This article first appeared in the St. Louis Beacon, Dec. 19, 2012 - As Gov. Jay Nixon and Missouri legislators begin their annual five-month dance to assemble and approve the next fiscal year’s budget, the latest state-income estimate signals that less fancy footwork may be needed to reach agreement.
Unlike the last few years, the state’s leaders can focus less on spending cuts and more on how they want to spend some extra money that’s expected to come in.
After dealing with the mandatory spending items, state Budget Director Linda Luebbering said the governor and lawmakers will have the limited luxury of asking themselves, “What are the priorities for the state, for spending those additional dollars?”
Missouri leaders haven’t been able to grapple with such a question since at least 2008, instead focusing instead on painful reductions, which reached billions of dollars over at least three years.
But she cautions that the amount of additional cash isn’t much – just under $240 million, a fraction of the state’s annual general-revenue budget of roughly $8 billion.
On Tuesday, Nixon and the General Assembly’s two top numbers people -- Senate Appropriations Committee Chairman Kurt Schaefer, R-Columbia, and House Budget Committee Chairman Rick Stream, R-Kirkwood – announced that their camps had reached a bipartisan consensus regarding a revenue estimate for fiscay year 2014, which begins July 1.
The projected general-revenue collection total is $7.929 billion, up $237 million from the current 2013 fiscal year. (General revenue amounts to roughly a third of the state’s budget, with the rest mainly federal money that flows through the state but is designated for certain purposes. That’s also true for certain earmarked tax collections, such as Missouri’s conservation sales tax, which cannot go into general revenue.)
The agreed-on estimate is based on projected economic growth of 4.8 percent. However, about one-third is offset by the state’s continued phase-out of the corporate franchise tax and the loss of one-time shots of federal money – such as this year’s $39 million infusion from the national mortgage settlement with top financial institution.
The state also is likely to lose about $60 million in tax income because the federal government appears poised to get rid of the two-year reduction in the Social Security tax, which amounted to a tax cut of 2 percent.
Because Missouri allows federal taxes to be deducted when calculating state taxes, higher federal taxes translates into a reduction in state taxes.
Taking all those caveats into account, the upshot is a net Missouri estimated growth rate of 3.1 percent for the coming fiscal year.
The FY2014 revenue estimates also doesn't reflect the continued fiscal and philosophical dispute in Jefferson City over whether to expand the state's Medicaid program as sought under the federal Affordable Care Act.
The state's major hospitals join Nixon in seeking the expansion, which he says would add 300,000 Missourians to the state's Medicaid rolls -- but would also free up about $250 million in state money over three years that could be shifted to non-health care spending. The savings comes largely from the infusion of federal aid to pay for the Medicaid expansion.
Nixon is expected to take all of those factors into account as he and his staff, including Luebbering, draw up a proposed FY2014 budget. The budget director said it was too early to make any projections about the governor’s likely spending priorities.
Nixon plans to unveil his proposed budget in about a month, when he makes his annual State of the State address. Said the governor in a statement:
“My top priorities include balancing our budget, holding the line on taxes and keeping our fiscal house in order. Because of our bipartisan fiscal discipline these past few years, Missouri is one of only a handful of states with a spotless Triple-A credit rating, and our economy continues to move in the right direction…”
The governor praised Schaefer and Stream, and their staffs, for their work with his budget team, including Luebbering, to come up with a consensus estimate. “Through this bipartisan process, we have once again developed a solid foundation upon which to build our budget for the coming year,” he said.
Said Schaefer: "Revenue forecasts call once again for a fiscally disciplined State budget. Governor Nixon, the House and the Senate will continue to work diligently toward a responsible Missouri budget."
Added Stream: “The revenue estimate indicates we will need to continue the state’s disciplined approach to the budget. The House will continue to work with the Governor and the Senate to craft the best budget for the people of Missouri.”
Note that none of the three mentioned the word "cut."
