Ohio is currently in the midst of working out its new budget, and with a Republican-dominated state government it is unsurprisingly chock full of bad policy. While a high level overview shows the GOP’s preferential option for the rich, seeing some details really highlights the impact elsewhere. What follows comes from an email attachment sent out by the City of Cleveland, and it shows how these Republican priorities will harm it. Keep in mind the numbers below are for one city; similar hardships will be inflicted on communities throughout the state.

One more thing before going into the numbers. Republican governors have been crying poverty in states across the country in order to justify slashing public services and having fire sales for public goods. Those of us fighting the attack on the middle class should rally support for restoring these cuts via a tax on the rich. A 15% income tax starting at $1 million per year would go a long way towards curing what ails state budgets.

A humble suggestion: That activists use referendum or ballot initiative processes to get an Elite’s Bracket on the 2012 ballot. Sympathetic candidates can pledge to use the revenue to restore funding currently being gutted – and let the unsympathetic ones run on a platform of defending the wealthy. I think voters would make their intent pretty clear.

Impact of State of Ohio’s Efforts to Redistribute Revenue

State Imposes Budget Deficit

The State’s proposed two-year budget begins July 1 and:

  • Imposes a $35.7 million deficit on the City of Cleveland for the remainder of 2011 and 2012.
  • Causes 321 layoffs and the elimination of 145 vacancies

Local Government Fund

  • The local government fund is comprised of locally generated tax revenue that is sent to the State which then redistributes an appropriate portion of the money back to the local communities where the revenue was generated.
  • In addition to reducing allocations by 50% in two years, the current budget bill, as written would give the County the ability to change the apportionment of LGF at the local level, upon approval of seventy-five per cent or more of the subdivisions located wholly or partially in the county. This provision could also impact the amount of LGF returned to Cleveland.


Commercial Activity Tax and the Public Utilities Tangible Personal Property Tax are also locally-generated tax revenue that the State redistributes back to local governments and the state’s proposed budget unfairly redirects this revenue, taking money earned in cities like Cleveland and redistributing at a disproportionately higher rate to suburbs and rural areas:

  • The state budget originally called for a 30% reduction in CAT. It was amended to completely eliminate the funding for cities, like Cleveland, where CAT is less than 2% of their budget while communities where CAT is more than 2% of their budget will receive only a 30% reduction.
  • The application and collection of CAT happens in large, urban areas with a lot of business activity, like Cleveland, not in smaller communities that do not have large business sectors. So, the tax is being imposed and collected here but is being given to other communities.
  • A similarly amended formula causes large cities to lose the entire amount of tangible personal property tax (TPP) in the first year while allowing other cities to retain a portion of it.

State-Imposed Budget Deficits, 2011 – 2013

Local Government Fund Commercial Activity Tax Tangible Personal Property Tax Revenue Loss
2011 ($4,445,466) ($7,380,797) ($738,584) ($12,564,847)
2012 ($16,435,226) ($5,571,611) ($1,177,662) ($23,184,499)
2013 ($23,979,521) ($4,558,591) ($942,836) ($29,480,948)
Totals ($47,860,213) ($17,510,999) ($2,859,082) ($65,230,294)

State-Imposed Staff Reductions

Full Time Part Time Seasonal Total
Total Layoffs 275 1 45 321
Total Unfilled 46 16 83 145
Total Positions 321 17 128 466
  • Police
    • Laid Off: 81 Patrolman and 42 Cadets
    • Demoted: 2 Lieutenants and 15 Sergeants
  • Fire
    • Laid Off: 51 Firefighters
    • Demoted: 4 Battalion Chiefs, 3 Captains and 10 Lieutenants
  • Public Works:
    • Laid Off: 79
    • Vacancies unfilled: 114
  • Building and Housing
    • Laid Off: 6
    • Vacancies unfilled: 4
  • Other (Includes Public Affairs, Finance and Law)
    • Laid Off: 17
    • Vacancies unfilled: 13
  • Municipal Court
    • Laid Off: 37
    • Vacancies unfilled: 8
  • Clerk of Court
    • Laid Off: 8

SB 145 and Estate Tax

In addition to cuts in LGF and the elimination of CAT and TPP, the City of Cleveland faces additional loss of revenue in the amount of $73,500,000 from 2011-2013 from pending legislation:

Senate Bill 145

  • SB 145 would apply to any municipality that collects greater than $100 Million in income tax per year
  • Provides for a 10% credit for non resident workers.
  • This credit would result in a loss of revenue to the City of Cleveland of approximately $24 million per year.

Repeal of Estate Tax

  • If passed, the Estate Tax would end December 31, 2012.
  • Due to the amount of time it takes to settle an estate we are projecting a $1.5 million reduction in 2013, which represents half of what is typically budgeted – $3 Million.
  • After 2013, the City of Cleveland would receive $0 in Estate Tax, effectively removing $3 million from our budget annually 8

Potential Revenue Loss from Pending Legislation

2011 2012 2013 3-Year Projected Revenue Loss
Senate Bill 145 ($24,000,000) ($24,000,000) ($24,000,000) ($72,000,000)
Estate Tax $0 $0 ($1,500,000) ($1,500,000)
Totals ($24,000,000) ($24,000,000) ($25,500,000) ($73,500,000)