Nixon takes steps against budget shortfall
This article first appeared in the St. Louis Beacon, Dec.2, 2008 - Governor-elect Jay Nixon said Wednesday that he would impose a temporary freeze on long-term state contracts for goods and services, and conduct thorough reviews of state capital projects and tax credits in an effort curtail state spending in order to address Missouri's growing budget problems.
He said in a statement that these three government programs were among many policies that would be reviewed immediately to help him "make government smaller, more efficient and more responsive to the needs of Missouri families."
His proposals came a day after his transition team told him that Missouri faced what Nixon called "historic economic challenges" and $342 million in red ink during the current fiscal year. His transition team leaders are former Sen. Wayne Goode and Margaret Donnelly, who ran unsuccessfully for the Democratic nomination to succeed Nixon as state attorney general.
Nixon said capital projects would include both those for which ground had yet to be broken and those already underway. He said he wanted status reports "regarding the percentage of completion, the cost to complete the job and whether each job is over or under budget."
During the campaign, Nixon criticized some tax credits without being specific. Now that he has been elected governor, he said he would instruct the Department of Economic Development in his administration to review all tax credits to determine which are producing jobs.
In addition, Nixon is calling for "top-to-bottom" performance reviews of all state agencies and major programs. The goals, he said, is to find ways to consolidate programs in order to make government more efficient.
Nixon appealed for bipartisan support, saying that making "tough decisions and instilling the right priorities" will give Missouri the resources to produce new jobs, make health care more accessible and help middle class families.
Our original story:
Former state Sen. Wayne Goode mentioned for the first time today that incoming Gov. Jay Nixon might have to hold back funding for some programs in response to the projected budget deficit that Nixon will face when he takes office next month.
Goode, an expert on the Missouri budget and co-chair of the Nixon transition team with Margaret Donnelly, said the deficit projection for the current fiscal year now stands at $342 million. Asked if that meant state withholdings might be on the table, Goode said, "The governor obviously is considering that at this point. We have to operate from a balanced budget. So you can assume there will have to be some adjustment in the budget."
But he stressed that Nixon's first approach would be to focus on efficiencies in state government. He also said that state layoffs were "not anticipated at this time. That's not part of the plan. Finding efficiencies isn't the same as laying off people."
Goode, from Normandy, said he didn't think "anything official has been done to put a hold on new hiring," but he added that he did not expect that the state would fill any unneeded jobs.
Nor is the governor considering tapping into Missouri's so-called Rainy Day Fund to address the deficit, Goode said. He wouldn't say whether the budget picture would force Nixon to back away from his campaign promise to restore Medicaid funding. Instead, Goode said Medicaid was "a big priority," and he added that Nixon would announce in the next few days steps he intended to take to "basically control spending."
Following Goode’s announcement, Nixon issued a statement saying that he would work with the President-elect Barack Obama administration and the General Assembly to “tackle these economic challenges, create new jobs and turn this economy around.”
He noted that he was among governors and governors-elect who met Tuesday with Obama and that the next president “clearly understands the pain that families are feeling, and he has indicated that his administration will work aggressively to pass the type of economic stimulus package that will help us move Missouri forward.”
He added that "the economic challenges we face are historic, and in order to solve them, we will need a historic bipartisan effort. Because when a crisis hits, whether it be a national security crisis or an economic crisis, we must put politics aside and come together for the good of our Missouri families.”
Speaking during a conference call with reporters across Missouri, Goode said the current economic crisis was especially frustrating.
"This is a downturn like none we've ever seen in the past," he said. "There's so much uncertainty about the downturn. It's difficult to tell when we'll come out of it."
Help may be coming
Obama pledges to work with governors on the economy: Meeting in Philadelphia, he sought to reassure them after dwindling revenue and rising unemployment have put a strain on their budgets. | CNN
He said that when the Missouri General Assembly passed the budget last May, it expected to spend $8.9 billion, with any shortfall addressed by a budget surplus and tobacco taxes.
"I'm not blaming them," Goode said. "They were working with the revenue available at the time. But it has changed significantly."
Now, Goode said Missouri was expected to take in $7.6 billion. The bottom line at this point, Goode says, is that Missouri expects to end up with a deficit of $342 million.
Goode's projected shortfall was higher than one cited Tuesday morning during the first of three meetings that a group is holding across Missouri to call attention to the state's growing money crisis and seek ways to solve it.
The first meeting took place at the University of Missouri at St. Louis. There, Amy Blouin, head of the Missouri Budget Project, said the projected deficit for the current fiscal year would be at least $200 million and could rise to $900 million in the next fiscal year.
"Please don't blame the messenger," Blouin said. "We have to address the economy because the economy is having a substantial impact on state budgets."
She said Missouri median income is $5,000 lower today than in was in 2001. She said she used the 2001 year for comparison because that year marked the start of the previous recession. She also said poverty in Missouri had increased by 12 percent, to 742,000 Missourians today from 659,000 in 2006.
Blouin added that Missouri has no cushion, no budget surplus because all the money has been used to pay bills.
"That money (surplus) was like having a savings account," she said. "The money isn't going to come back."
Some speakers at the budget session, which Goode also attended, were upbeat to some extent. They put much hope in a federal stimulus package in the incoming Obama administration.
"We should never forget that a crisis is a terrible thing to waste," quipped Otto Fajen, representing the Missouri National Education Association. On a more serious note, he said the next stimulus package could be a godsend for state government if the package includes some funds to prop up state budgets.
"If the federal government can help states, it would have an impact on hemorrhage of the economy," he says.
Bill McKenna, chair of the Missouri Transportation Alliance, says a stimulus package targeted at creating jobs would offer the best hope for Missouri and other states.
Of the $78 billion spent on the most recent economic stimulus package in the Bush administration, McKenna argued that only $21 billion was used to "buy something." The rest, he said, went to pay back existing debt.
"That didn't jump start the economy, not with gas at about $4 a gallon at that time. That money went to Saudi Arabia."
He said investment in infrastructure, such as roads and other transportation needs, would be able to stimulate the economy. McKenna added that Missouri was gearing up to have the road contracting process ready to roll on short notice to take advantage of whatever money the federal government might invest in transportation-related spending.
"The transportation return on investment is extremely good," he said. "It creates a lot of good paying jobs; it puts people to work who spend money here."
A second session on Missouri's budget problems takes place Wednesday in Springfield, and a third one occurs Thursday in Kansas City. In addition to the Budget Project, sponsors include the St. Louis Business Journal, the Missouri Municipal League, and business groups in Springfield and Kansas City.