Governor Ted Strickland’s new plan for filling the $851 million gap in the current state budget left after his VLT plan hit a roadblock last week is to freeze the state income tax reduction that was expected to go into this year. Strickland, in a press conference this week, laid the groundwork for his new plan, saying that it was the best option over cutting education programming or increasing the state sales tax.

If the governor’s proposal is approved by the legislature, Ohioans would not see the 4.2% income tax reduction this year as outlined back in 2004 when the five-year phase in of a 21% income tax cut was originally approved. This delay would boost revenues by $844 million; the remaining difference in the gap would be achieved through cuts, if necessary, according to the governor.

Last week, the Ohio Supreme Court delivered a blow to Strickland’s video lottery terminals (VLTs) proposal when they ruled in favor of a conservative organization’s request to seek referendum on the proposal. It appears that the issue will not be on the ballot until November 2010, significantly delaying the expended revenue needed for this biennium. Strickland said in his press conference that it was a “practical impossibility” to rely on the slots revenue.

In addition, the governor plans to follow up with the Ohio Supreme Court and request a declaratory judgment on whether or not the state, through the Ohio Lottery Commission, can operate slots at Ohio’s racetracks. Even if the Court rules in the favor of the governor on this case, Strickland does not plan to move forward with the proposal. “Although it is impractical to assume any income from VLTs for this biennial budget, it would be my expectation as we move forward, depending upon the recovery of the economy and other factors, that the VLT initiative should be a tool for me or anyone else who would be governor going forward,” Strickland said.