Tax cuts threaten the quality of Missouri’s public services

06/14/2014 11:00 AM

06/13/2014 10:29 PM

According to many Missouri politicians, the state can cut taxes even while planning to spend more money than it takes in. But the numbers do not compute.

Missouri’s fiscal problems aren’t as bad as the widely reported crisis that Kansas is suffering. But they are headed in that direction, potentially affecting 6 million Missourians.

The state soon may have to reduce financing for K-12 schools, public universities, social programs and other services. Missouri already under-funds many of these vital programs, so further budget cuts could leave the state in an even weaker position to compete for new residents and jobs.

Gov. Jay Nixon last week provided a needed lesson in fiscal responsibility. He vetoed special-interest tax breaks passed by the legislature, pointing out they could drain several hundred million dollars from the budget. But because Republican leaders vow to try to override the vetoes this fall, Nixon must be prepared to slash proposed spending for state programs as early as next month.

The Star recently reviewed Missouri’s general fund receipts through May, which is the 11th month of the 2014 fiscal year. It also reviewed predictions for the 2015 fiscal year that starts July 1. Some of the findings:

Missouri expected to have about $7.45 billion in general fund receipts by May 31.

Instead, it had $7.32 billion, a shortfall of $130 million.

Missouri took in about $40 million less than projected in individual income tax receipts, the biggest contributor to the shortfall.

Kansas, because of large tax cuts passed in 2012, was $282 million behind in personal income tax revenues in a general fund budget of $5 billion.

(Missouri’s income tax cut, passed this session over Nixon’s veto, will not take effect for several years. But when it does, the state could see a drop of $600 million annually in tax revenues.)

Missouri has a cash balance of $200 million it could use to balance the budget. Missouri also has a budget reserve fund of about $540 million. Up to half of the latter could be used to pay the state’s bills, though that money would have to be paid back by the end of the fiscal year.

Missouri’s budget woes aren’t forecast to ease in the 2015 fiscal year.

That’s partly because, even with supposedly conservative Republicans in charge of the legislature, the state appears ready to spend more than it collects.

The state’s expected general fund revenues are $8.59 billion. But lawmakers have approved total general fund spending of $8.96 billion.

The $8.59 billion in projected receipts may not be realistic, either. Budget estimators calculated a 4 percent growth rate over this year. However, the state is unlikely to reach even the 2.8 percent growth goal set for this year. If Missouri ends the year $130 million in the red, for example, it would need a 6 percent expansion of revenues to reach $8.59 billion in the next fiscal year.

By comparison, Kansas experts predict a growth of only 0.5 percent in that state’s revenues in the next fiscal year.

Yet another big and potentially costly unknown looms.

Republican leaders contend the state needs to cut its taxes. That mindset led to the parade of special tax breaks they helped pass in the recent session. If passed over Nixon’s vetoes, the bills reduce general fund revenues by $250 million.

GOP officials must be challenged in the September veto session to show whether there’s any credence to their claim that these tax changes will help the Missouri economy.

GOP legislators can be expected to trumpet how they are “returning money to the people.” But that claim quickly becomes hollow if legislators aren’t willing to say what services they will cut to do that.

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