This article first appeared in the St. Louis Beacon: Save it, spend it or give it back? That, in essence, is the growing debate in the Missouri Capitol as legislators are monitoring the state’s apparently improving income picture, which could result in a budget surplus when this fiscal year ends June 30.
House Speaker Tim Jones, R-Eureka, is adamantly in favor of the “save’’ option, and he displayed a bit of pique Monday as he blasted the state Senate for approving a FY2014 budget last week that earmarks some of the possible windfall for needed physical repairs to the state Capitol, among other things.
Failure to stick with last fall’s bipartisan revenue estimate, said Jones on the House floor, “would be betraying the trust of the taxpayers.”
“Our budget, as we proposed, will balance,’’ said Jones. “The Senate’s budget has done nothing of the sort.”
He accused the Senate of making its projected income estimate "up from thin air or whole cloth."
The House-Senate debate is particularly noteworthy because it comes after years of austere budgets and unpleasant cuts to comply with the state constitution's required balanced budget.
The consensus revenue estimate, known as the CRE, is not mandated in the state constitution. But it has been the accepted practice each year, and it is reached with negotiations between the General Assembly and the governor's staff before each legislative session.
This year's unexpected riches are prompting debate over whether the consensus revenue estimate should be changed to reflect the state's improved fortunes.
"The CRE has to mean something,” the speaker told reporters Monday. “That number should not be a moving goalpost.”
Jones’ comments came after the House on Monday had loudly rejected all of the Senate’s approved budget bills, which means that the two bodies will need to haggle out their differences in conference committees. The General Assembly must approve a budget by May 10 and send it on to Gov. Jay Nixon.
The consensus revenue estimate for fiscal year 2014, which begins July 1, had been 3.1 percent. But the accuracy of that figure has come into question because of this year’s larger-than-expected collections.
State income this year exceed projections
The state’s latest income figures show that, as of March 30, Missouri government has collected $420 million more in taxes and fees this fiscal year, compared to a year ago. More significantly, income collections have increased by 8.3 percent compared to the previous fiscal year (FY2012) – well above the latest estimated revenue increase of 4.8 percent.
The original consensus revenue estimate for this fiscal year had predicted that the state’s income would increase by 3.9 percent, compared to the previous fiscal year. But that number was revised as more income continued to pour in.
House Budget chairman Rick Stream, R-Kirkwood, said the House’s proposed budget for FY2014 was about $300,000 below the revenue estimate, while the Senate’s version was roughly $4 million to $14 million over the agreed-on consensus revenue estimate.
Adding to the confusion, Nixon’s proposed budget had included income and spending that the General Assembly largely has rejected: in particular, his support for expanding the state’s Medicaid program, which would increase state spending but would be entirely covered by added federal revenue.
The GOP-controlled House and Senate have rejected the idea in multiple votes.
Income tax changes would affect budgets
The governor’s budget proposal also assumes that the General Assembly approves the imposition of sales taxes on items purchased via the internet.
One version of the internet sales tax is included as a provision of a bill, known as SB26, that dramatically revamps the state’s income tax system by cutting business taxes in half over a five-year period and reducing the income tax for individual filers.
The bill also increases the state’s sales tax, now 4.225 percent, by at least half of a percent (.6 of a percent in the House version).
Backers say the changes would attract more businesses to the state and stem any departures to neighboring Kansas, which has slashed its income tax rates. Opponents say the changes could cost the state of Missouri up to $900 million a year in revenue, while supporters say the income loss would be far less.
Nixon has vowed to veto SB26, as it now stands, saying it unfairly shifts the state's tax burden to the poor and the elderly.
Jones and Stream didn’t mention the proposed income taxes on Monday, instead focusing solely on the dueling budget bills.
Both cited national predictions that the nation’s economic picture is likely to worsen in the coming months for various reasons. If that’s the case, said Jones and Stream, Missouri’s revenue stream may weaken and become lower than expected.
Stream and Jones said that, at minimum, the state should bank any income increase for FY2013 and FY2014. If Missouri’s economic picture continues to be strong, both said they might be amenable – in a year or two – to some capital improvement projects for the state Capitol.
Tax credits unlikely to change
The state budget deliberations also are enmeshed with another issue that, of late, has gotten little attention: the state's various tax credit programs, which now reduce the state’s bottom line by close to $600 million.
The biggest target, of Nixon and some allied senators, has been the two largest tax credit programs. One encourages construction of low-income housing and the other provides incentives for revamping historic, older building.
The Senate has approved deep cuts in both programs, which is reflected in its proposed budget. But the state House has approved much smaller trims.
Some legislators privately predict that both programs will end up seeing no change for the coming fiscal year. That would mean the cap for the historic tax credit would remain at $140 million a year and the lid for the low-income tax credit would stay at $190 million a year.
Both programs have popular with developers in the St. Louis area and the region’s top officials, including St. Louis Mayor Francis Slay and St. Louis County Executive Charlie Dooley.
House rejects Medicaid expansion again
During the House’s budget debate Monday, House Democrats succeeded in obtaining one last vote on Nixon’s proposed expansion of the state’s Medicaid program, in line with the recommendations of the federal Affordable Care Act.
And in line with previous votes on the subject, House Republicans – who outnumber Democrats almost 2-to-1 – rejected the idea.
The House’s latest vote against Medicaid expansion was 102-53.
Jones holds out hope on education changes
Aside from the state budget, the other issue key to the speaker's 2013 agenda involves his proposed changes in teacher evaluations and tenure.
Jones said a new version of his proposals could hit the House floor later this week.
The House defeated an earlier version backed by Jones that, in effect, did away with teacher tenure. The newest version is sponsored by state Sen. Jamilah Nasheed, D-St. Louis. She and Slay have advocated various changes in public education, including more charter schools.
Late last week, Jones removed several Republican critics from two committees reviewing the House's version of the latest education measures.
School and teacher groups are lobbying against any major changes in teacher tenure or evaluation. Jones told reporters that he was open to compromise, but added, “I want a meaningful bill.”
Jones said that he was considering setting up a second House education committee that would include critics of his proposals, with the charge of coming up with alternative ideas “to address failing schools.”
In any event, Jones acknowledged that the state Senate this session may kill the education proposals that he supports. But he emphasized that he plans to try again in 2014.
