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Nixon says latest cuts of $204 million, including 700 state jobs, will keep 'fiscal house in order'

This article first appeared in the St. Louis Beacon, Oct. 28, 2009 - As a veteran state budget planner, Linda Luebbering assisted in steering the state's fiscal ship during some turbulent economic times.

Luebbering was state budget director for Gov. Bob Holden, a Democrat whose budgetary fights with the Missouri General Assembly likely attributed to his political demise. The state had to deal with declining revenue brought about by a weakening economy and the Sept. 11 terrorist attacks.

But Luebbering -- who returned to Missouri state government as Gov. Jay Nixon's budget director -- didn't mince words on Wednesday in putting the current budgetary situation into perspective.

"The budget situation this time is above and beyond what the state has experienced in decades," said Luebbering. "This is the worst I've ever seen, and I have worked in state budgeting for probably around 20 years. So, it is challenging."

Nixon and Luebbering announced Wednesday roughly $204 million worth of "withholds" across the state government spectrum. (A withhold is money appropriated by the Legislature but not released by the governor; depending on the state's later budget situation, the money could be restored. Flat out budget cuts cannot.) These cuts are on top of hundreds of millions of dollars worth of line-item vetoes and budget restrictions announced earlier for the current fiscal year.

Nixon said he's cut about $634 million total from the state budget for the current fiscal year that began July 1; he also made at least $100 million in cuts during the last half of the previous fiscal year, which was already underway when he took office in January.

The losses include the elimination of hundreds of part-time and full-time positions in state government, reductions in Medicaid provider reimbursement rates, a freeze on grants for life science programs and a slash to dollars to repair state buildings.

Nixon did not make cuts to core K-12 and higher education funding or eligibility for Medicaid. But he said "protecting these core services has required us to trim in some areas."

"Making these reductions is never easy," Nixon said. "But it is essential to run a fiscally conservative state government. That's the job that the people of Missouri elected me to do."

Among other things, Luebbering said the state would seek to lower reimbursements on services she described as being "above the Medicare rate." Under Nixon's plan, the reimbursements for the services -- such as X-ray labs -- would be lowered to equal to or slightly below the Medicare rate.

Jon Dolan, the executive director of an association representing long-term care facilities, said nursing homes would be affected. He said his organization, the Missouri Health Care Association, is working with Nixon's administration.

"But we also are not shy about saying we are, next to the neo-natal care unit -- which has the money it needs -- we are the most needy and indigent and frail and elderly Missourians," Dolan said. "So we are working very closely with the administration to make sure that everything that is done -- no matter what's chosen -- will be fair."

Asked whether the cuts would make it harder for providers to accept Medicaid recipients, Nixon said using Medicare reimbursement rates won't hurt access.

"In all of these areas, we were very, very careful to provide the resources for what I think will be a continuing pool of people who are going to access Medicaid," said Nixon, noting that 20,000 more children have entered the program since the beginning of the year.

Nixon's cuts include:

  • $20 million for personnel and equipment. Nixon said roughly 493 part-time and 200 full-time state positions would be cut through a combination of layoffs and not filling vacancies.
  • $15.8 million from K-12 transportation. Essentially, the funding would be trimmed to last year's level, said Luebbering, effectively eliminating the increase for the 2010 fiscal year.
  • $3.1 million to the University of Missouri Hospital and Clinics.
  • $13 million for grants doled out by the Life Sciences Research Board. Luebbering said that would allow administrative staff to remain in case the grants could be allocated. But, she added, no new grants will be given out for a year unless the situation drastically changes.
  • $20 million for repairs and maintenance to state facilities. That's on top of $47.8 million previously withheld. Luebbering said the cutback means that only critical repairs will be undertaken.

Rep. Chris Kelly, D-Columbia and a member of the House Budget Committee, said Nixon's duty to balance the budget is one of the most "fundamental" jobs he has as chief executive.
"I hate the cuts that he made and I don't see how he had any choice," Kelly said. "And I think given the need to make the cuts, his list is reasonable. ... What he cut and when he cut were both generally correct. It's very good that he did not try to hide the ball, that he did this early."

Kelly said that the most harmful cut might be the $3.1 million to MU's hospital, especially since the facility is the provider of last resort for dozens of counties in rural Missouri.

"For rural health care, it is a significant problem," Kelly said. "And it's also a problem for the entire University of Missouri. When the University of Missouri cannot recover either fees or insurance payments or Medicaid or state dollars, the whole budget of the entire university suffers."

House Budget Chairman Allen Icet, R-Wildwood and a candidate for the Republican nomination for auditor, said that Nixon might not have gone far enough with the cuts. He said the governor could have cut more now to guard against bleak news for the rest of the fiscal year.

"He needs to be more aggressive," said Icet, reiterating that he did not have all the details in front of him. "Here we are four months into a 12-month fiscal year, we're one-third of the way through, and I just don't know if he's done enough."

Nixon said he couldn't rule out more cuts down the road.

"But at this particular juncture, at this particular time, the cuts that we have meet the requirement that we have to keep the fiscal house in order," Nixon said.

As we reported earlier Wednesday----

Missouri Gov. Jay Nixon announced today his latest round of budget cuts, and -- as expected -- social services are hit the hardest.

Overall, the governor detailed $204 million in cuts and withholdings, reflecting the dramatic drop in state tax collections, particularly income and sales taxes.

The state's Departments of Social Services, Health and Senior Services, and Mental Health will layoff hundreds of workers, although most are part-timers. Affected will be 363 current parttime workers, and another 130 unfilled parttime posts.

State Budget Director Linda Luebbering said 200 fulltime state jobs also are being cut, but she did not yet have details on which departments would be affected.

But although the loss of close to 500 parttime jobs, and 200 fulltime, are dramatic, they're not the bulk of the budget cuts. The job cuts will save only about $20 million.

The largest chunk of savings, about $33 million, is coming from reduced payments to Medicaid service providers, generally nursing homes.

The governor also is trimming $29 million from police communications upgrades, $20 million earmarked for repair and improvements of state buildings, and $13 million in life science spending. The latter is a one-time cut, Nixon said.

Nixon had first disclosed that he was going to have make this week's trims in an interview Monday with the Beacon, in which he acknowledged that the state's budget problems continue.

Today's cuts represent at least the fourth round of budget reductions since Nixon took office in January, reflecting the state's worsening economic condition. He laid off 1,200 state workers in January, cut more than $400 million from  the state budget in June, and another $60 million in August.

The problem: Missouri's state income is down more than 10 percent from a year ago, including a stunning 16 percent drop in September. Luebbering expects the declines to stabilize in the coming months, largely because the state's economic slide began in earnest with the October 2008 figures.

The last fiscal year's budget, which ran through June 30, ended up down almost 7 percent from the previous year. This year's budget had predicted only a one percent drop, but the monthly numbers hint that the decline will be closer to 5 percent.

If that's the case, Nixon will need to  make more cuts in the coming months to balance this fiscal year's budget by next June 30, as the state constitution requires.

Jason is the politics correspondent for St. Louis Public Radio.