Nixon rejects any tax increases to balance budget, predicts slight upswing in revenue next year
This article first appeared in the St. Louis Beacon, April 26, 2010 - Missouri Gov. Jay Nixon admits that cutting more than $900 million from an already lean state budget has been painful, and he fears more budget-trimming pain may be in store for the coming fiscal year that begins July 1.
But although the state's income has dropped more than $1.7 billion compared to two years ago, Nixon says he has no plans to propose any sort of tax increases to bridge some of the gap.
"We are not looking at those sorts of things from my chair,'' the governor said in an interview with the Beacon over the weekend. "We're going to stay resolute and hold the line on taxes."
Nixon acknowledged that he has heard some private discussions around the state about possibly revisiting Missouri's taxes on tobacco products, which are among the lowest in the country. But the governor noted that Missouri voters have rejected proposed tobacco tax hikes twice in the last decade -- in 2002 and 2006.
"At this point now, what the taxpayers elected us to do is balance the budget on what resources are coming in,'' Nixon said.
He added that, from a practical sense, any tax hikes wouldn't go into effect soon enough anyway to help increase state income during the current economic downturn.
In any case, with tax hikes a non-starter, Nixon is focusing instead on exploring ways to cut state spending. And he is cautiously optimistic that the state's income collections will begin to go up, after more than a year of sliding down.
This fiscal year "we don't see any more trimming up,'' he said. But the governor added that he can't necessarily say the same about the coming fiscal year that begins July 1.
Although praising legislative work in the state House and Senate to craft a new budget, Nixon said he still may have to make more cuts shortly after that budget goes into effect July 1.
Tax Credits Remain Among Nixon's Targets
At the moment, Missouri's various programs of tax credits are tops on his list of cost-cutting projects. State Auditor Susan Montee issued a report Monday that, in effect, backed up Nixon's case that the $585 million a year that the state awards in tax credits lack sufficient oversight. The state also needs to document better whether the benefits of the various tax breaks are worth the cost, Montee said.
Nixon, a Democrat, told reporters at a news conference here Monday that he was optimistic that his administration and the Republican-led Legislature would come up with changes in the tax credits that would better serve the state, financially and economically. He wants to cap the state's 59 tax credit programs so that they annually cost the state around $314 million a year.
Tuesday night, Nixon upped the pressure on the Legislature by participating in conference calls with public-school and higher-education officials from around the state. The governor asked the educators "to raise awareness of the need for tax credit reform within their school districts or on their campuses and throughout the community."
He also urged members of School Board "to contact legislators directly to discuss the issue,'' the governor's staff said.
The governor contends that the growth of the tax credit programs threatens state spending for public education and state universities and colleges.
But such tax-credit curbs won't affect the current fiscal year's budget, which has two more months to run.
Last week, Nixon made another unexpected round of $45 million in cuts. On Monday, he predicted that he won't have to make any further cuts during this current fiscal year.
He didn't mention one of the reasons for his optimism -- an unexpected $120 million in additional state income that the Department of Revenue reported on Friday.
State Budget Director Linda Luebbering said Monday that she doesn't know where the $120 million came from or whether it's an uptick on personal income taxes, sales taxes or corporate taxes.
The state Office of Administration, which includes the state's budget overseers, also has no master list of the $900 million in this year's budget trims. Its website simply lists each round of cuts and budget restrictions that Nixon has ordered since last July to keep the budget in balance, as required under Missouri law.
A spokeswoman said Monday that Luebbering's office may craft a more comprehensive list of this year's cuts.
At Monday's news conference, Nixon once again cited March's unexpected increase in state income-tax collections -- while other tax sources declined -- as evidence that more job creation and growth may be underway.
Experts have maintained that states will likely lag about a year behind in economic recovery, compared to the federal government, Nixon said. He predicted that Missouri's overall state revenue figures will begin increasing by this fall.
Nixon Highlights Cuts in Energy Use
In any case, the governor's cost-cutting focus explains why Nixon held the news conference in west St. Louis County on Monday to highlight the state's 5.6 percent reduction of energy use over the last year.
Such reductions in use of electricity, gas and other fuels has saved the state $3 million over the past year, the governor said
The state's lower use of electricity alone, he said, amounts to a reduction of 5.5 percent in kilowatt hours -- or "enough to power more than 2,500 Missouri households for an entire year."
On an environmentalist note, he added, the electrical savings also "corresponds to 16,250 tons of carbon dioxide not being emitted into the atmosphere."
The overall energy savings is almost three times what Nixon had called for when he signed his energy-reduction mandate a year ago. His executive order called for state employees to reduce energy use by 2 percent a year for the next 10 years.
Nixon gave much of the credit to the first year's stellar success to Talisen Technologies, a St. Louis-based firm hired by the state to provide technical support for the energy-reduction production. With its software, the firm is able to track via computer the energy use at 1,000 state buildings across Missouri.
Nixon held his news conference at Talisen's West County headquarters and toured some of its facilities, including its energy control center.
Nixon said the $3 million in this year's savings was over and above what Talisen is paid for its work. The firm's chief executive, George Brill, said the firm has a five-year, $15 million contract with the state that was signed under former Gov. Matt Blunt's administration.
Brill said the firm is about to conduct similar services for Kansas City, and is in the running for energy-saving projects involving St. Louis County and the state of Kentucky.
Meanwhile, Nixon acknowledged that saving energy is just a small portion of what the state needs to do get its budget woes back on track.
And there's some state buildings that will continue to be energy wasters -- most notably, the Missouri Capitol.
Despite budgetary pressures, Nixon said dryly that he had no plans to install a dropped ceiling in the Capitol rotunda. "And I won't hang a ceiling fan from the dome,'' he said.
Even cost-cutting has its limits.