More budget cuts expected as state revenues drop more than expected.
From Missouri Digital News: https://mdn.org
MDN Menu

MDN Home

Journalist's Creed

Print

MDN Help

MDN.ORG: Missouri Digital News
MDN Menu

MDN Home

Journalist's Creed

Print

MDN Help

MDN.ORG Mo. Digital News Missouri Digital News MDN.ORG: Mo. Digital News MDN.ORG: Missouri Digital News
Lobbyist Money Help  

More budget cuts expected as state revenues drop more than expected.

Date: October 5, 2009
By: Jeremy Essig
State Capitol Bureau

JEFFERSON CITY - Two of Missouri's top budget officials predicted Monday that Missouri's governor will make further budget cuts in response to to an unexpectedly high drop in state collections.

The state administration reported a 10 percent drop in revenue collections for the first quarter of the current fiscal year compared to the same three months last year.

The decline was "worse than anticipated," said State Budget Director Linda Luebbering, who expects the governor to have to add to the $430 million he already cut from the current year's budget.

House Budget Committee Chairman Rep. Allen Icet, R-St. Louis County, agreed with Luebbering's assessment. While he expected a decline, 10 percent was worse than he anticipated, Icet said. In order to reach a balanced budget by April - as required by the Missouri constitution - Nixon will have to make cuts throughout the year, Icet said.

In total, for the months of July, August and September, the state collected nearly $189 million less than the same period last year.

"It does look like there will need to be additional restrictions on spending," Nixon's spokesperson Scott Holste said, although Nixon is "committed to keeping (funding) for essential programs in place."

One of these "essential programs" is the Foundation Formula, a program that funds K-12 education. Nixon will not look at cuts to the education fund, Luebbering said, adding that cuts to programs such as Medicaid were also off the table due to restrictions in the American Recovery and Reinvestment Act.

The budget office is preparing recommendations for spending cuts and will present these options to Nixon sometime in the next few weeks, Luebbering said. While both Luebbering and Holste said no specific cuts have yet been targeted, Icet expects these cuts to come from the elimination of open or current positions.

Jobs funded by revenue collection have on average a 15 percent yearly turnover, Icet said, but the current decline may require Nixon to go beyond leaving current positions unfilled.

A good portion of the open position cuts have already taken place, Luebbering said, but more lay-offs are still to come.

Ironically, state-wide unemployment is most responsible for the decline in tax collection. Individual income taxes, which provided $1.31 billion for the state last year, have only raised $1.2 billion this year. Missouri's unemployment rate is 9.5 percent according to the Bureau of Labor Statistics.

The revenue collection figures cover the months of July, August and September.

While the stock market's sharp decline occurred in September 2008, Luebbering cautioned against making a direct comparison between this September and a year ago because while the market crash occurred in September, state revenue collection remained strong for several more months.

State revenue collection looked good through January, Luebbering said, citing especially good December collections. An appropriate comparison may have to wait until February, the first month state collections began seeing an impact, Luebbering said.

While caution may be necessary for comparisons to be made, neither Luebbering nor Icet see few positives in the current numbers.

"The trend is not going in the right direction," Luebbering said.

Icet, while attributing a good portion of the revenue decline to unemployment, said money received from capitol gains provided another cause for concern. Capitol gains are any positive returns from an investment.

While describing the stock market as "impossible to predict," Icet said he fully expects this source of revenue to drop as well.

"We're in for a rough ride," Icet said.