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Holden plan for tobacco settlement money pronounced DOA by Republicans

January 30, 2001
By: Lauren Shepherd
State Capital Bureau

JEFFERSON CITY - Despite a call for bipartisanship, Missouri's new Democratic governor found one of his key proposals declared "DOA" by a top GOP leader.

During his State of the State address to a joint session of the legislature Tuesday, Holden said he would issue an executive order establishing a trust fund for tobacco settlement money that would be earmarked to pay for prescription drugs for seniors, life sciences research, anti-smoking initiatives and early childhood programs.

But Republicans immediately objected -- arguing that Missouri voters should have a vote on the final spending plan.

"The proposal the Governor put forward not only circumvents the legislature -- it also circumvents the voters," said House Minority Leader Rep. Catherine Hanaway, R-Warson Woods. "As far as House Republicans are concerned, I do think it's DOA."

At issue is how to spend an estimated $4.5 billion paid over a 25-year period as well as $319 million that soon will be available to the state under the national settlement with the tobacco industry.

Hanaway said several of the governor's priorities may have bipartisan support, such as creating a health care trust fund and using the money for health care related programs, but she said she disagreed with his plan for signing an executive order establishing the fund instead of putting the issue to a direct vote by the voters.

"That is new revenue coming into the state's coffers and it's a belt-tightening that we're asking voters to take on without a vote of the people," she said.

Co-President Pro Tem Sen. Peter Kinder, R-Cape Girardeau, agreed with Hanaway that Holden's plan for earmarking tobacco money would not be easily accepted by the legislature, saying "it's not necessarily DOA, but the next thing to it."

Kinder will become president pro tem once the January 23 election results giving the GOP control of the Senate are certified. "It's not my favorite part of the speech to hear after three years of discussion about a vote to the people and legislative consideration of this issue to have the puppet come down at the end of the show and say it's going to be done by executive order," Kinder said.

"It seems extraordinarily abrupt and we've got to take a long look at that, beginning with the questionable legal footing" of using an executive order to tell the legislature how to spend the state's money.

But Holden said he needs the tobacco settlement money to create a balanced budged, especially since the economy is projected to slow down.

In his speech, Holden cautioned that "the combination of a slowing economy, deep tax cuts, and unexpected mandatory expenses have put stress on our state budget."

He said the state's portion of the tobacco settlement money would enable him to balance the state's budget for 2002.

"We've got to present a fiscally sound budget and I need those tobacco funds to do that," he said at a news conference after his address.

He added that if tobacco money was not available, the legislature would have to find an extra $127 million in the budget to pay for state programs -- primarily in tax credits for prescription drug costs for the elderly that has run over budget.

Holden proposes replacing that program as well as other initiatives designed to help the elderly with prescription drug purchases.

The current system allows anyone who purchases prescriptions to receive a tax credit up to $200 regardless of their income.

Holden's plan would replace the tax credit by using tobacco money to pay for the entire cost of prescription drugs for seniors with individual incomes below $25,000 or household incomes below $50,000. "Under my plan, no eligible senior will pay more than $1,500 a person or $3,000 a family for their prescription drugs in any one year," Holden said in his address.

Kinder agreed that the current tax credit plan has failed and "has been abused, it's fair to say by someone in the Department of Revenue who didn't have a handle on it."

"It was much more expensive than it was supposed to be," he added.

But before creating a new program, Kinder said he wanted the Senate Appropriations Committee to study the tax credit program to see what went wrong.

In addition to prescription drug coverage, Holden also proposed a plan to allow disabled seniors to purchase prescriptions at the Medicaid reduced rate.

The plan, however, will require a federal-government waiver.

Republicans also took issue with the governor's promise to be a leader in developing a comprehensive transportation plan for the state, since Holden did not advocate any specific program.

"It's ordinarily the executive prerogative to propose while the legislature disposes," Kinder said. "We've had no specific proposal beyond a very vague and ringing declaration that he wants to lead."

"Those of us who've been waiting since Nov. 7 for those specifics will have to keep waiting, I guess," he added.

But Holden said after his speech that he wanted to garner support from both parties for specific transportation proposals before advocating any one solution.

"As soon as I, as governor, present my plan without the support of the leadership of the two houses and both parties, then it makes it very difficult to go out and get that goal achieved," he said.

While criticized for his health and transportation programs, Holden won GOP praise for his education package that includes incentives for teachers getting national certification, school report cards, increased money for technology in schools and courses on character.

Kinder, however, issued a scathing attack on Holden for not addressing the problems in the two urban school systems of St. Louis and Kansas City.