Gov. Jay Nixon has given the Republicans who control the General Assembly an ultimatum.
Abandon special tax breaks to a variety of industries, or see the governor freeze millions of dollars in education funding indefinitely.
The Democrat announced Tuesday he was vetoing or freezing $786.2 million in state spending. The problem, he said, is that Republicans passed a budget that was “dangerously out of balance” thanks to tax giveaways and new spending.
“While eroding our tax base with new loopholes for special interests, the legislature simultaneously littered the budget with earmarks and new government programs, demonstrating misplaced priorities and a stunning lack of fiscal restraint,” Nixon said.
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A showdown over Nixon’s vetoes won’t happen until September. The new school year will already have begun by then, timing that adds an element of uncertainty to school district budgets. In the meantime, the dispute puts in limbo money for everything from some teacher salaries to busing costs to preschools.
The budget passed by the legislature in May called for more than $100 million in additional spending for the state’s K-12 public schools and a $43 million increase for colleges and universities.
Nixon is withholding the funding for both increases, saying the state can no longer afford it. But he said the additional school money would be released if legislators sustain his previously announced vetoes of bills granting special tax breaks to industries such as computer data centers, grocery stores, power companies and dry cleaners.
“That is the choice in front of us,” he said. “Is a tax break for a utility company, a tax break for a fast-food restaurant, a tax break for a dry cleaner — are those ahead of funding education in this state?”
Republicans and their allies immediately condemned the governor’s actions.
Dan Mehan, president of the Missouri Chamber of Commerce and Industry, called Nixon “petty” and said the governor is hurting the students “he claims he is trying to protect.”
Sen. Ryan Silvey, a Kansas City Republican who serves as vice chairman of the Senate Appropriations Committee, said the governor is playing politics with education funding.
“The governor has decided once again to put children in the crossfire of a political fight with the legislature on tax cuts,” he said.
Silvey defended the vetoed legislation, calling many of the tax-break bills mere corrections of tax policies that he said had been wrongly applied by the courts or Nixon’s administration.
A similar political dynamic played out last year, when Nixon froze $400 million for education, health care and other programs until after the legislature failed to override his veto of an income tax bill.
This year, however, several other factors are playing into the governor’s budget decision.
According to Linda Luebbering, Nixon’s budget director, about $51 million in reductions can be attributed to the legislature failing to approve an amnesty program to encourage people with overdue taxes to pay. Another $50 million was the result of tobacco settlement proceeds being built into the legislature’s budget that are not available, she said.
Compounding the issue, she said, was slower-than-expected growth in state revenues.
“You can’t spend more than you take in,” Nixon said.
In addition to the $100 million withheld from the K-12 funding formula, Nixon also withheld $15 million in transportation funds for schools and $3 million for a preschool program in provisionally accredited and unaccredited schools, among other education measures.
Most could later be released at Nixon’s discretion.
Gayden Carruth, executive director of the Cooperating School Districts of Greater Kansas City, said several local districts have already finalized their budgets for next year. Others are set to finish that process before June 30.
“My guess is that most districts were very cautious in their planning in anticipation that something like this might happen,” she said. “But it still makes planning and budgeting very difficult when you don’t know for sure what the funding might be.”
Carruth said that while Nixon’s budget decisions will cause some difficulties for local school districts, she said the governor was correct in vetoing the tax break bills because they would have created long-term problems for education funding.
Nixon put a hold on state employee pay raises, expanded child care subsidies and the restoration of dental and therapy coverage for adult Medicaid recipients that had been eliminated a decade ago. He is also eliminating 260 full-time state positions and closing 19 regional state offices, including seven for the Department of Revenue and six each for the departments of Mental Health and Natural Resources.
Another item withheld from the budget is a $5 million appropriation to help Kansas City cover expenses if it is chosen to host the 2016 Republican National Convention.
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