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Bill Would Force Ohio Cities To Balance Budgets

A new bill at the Statehouse would mandate cities and townships to balance their budgets and maintain actuarially funded municipal pension plans. Republican State Representative Lou Terhar says it’s time for cities, townships and other municipalities to make sure they have their debt under control, just like the state has done.

We have taken the state from a major deficit to a balanced budget to a rainy day fund that can actually support a bond rating and we don’t need a surprise that will take us away from moving us further ahead as we go.

Terhar says more than 30 cities or political subdivisions throughout Ohio are designated as being in fiscal emergency, fiscal watch or fiscal caution. So he’s proposing a bill that would require municipalities to have a balanced budget, and have their own pension plan to make sure they are properly funded for longevity. Republican State Auditor David Yost is backing Terhar’s bill. He says the pension part of the bill is especially important when you consider what’s happening to public pensions in Detroit as the city struggles with bankruptcy. Yost says it’s important cities with public pensions take steps now to make sure they don’t become monsters that eat up the local budgets.

Call it 'Pensionzilla.'

Yost says this bill is about making sure hard choices are made now at the local level that will keep cities on strong financial footing. "You know in business, there isn’t any incentive to kick the can down the road because down the road you are not term-limited out. You hopefully still have your business right? So if you kick the can down the road, you are hurting yourself," Yost says. But Kent Scarrett, the Director of Communications for the Ohio Municipal League, says there’s no reason to think cities and municipalities don’t want to keep their finances in order. He says cities are already required to have balanced budgets. And he says there’s good reason why city leaders want to make sure they have financially secure budgets.

In general our municipalities are very interested in having balanced budgets so that the state doesn’t feel the need to place us in some category of fiscal concern that would introduce the state auditor into our fiscal operations and procedures.

Scarrett says cities are having a hard time right now trying to make ends meet, especially since the state has made drastic cuts in local government funds and taken away local revenue through estate taxes. "Reductions in the level of services is certainly something many communities are facing," Scarrett says. "Now if the state continues to increase pressure on our communities, especially since they are being faced to raise the bulk of their revenues locally now, it’s difficult. Scarrett has worked with state government in various capacities since 1990. And during the past few years he’s seen a shift from Republicans wanting government to be smaller and favoring local control.

There is clearly a shift.

There is clearly a growing state government through actions of this and previous general assemblies and the focus seems to be giving more authority to the state government and restricting what used to be local control. But bill sponsor Representative Terhar says he’s not looking at telling cities how they have to spend their money. He says he just wants to set rules in place for them to keep it under control. "The only sovereign entity in the state of Ohio is the state of Ohio, We can’t go bankrupt," Terhar says. "If one of the political subdivisions in Ohio goes bankrupt, we pay the bill. And therefore, all we are asking is that everybody plays by the same rules that we do because in the end, the we is all of the taxpayers, not just the taxpayers of a municipality. And so what we are looking for is not just fiscal prudence but fairness in how we govern. Terhar’s bill is still being drafted at this point. He is looking for more input at this point, and he expects to have hearings sometime this fall.