Ohio’s Kasich Readies for Spending Cuts If Faltering Economy Clips Revenue

Ohio Governor John Kasich stands ready to cut state spending if revenue slows as the economy sputters following what the former congressman called the “chaos” surrounding the debt-ceiling debate in Washington.

Kasich, 59, a first-term Republican, has told his budget director to monitor revenue collections so any emerging deficit can be averted, he said yesterday in a telephone interview. The seventh most-populous state passed a two-year budget in June that closed an $8 billion deficit.

“We have to watch this, and I don’t want to get ourselves in a position of where we whistle past the graveyard and find ourselves in a hole,” Kasich said from Columbus. “Any sort of reductions are not pleasant, but we’re not going to go back in the hole.”

Ohio’s preparations may be followed by other states, according to Brian Sigritz, director of state fiscal studies at the National Association of State Budget Officers. While he said he hasn’t heard other governors expressing concern that spending cuts may be needed this year, the condition of the economy and the effects of federal aid reductions worry policy makers. Most states including Ohio began fiscal 2012 last month.

“Depending on what happens with the national economy, you could potentially be looking at more midyear spending cuts for states,” Sigritz said by telephone from Washington.

Previous Cuts

Twenty-three states took such steps in fiscal 2011, down from 39 in 2010 and 43 in 2009, Sigritz said. Combined state revenue in 2012 is projected to trail 2008 levels by $24 billion, or 3.6 percent, he said.

The “chaos” surrounding the deal passed by Congress and signed by President Barack Obama this week to avoid a U.S. default on its debts unsettled the public and companies, Kasich said. That is contributing, combined with the faltering economy, to pressure against business investment and hiring, he said.

“Thank God we didn’t default, but I think people are not satisfied with this agreement,” said Kasich, a former head of the Budget Committee in the House of Representatives who helped craft a balanced federal spending plan in 1997. “I’m very concerned about Washington, their inability to solve problems.”

Ohio’s revenue last month was on target, Kasich said. Yet he remains concerned that collections may weaken.

“You look at things and if you have to, you trim along the way,” he said. “I’m not saying we will, but I’m also saying I don’t walk us past a real serious problem only to face it later in the fiscal year.”

To contact the reporter on this story: Mark Niquette in Columbus at mniquette@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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