JEFFERSON CITY — The state revenue shortfall this fiscal year means many Missourians will face a delay in receiving their income tax refunds.
To maintain the cash flow, pay state employees and run state-funded agencies and institutions, Missouri is delaying tax refunds and has borrowed $325 million from its budget reserve fund since February.
State Budget Director Linda Luebbering said Monday that an estimated $1.39 billion in total refunds will be paid to taxpayers. She also said all refunds will be paid out by or before June 30, the last day of this fiscal year.
"It's just a matter of managing our cash to make sure we can pay all of our bills," Luebbering said.
Ted Farnen, a spokesman for the state Department of Revenue, attributed the delay to less manpower and the budget process itself.
"We're trying to do more work with less money," Farnen said. "We normally hire 300 temporary employees to help process our tax returns. This year, we hired only 127.
"The other aspect of it is, just like any budget — especially here in Missouri where we have to have a balanced budget — we only have so much to work with for refunds. So if we use up the (revenue) for that time period, then yes, we have to wait a little bit until we have the actual money to give out those actual refunds."
Luebbering said the state is managing its cash flow and maintaining state operations, such as the public school and hospital systems, in several ways.
First, the state is constitutionally allowed to borrow money from its budget reserve fund as long as the borrowed money is paid back with interest by May 15 of the same fiscal year. For the seventh year in the past eight years, Missouri is taking money out of the reserve fund, which held $557 million at the beginning of this fiscal year. The state borrowed $175 million in February and $150 million in March from the reserve fund. Luebbering said she does not anticipate that the state will need to borrow further funds from its reserves for the rest of the fiscal year.
Second, spending reductions as requested by Gov. Jay Nixon have been put in place across all state departments "to the tune of just under $181 million," Luebbering said. These spending reductions are the main reason why less than half the usual number of temporary staff have been hired to help process income tax returns.
Finally, Luebbering said the state has to maintain the balance between refunds and payments to ensure that the budget line does not dip into the red and "to make sure that the timing of those payments out allow us to make sure we have enough cash in the bank."
"Our revenue comes in late in the fiscal year because we're so dependent upon individual income taxes, which come in fairly heavily in April," Luebbering said. "And our spending is more consistent throughout the year. So there are times that we either need to borrow from the budget reserve fund or do other things for cash-flow purposes in order to get us to the point in time when our revenue is coming in."
The state Revenue Department received about 1.6 million income tax returns by mid-March, Farnen said. He said the department staff anticipates receiving the remaining 1.2 million tax returns before the April 15 deadline.
Farnen also said receiving almost half of all the tax return forms in the last three weeks will result in a "big crunch" for the smaller temporary staff to process, as well as a delay in the state's receiving the revenue it needs to operate. That delay has necessitated the state's borrowing from the budget reserve fund and, in turn, might cause delays in Missourians' receiving their income tax refunds.
Luebbering said processing refunds is not taking significantly longer than in previous years. She said the average turnaround for tax refunds is just under seven days.
But Farnen said that once the surge of tax returns begins arriving in the state's Revenue Department office before April 15, the amount of paperwork and the varieties of tax returns will slow down the turnaround time.
Missourians who applied for the property tax credit receive priority, Farnen said. The credit, which is available to low-income Missourians, senior citizens and the disabled, will manifest either as a tax credit or a refund check. Either way, Farnen said, those taxpayers are first in line in the process.
"We made the decision to try and process those as quickly as possible because of who the recipients are," Farnen said. "We all need the money, but they really, really need the money. So our property tax credits are all the way caught up."
In late January, Nixon and Republican legislative budget leaders agreed to a revised estimated revenue shortfall of $261 million for the remainder of this fiscal year. That shortfall was not unexpected, Luebbering said.
"It's really right about what we were anticipating needing to do because we're staying right on track with our revised consensus revenue forecast," Luebbering said. "Unfortunately, that revised estimate is for a decline of about 4 percent, but we are right on track with that."