This article first appeared in the St. Louis Beacon, Nov. 2, 2011 - After a strong summer, Missouri's financial situation has taken a turn for the worse this fall. October marks the second straight month where state government has collected less in revenue that it did a year ago.
Net general revenue collections for October were down 1.3 percent compared to those for October 2010, from $476.4 million to $470.1 million.
"It's definitedly not the right trend,'' said state Budget Director Linda Luebbering in an interview today.
She cautioned against reading too much into a couple months of collections. But at the same time, Luebbering acknowledged that state revenue is "not where we need to be'' for the current fiscal year (FY2012), which began July 1.
The state's budget, approved by the General Assembly last spring, is based on a projected increase of "just under 2 percent" compared to the previous fiscal year (2011), Luebbering said.
So far this fiscal year, the state has collected $2.25 billion general revenue -- up just a smidge from the $2.23 billion collected at the same point a year ago.
Corporate Collections Way Down
With the October numbers, Missouri's year-to-date tally is up 1.2 percent compared to a year ago. That means that another bad month could definitely put state collections below where they need to be to guarantee a balanced budget by the end of the fiscal year next June 30.
Since Missouri's constitution requires a balanced budget, that could mean Gov. Jay Nixon might be forced to withhold or cut budgeted monies -- an action that he has hoped would not be necessary. For the first 18 months of his term, through the summer of 2010, Nixon had to cut more than $1 billion in budgeted allocations. Schools and social services took the biggest hits.
Luebbering said she's particularly concerned about some "troubling'' numbers in this fiscal year-to-date tallies -- in particular, a sharp drop in corporate tax collections, which are down 16.9 percent as of Oct. 31, compared to the same point in 2010.
She can't explain the drop. As a result of the General Assembly's action earlier this year, the state is phasing out Missouri's corporate franchise tax. But Luebbering said that phase-out doesn't go into effect until 2012, so it shouldn't be to blame for the current decline.
One bit of good news, she said, was the sharp increase in sales tax collections -- up 14.6 percent this October, compared to October 2010. For the fiscal year, sales tax collections are up about 5 percent.
Individual income tax payments also continue to show a slight increase, which signals that more workers are finding new employment -- or working more hours.
But overall, if the numbers in the next couple months fail to show improvement over 2010, Luebbering implied that the governor likely may need to act. Under the Missouri Constitution, the governor can unilaterally cut spending or "withhold'' money for release later, if the economic situation improves.
The current fiscal crunch comes as Nixon is in court battling state Auditor Tom Schweich, a Republican challenging the governor's power to make budget cuts, or reallocate money, without legislative approval.
Schweich contends that Nixon, a Democrat, overstepped his bounds earlier this year when he acted to withhold about $170 million from the current fiscal year's budget, so that the state would have enough money to pay its share of the disaster relief in response to the deadly May 22 tornado that devastated Joplin, Mo.
Nixon has noted that the tornado took place after the General Assembly had ended its regular session, He reallocated some of the withheld money, pointing out that legislators had earmarked a place in the budget for unspecified estimated disaster costs.
This summer, with the state's income appearing flush, Nixon restored some of the withheld money to the state budget.
At an unrelated event in St. Louis on Tuesday, Nixon emphatically reaffirmed his stance that he had acted no differently than previous governors, who are given broad powers under the Missouri constitution to regulate how state money is spent.
Luebbering declined comment about the suit. But as for general budget matters, she said that it was definitely more prudent for the governor to withhold or trim from the budget early in the fiscal year, than to wait — and perhaps have to make drastic cuts with only a few months left in the budget year.
"It's much better to be cautious at the beginning of the year,'' Luebbering said. "You can always release the money'' if state revenues improve.
At the moment, she admits to being concerned about how this fiscal year will turn out. The economic picture could affect the General Assembly's outlook when it reconvenes in January, and immediately begins work on a new budget for FY2013.
Here's the October numbers, as released by the state's Office of Administration:
Gross Collections By Tax Type
Individual income tax collections
Increased 2.5 percent for the year, from $1.59 billion last year to $1.63 billion this year.
Increased 3.6 percent for the month.
Sales and use tax collections
Increased 5.5 percent for the year, from $570.2 million last year to $601.3 million this year.
Increased 14.6 percent for the month.
Corporate income and corporate franchise tax collections
Decreased 16.8 percent for the year, from $153.5 million last year to $127.7 million this year.
Increased 4.6 percent for the month.
All other collections
Decreased 17.5 percent for the year, from $149.6 million last year to $123.3 million this year.
Decreased 24.4 percent for the month.
Refunds
Decreased 3.3 percent for the year, from $232.0 million last year to $224.4 million this year.
Increased 60.7 percent for the month.
