$640M budget gap forecast for Ohio

COLUMBUS, Ohio (AP) - Gov. Ted Strickland on Monday announced a new $640 million state budget gap, the third deficit this budget cycle, and said the next two-year budget could be as much as $7.3 billion in the red.

The state is facing an unprecedented economic crisis that will only get worse without direct federal help, Strickland said. The governor flatly ruled out a tax increase, saying it could make things worse under the current conditions.

Strickland continues to press the federal government for direct aid to the states that he said could prevent further cuts to the current budget. He sent president-elect Barack Obama a letter Monday asking for $100 billion in block grants to the states and $3.2 billion to help with welfare expenditures and another economic recovery package.

For the first time, Strickland said the state would likely to have to dip into the rainy-day fund -- which currently has about $750 million -- to deal with the economic slowdown. He has previously said the rainy-day fund should be saved for even worse times ahead.

"We share this with you and with people of Ohio because we believe that this is the time for all Ohioans to join together in an extraordinary partnership in order to meet the challenges before us," Strickland said during a somber news conference.

Budget Director Pari Sabety said Ohio is facing losses in tax revenue of historic proportions. And there's even worse news: Over the next two years, Ohioans could see overall reductions in how much they take home in salaries and wages for the first time in state history.

The erosion in tax revenues is the worst in 40 to 50 years, Sabety said.

Among other grim news Sabety and Strickland delivered Monday:

-- Even if state agencies reduce their budgets by 10 percent next year and in 2010, the state would still face a $4.7 billion deficit.

-- Ohio likely faces an extended state recession through the end of this calendar year and all of 2009.

-- The state is facing a three-year decline of $1.4 billion in personal income tax collection, the worst since the tax was implemented in 1972. Revenue from sales taxes will be $490 million less in 2010 than this year, the first such decline since 1950.

Adding to the drama of the announcement, Strickland stepped before microphones to announce the news that was just then flashing around the world: The U.S. officially went into a recession in December 2007.

Strickland implored Ohioans to do their part in helping the state get through the most difficult economic period it has seen in decades.

"I am calling upon Ohioans during this particular season of the year to look out for each other, try to be a good neighbor, a good friend, and to try to share whatever resources they have with those who are most in need," he said.