waste pickup and custodial contracts and $1 million less to neighborhood health clinics, a cut of nearly 20 percent. By March, 11 of the city's recreation centers, which provide art classes, sports, homework help, child care and senior activities, will be "basically mothballed."

The final decisions fell to Mayor Michael B. Coleman, a three-term Democrat appointed to the City Council in 1992. In a city cushioned by government work and Ohio State University, he said, "I never thought I'd have to do that, not in Columbus."

To continue operations at current levels would cost $698 million, Taylor said, but revenue is projected to be no greater than $615 million. The mayor is proposing a $643 million budget, which includes service cuts and requires $28 million from the city's dwindling rainy-day fund.

"Frankly, there's not much more to trim," said Coleman, who pointed out that the city workforce, excluding police and firefighters, has dropped from 1,800 to 1,300 since 2000. "Eliminate garbage collection or lay off police and firefighters . . . or I could begin looking at rec centers. None of these are good choices." Coleman is appealing to community groups and charities to fill the gaps, to "catch as many as they can." He said Neighborhood House, a nonprofit, intends to take over a center in northeast Columbus.

One of the city's biggest fears -- and an indicator of how governments are linked to one another -- is that the state authorities will cut $50 million in revenue sharing that Columbus receives each year. In ordinary times, Coleman might not be worried, but, he said, "governors and mayors are all in a position of doing things we'd never even considered doing."

Surveying the carnage, Coleman called a federal rescue package "essential to the salvation of America." The Columbus health department, serving a city of 750,000, expects in the coming budget year to lose $3 million of its current $19 million and 36 of its 200 jobs, said director Teresa C. Long. That will mean less prenatal care, less drug and alcohol treatment, free screening for fewer diseases and the elimination of hospice help.

It will also mean the end of the city's five-person rat control operation.

At the Homeless Families Foundation, which houses 47 families for as long as 80 days at a time, Karie Gallegos once had four counselors. She now has two.

At the Ohio Association of Second Harvest Foodbanks, director Lisa Hamler-Fugitt asked for $14 million a year from the state and received $8.5 million despite growing demand and rising food costs.

Hundreds of people showed up in Logan, south of Columbus, to receive food this month. The first family, a mother, father and four young children, pulled their aging minivan into line at 5:30 p.m. one evening to get groceries the next morning at 8.

Hamler-Fugitt worries that the federal stimulus will have only limited benefits: "It's one-time money. We have a structural deficit." Habat said something similar, pointing out that tax cuts passed by the state legislature in 2005 will save taxpayers and cost the government roughly $4.4 billion during the next two years, more than half the projected deficit.

"With the magnitude of the problem, there's no way Ohio can expect the federal government to give it that kind of money," said Habat, whose organization calculates that the recession will cost the state another $4 billion in revenue during the next two years.

"Ohio always lags in recovering from recessions," Habat said.

State policymakers are united in saying that any recovery will require federal tax dollars, and lots of them.

As for the telephone call Strickland made to Emanuel, asking for billions: The governor said Emanuel called back and said "something to the effect of, 'I hear you. You may not get everything you want, but you'll get help.' "

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