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More money into state coffers ignites bipartisan deal for one-time spending spree

In Economy

3:51 pm on Thu, 05.02.13

Thursday’s developments in the Missouri Capitol highlight that there’s nothing like a financial windfall to ignite bipartisan goodwill.

The latest revenue figures for Missouri government were released Thursday morning and were even rosier than expected. The news prompted Gov. Jay Nixon, a Democrat, to announce immediately that he’d call on the General Assembly – now embroiled in crafting a new budget – to consider adding $86 million in one-time spending for capital improvements.

Rick Stream
Rick Stream

House Republican leaders swiftly agreed with the idea, with Budget chairman Rick Stream, R-Kirkwood, presenting an amendment Thursday afternoon that upped the figure, earmarking $121 million for several construction projections.

Among them: $38 million to purchase the building next to the Capitol housing the Department of Transportation and transforming it into office space for state employees now based in the Capitol, including those who work for the General Assembly.

(MoDOT would then move into an historic, but unused, old state prison in Jefferson City, officials say.)

The House amendment, which Speaker Tim Jones, R-Eureka, says has Nixon’s support, also includes $50 million for repairs to the state Capitol, $20 million to improve state parks and $13 million to design a replacement for Fulton State Hospital for the mentally ill.

With little debate, the House approved the amendment, 131-26.

Nixon also announced that he has released $29.6 million in allocated money from this fiscal year’s budget that he had temporarily “restricted’’ until it was clear that the state would end its fiscal year on June 30 with a balanced budget, as required by the state constitution.

The released money “will provide additional funding for education, local public health agencies and other services,” Nixon said in a statement.

State’s bottom line sees unexpected $400 million

The proposed added spending came after state Budget Director Linda Luebbering reported that net general revenue collections in April were up by a whopping 27.4 percent compared to April 2012 – or an increase in $200 million in just one month.

That’s likely the largest one-month increase since the economic downturn in late 2008 led to two years of plummeting state revenue.

With only two months left to go in the fiscal year (FY2013), net general revenue collections have increased 11.2 percent compared to the previous fiscal year – or roughly $670 million more than last year.  If the percentages hold, the income increase for the current fiscal year is close to three times the estimate of about $200 million used to draw up this year’s budget .

More state income could affect tax debate

A deal apparently has been struck to cut short any House/Senate tension over whether to revamp earlier conservative income estimates used as the outline for the FY2014 budget, which must be completed and forwarded to Nixon by next Friday.

Jones told reporters that all sides agreed Thursday to stick with the current income estimate for FY2014 and bank any additional savings for this year, and perhaps in FY2014, until the state’s ongoing economic picture was clear.

Tim Jones
Tim Jones

Jones did acknowledge, in response to a query from the Beacon, that the improved revenue numbers might affect the debate in both chambers over state tax credit programs and possibly influence the fate of SB 26 – a bill calling for sizable cuts in state corporate and individual taxes coupled with a sales tax hike.

The state Senate approved a bill earlier this week that calls for sharp cuts in the state’s tax credit programs for low-income housing and historic buildings – two programs used heavily by developers in the St. Louis area. The House has been cool to the cuts and some activists involved in negotiations privately predict that the higher state income figures may bolster the House’s position.

While not getting into detail about the tax credits, Jones noted that this year’s economic growth came as the state was phasing out its corporate franchise tax.

Jones said that those who were critical of the projected state income loss if SB26 is passed – which range from $200 million to $900 million -- might want to reconsider their view. He said that tax cuts may be fueling the current growth.

Budget chief warns growth may not last

In an interview, Luebbering declined to go that far. She said the administration was sticking with its fiscal concerns about SB 26.

Luebbering said the April numbers were fueled, in part, by an increase in individuals paying capital-gains taxes because their holdings, such as in stocks, were no longer losing money. She said it was too soon to tell if the state’s increase in income-tax collections was due to more people getting jobs or current workers earning more money.

Linda Lubbering
Linda Luebbering

The state also had a sharp increase in sales tax collections, which the budget director couldn’t explain. She has expressed concerns for months about the state’s lagging sales-tax numbers, even as other sources of state income have improved.

That aside, Luebbering warned about assuming that Missouri’s current spurt of financial growth will continue.

“We got some one-time good news,’’ she said. “I just wouldn’t anticipate the type of growth that we are seeing right now continue for an extended stretch  of time.”

Luebbering also noted that state government has a ways to go before it recovers from the economic decline in 2008. For example, the state of Missouri traditionally has had in the bank a “cash balance” of about $800 million, an amount equal to about 10 percent of its general revenue budget.

But since 2008, she said the state’s cash balance has dropped as low as $200 million. With the latest good news, Luebbering hopes to end the fiscal year with a cash balance in the range of $500 million.

April’s unexpectedly strong showing also has allowed the state government to repay early the $375 million borrowed from the Budget Reserve Fund during fiscal year 2013, which the budget director noted is ahead of the state’s constitutional deadline of May 15.

Governor lauds news of economic improvement

“Today’s general revenue report shows that our focus on fiscal discipline and job creation continues to pay real dividends for our economy and our state budget,” Nixon said in a statement. “With personal income up and our unemployment rate below the national average for the 43rd straight month, Missouri’s economy is clearly moving in the right direction, as this report reflects.”

Nixon didn't mention that he had been forced to cut at least $1.5 billion from state budgets during his first years in office, beginning in 2009.

Instead, he focused on how the added money could help bolster the fortunes of another state issue close to his heart: parks.

Jay Nixon
Jay Nixon

“As we continue to monitor these positive trends, strategic investment in key assets, such as our state parks, is a fiscally prudent approach to moving our state forward,” Nixon added.

The governor’s initial proposed amendment had called for $45 million for improvements to state parks – more than twice the $20 million approved by the Missouri House. His statement pointed to his State of the State address in January, when Nixon proposed dramatic upgrades throughout the state’s system of 87 state parks and historic sites.

The governor had proposed to spend only $28 million for improvements to the state Capitol – and had not mentioned the $38 million now proposed by the House to purchase and revamp the building now used by the state Department of Transportation, just east of the Capitol.

However, Jones told reporters that all parties in the House, Senate and governor’s office had agreed to the $121 million proposed passed by the House. The governor’s staff didn’t dispute that characterization.

Jones said the improved financial picture could lead to changes in the proposed statewide bond issue that isn't expected to get through the General Assembly this session, but which he predicted will be re-introduced next year.

Meanwhile, the governor spent part of Thursday in Kansas City, lauding the addition of up to 2,000 new jobs at automaker Ford’s truck production plant. Left unsaid is the expectation that those jobs will add more tax income to the state’s growing coffers.

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