More than three years after Ohio Gov. John Kasich erased an $8 billion state budget deficit partly by reducing funding to local governments, the region’s cities, villages and townships continue to look for ways to deal with the cuts.

The administration sliced the Local Government Fund, which was established in 1935, by 50 percent and phased in an elimination of the estate tax (estates in excess of $338,333 were taxed). In addition, the state in 2005 began phasing out the Tangible Personal Property tax, which also was a big source of revenue for local governments.

Hamilton County Auditor Dusty Rhodes has pointed out that Hamilton County communities received $53 million from the Local Government Fund in 2010, and that was reduced to $26.6 million in 2013. An even bigger blow to the county and its local communities was the reduction in tangible personal property tax reimbursements from $4.9 million in 2010 to $493,571 last year, he said.

Add to that the losses from the estate tax, which ended Jan. 1, 2013. Estate taxes were split 80 percent by the communities in which a person died and 20 percent by the state. In Hamilton County, estate taxes totaled $57.5 million in fiscal 2012; now, they’re zero.

All of this has led local governments to cut services and jobs, or to boost revenue by raising taxes. Ohio’s local governments cut 25,000 positions from January 2011 to June of this year, the Associated Press reported.

In addition to regular renewal requests, 15 levies seeking additional taxes were on the ballot this year in the four Southwest Ohio counties. (Results were unavailable at press time.)

Kasich has said the state needed help in closing its $8 billion budget deficit that came as a result of the Great Recession. He wanted to push local governments to get more efficient and share services. The cuts in the Local Government Fund amounted to 3 to 5 percent of most budgets at the city, village and township level, he said, so it was not as devastating as his detractors say.

On the other side, Policy Matters Ohio said that it not only was the cut in the Local Government Fund but also the other cuts that took a huge toll on those governments—totaling $1.5 billion in annual lost revenue since fiscal year 2011. The state balanced the budget on the backs of local governments, it said.

Local government officials say they want to stay out of the politics and focus on how to handle the cuts.

Jim Hanson, finance director for the city of Montgomery, says the city has lost about $2 million a year from the state, about 20 percent of the general fund. That includes going from about $300,000 a year to $150,000 in Local Government Fund distributions and losing more than $1 million a year in estate taxes.

“In Montgomery, we have a pretty healthy tax base,” Hanson says, noting that the city has a 1 percent income tax, which is smaller than many area cities. “What we did was reallocate it so that we have less going into our debt-service fund or our capital-improvement fund, without hampering our ability to pay debt or make capital improvements.”

Local Government Fund proceeds make up only 1.58 percent of Montgomery’s revenue. Some smaller villages and townships in the area, however, have relied on the Local Government Fund alone for up to 30 percent of their budgets.

Hanson says Montgomery city officials have been fortunate: They have not dipped into the city’s rainy day fund. They reduced the city employee head count by not filling positions when people retired or moved to jobs outside the city.

“We’re very conscious about basic services that the public expects and wants,” he says. “As far as core services, we have not tried to diminish those at all.”

Loveland lost almost $700,000 a year from the Local Government Fund, estate taxes and the tangible personal property tax, its finance department calculates. Real estate devaluations cost another $410,000. The city cut nine positions, about 21 percent of its full-time staff.

“Our department heads and staff are constantly looking for ways to cut costs while not cutting services,” Loveland City Manager Dave Kennedy says. “The city of Loveland is fortunate to be supported by a large dedicated group of volunteers that help with landscaping and event planning and coordinating, which reduces the city’s expenses.”

He says the most pressing problem there is the reduction in spending on maintenance and infrastructure. It has budgeted $300,000 a year for 2014 and 2015—a little less than half of what it should be spending, he says.

The city of Wyoming recently planned to vote to raise its city income tax by two-tenths of a percent—from 0.8 percent to 1 percent—to help it bridge the gap in lost funding.

“With the reduction of the Local Government Fund share, with the elimination of the estate tax and with the reduction of property values in the last re-appraisal, Wyoming has lost a total of $1.2 million of annual revenue on an ongoing basis,” City Manager Lynn Tetley says. In the past three years, Wyoming has eliminated 10 full-time positions and put those duties onto other employees; begun to share technology services with the Wyoming City School District; refinanced its debt; and eliminated some consulting contracts.

But the biggest item has been deferring capital expenses, such as maintenance, infrastructure costs and equipment replacement. That’s what led city leaders to look at raising the income tax, which should bring an additional $1 million to $1.2 million, she says.

“I feel that we have right-sized our community,” she says. Because the city doesn’t expect a resumption of state funding, “we don’t intend to bring any of those things back, with the exception of capital and infrastructure maintenance.

“Our priority was to maintain the existing level of service delivery that we have, which our residents expect and move here for.”

The elimination of the estate tax eliminated an average of $808,000 a year for Wyoming, which was “the biggest hit for us,” she says. That money went almost exclusively to capital projects, so that’s hurt the city’s ability to move forward with things such as road projects.

The kicker for the increase in the income tax came when the city, in June, received an almost $6 million grant from the OKI Regional Council of Governments for a full repair of Springfield Pike (Ohio 4), but needed a little under $2 million in a local match to do the project, she says.

“We all hate taxes, but people recognize that there were things that have changed in the world that we weren’t in control of,” she says.