Prospects Termed Good for Tax Increase in Ohio

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The Ohio House of Representatives will begin considering this week a Senate-passed bill that, state education officials say, would avert financial disaster for the state's schools.

Senate Bill 530, approved by the Republican-controlled chamber on March 31--the day before the state's 615 school districts were required to have their budgets prepared--calls for a temporary 25-percent surcharge on the state income tax.

The tax increase, retroactive to Jan. 1, 1982, and in effect until July 1, 1983, would raise approximately $519 million. Together with cuts in the appropriations that were approved last November as part of the biennial budget, the measure would eliminate the state's projected deficit of $1 billion.

Education would fare "reasonably well" under the terms of SB 530, said G. Robert Bowers, assistant state superintendent of public instruction. While most state agencies would have to cut 7 percent from the budget enacted last fall, general state aid to school districts would be trimmed by only 3.5 percent.

However, the bill also calls for 9-percent cuts in key state categorical programs--transportation, state programs for disadvantaged pupils, vocational and special education, and school lunch--and 15-percent cuts in categorical programs considered less critical. Mr. Bowers said state officials had not yet determined how the bill would affect individual school districts.

While the aid cuts proposed under SB 530 would be painful, Mr. Bowers said, they are a far cry from the 24-percent cut that the state's Office of Budget and Management estimated would be needed in July without a tax increase.

The Ways and Means Committee of the Democratic-controlled House was scheduled to begin hearings on the measure this week. Many Democrats have complained that the Senate plan requires too many cuts in essential services, so some observers speculate that if the House changes the bill, it is likely to be in the direction of raising more revenue.

Gov. James A. Rhodes, a Republican, preferred other means of raising revenue, Mr. Bowers said, but "is supportive of finding some kind of solution."

"We're optimistic that the basic provisions of the Senate bill to increase the income tax will forestall the major problems that Ohio school districts were faced with," Mr. Bowers said. "Overall, it's a feeling of encouragement."

Local school officials in Ohio have been on what one described as "a financial roller coaster" since last fall, when the legislature imposed a temporary increase in sales taxes to raise $1.3 billion. At the time, the legislature also approved a biennial budget providing for a 22-percent increase in education spending.

By January, however, the budget office was predicting a $1-billion deficit, despite the tax increase, primarily because the economic recession has caused revenue from sales and income taxes to drop below expected levels.

Defy State Law

The budget office's predictions--which have grown steadily more dire since January--at one point had officials of some school districts threatening to sue the state for "nonsupport" or to defy state law by closing down the schools for financial reasons.

For example, the budget office announced in late January that an 8.9-percent cut in state aid would be needed immediately, to be followed in July by a 16.3-percent cut. (The average district in Ohio receives about 45 percent of its nonfederal revenue from the state, but some receive a far higher or far lower proportion, depending on local property wealth.)

Both cuts were to be administered on a sliding scale according to a district's local wealth and the degree to which it depends on state aid. Under this plan, some of the state's wealthier districts would have lost as much as 50 percent of their state aid.

What actually went into effect, however, was a more modest cut of 4 percent, also administered according to need. The threats of lawsuits and shutdowns "have pretty well evaporated," Mr. Bowers observed.

Despite the signs that the tax increase will pass, officials of local school districts apparently are not counting on it to balance their budgets.

Most districts were able to meet the April 1 deadline for presenting state officials with balanced, if spare, budgets based on the 4-percent cut that already has gone into effect, Mr. Bowers said.

And 21 school districts have already re-quested and received approval for emergency loans from the state totaling $43 million--including $29 million for Cleveland, which will use $14 million for current expenses and the remainder to refinance the state loan it received last year. Another 30 districts are expected to request loans this month.

If the tax increase is passed by the House and signed into law by Governor Rhodes, the districts will have to pay back their loans ahead of the usual schedule.

The legislature has already transferred some $30 million into the emergency-loan fund and may transfer more, if necessary, Mr. Bowers said.

"If [SB] 530 passes, though, we should be all right in the rest of the state," he added.

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