Missouri ends fiscal year with more money than expected, but budget chief urges caution
This article first appeared in the St. Louis Beacon: Missouri state government ended its latest fiscal year with an unexpected additional $339 million in the bank, but that’s not money just sitting around waiting to be spent.
Even though the growth in FY2013 was more than twice the projection, state Budget Director Linda Luebbering warns that it will take a lot more than that to make up for the state’s four lean years.
The fiscal year saw the state’s general revenue collections grow by 10.1 percent, compared the previous year – or more than twice the predicted growth of 4.8 percent.
But the extra money from FY2013, which ended Sunday, will largely go into the state’s cash balance fund, which has been seriously short for years, Luebbering said.
The extra money will beef up that fund to about $447 million, which still is way below the state’s preferred cash balance, used to pay the state’s bills while awaiting other expected income.
“Our cash balance should be double what it is,’’ Luebbering said in an interview Wednesday.
Some of the extra $339 million – Luebbering declines to call it a “surplus” – also will eventually be diverted into the state’s “rainy day fund,’’ which also is underfunded.
And almost $200 million of the extra money already has been earmarked for state capital-improvement projects, such as repairs to the state Capitol, which were approved by the General Assembly in May.
In other words, Missouri state government isn’t as flush with cash as some might believe, the budget director said.
That’s why, she said, that Gov. Jay Nixon has withheld $400 million in budgeted FY2014 spending – including the entire capital-improvement allocation – until it’s determined whether the Republican-controlled General Assembly overrides his veto of a tax cut package contained in HB253.
Nixon’s administration maintains that the package – which would cut corporate taxes in half over five years, and trim individual income tax bills by roughly 17 percent – would cost the state $800 million a year when fully implements. Tax cut backers contend the financial loss would be less.
Investment growth, not jobs, fattens Missouri's bottom line
Such cautions aside, Luebbering did acknowledge that the state’s financial fortunes have improved as it heads into the new 2014 fiscal year, which began July 1.
“We definitely are starting to see a turnaround,’’ Luebbering said. But, she emphasized, much of that extra money came from wealthier Missourians who paid more in taxes because of improved returns in their stocks and investments.
For example: Missouri’s income tax collections for FY2013 increased 9 percent for the year, compared to FY2012. But only a third of that increase came from more people working, or earning more money.
The bulk of the higher income taxes came from increased investment income, generally from wealthier Missourians. In fact, the budget director said the higher taxes on investments and stocks were the major reason why FY2013’s bottom line looked so good.
Backing up that narrative was the fact that Missouri’s sales tax income only increased 1.3 percent during FY2013, compared to the previous year. “People are starting to earn more, but they’re not willing to part with much of it,’’ Luebbering said.
Another cautionary note was the tally for June, the last month in the fiscal year, which saw an increase in income tax collections of 5.6 percent, compared to June 2012. The growth was lower than what the state has seen in recent months, a possible hint at a slowdown, the budget director said.
The state’s projected revenue growth for FY2014 has been estimated at 3.1 percent higher than for FY2013. But because FY2013 ended up so strong, Luebbering said that the increase in FY2014 could be far lower than the projection, and the state’s bottom line would still be fine.
For FY2013, the state’s general revenue collections totaled $8.08 billion, up from $7.34 billion a year earlier. That means the state took in $740 million more during the fiscal year, compared to FY2012.
The total for June was $781.5 million, compared to the June 2012 tally of $729.2 million – an increase of 7.2 percent.
Here’s the state’s fiscal breakdown for June – the last month in the FY2013 fiscal year -- and its final tallies for the fiscal year, which ended last Sunday.
GROSS COLLECTIONS BY TAX TYPE
Individual income tax collections
- Increased 9.0 percent for the year, from $5.84 billion last year to $6.37 billion this year.
- Increased 5.6 percent for the month.
Sales and use tax collections
- Increased 1.3 percent for the year from $1.87 billion last year to $1.90 billion this year.
- Decreased 1.1 percent for the month.
Corporate income and corporate franchise tax collections
- Increased 4.5 percent for the year, from $502.9 million last year to $525.7 million this year.
- Increased 11.1 percent for the month.
All other collections
- Increased 18.2 percent for the year, from $398.4 million last year to $470.9 million this year.
- Decreased 34.1 percent for the month.
- Decreased 7.8 percent for the year, from $1.28 billion last year to $1.18 billion this year.
- Decreased 38.0 percent for the month.