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Missouri tapping stimulus money to pay tax refunds

Thursday, May 21, 2009 | 6:24 p.m. CDT

JEFFERSON CITY — Missouri is using $250 million of federal economic stimulus money to speed up the payment of hundreds of thousands of individual income tax refunds that otherwise could have been delayed until summer.

Gov. Jay Nixon's administration said Thursday that the move was necessary because income and sales tax revenues have fallen even further behind their already negative projections.

Some Missourians have been waiting since mid- to late March to receive their tax refunds.

Cash flow problems could have forced the state to delay refunds until the new fiscal year starts in July, said Nixon's budget director, Linda Luebbering.

By using federal stimulus money, the Department of Revenue hopes to send out refund checks by June 5 for people who had filed their returns before April 15. Those who filed on or after the tax due date, or had errors on their returns, might still have to wait longer for their refunds.

Missouri already has paid about $620 million in tax refunds to nearly 1.5 million individual income taxpayers. But the state still has a backlog of about $278 million in refunds due to about 500,000 individual taxpayers for the 2008 tax year, said Department of Revenue spokesman Ted Farnen.

The federal stimulus money will cover most of that. The rest will be paid with regular state revenues, Farnen said.

Although its financial problems are not as pronounced as states such as California or Illinois, Missouri has been forced this year to cut spending, borrow from cash reserves and delay tax refunds to keep its $22 billion budget in balance.

After withholding $176 million from state agencies in January, Nixon's administration recently cut an additional $10 million by directing agencies to leave vacancies open and further reduce office and travel expenses, Luebbering said.

Earlier this year, the state borrowed $325 million from its cash reserves, which had to be repaid by May 15. The state cannot dip into its reserves during the final month-and-a-half of the fiscal year, but there are no such restrictions on tapping the federal stimulus money.

The money being used for the tax refunds was paid to Missouri as an enhanced federal reimbursement for Medicaid services and can be used for "budget stabilization" purposes.

When lawmakers passed the 2009 budget about a year ago, state officials projected that general revenues would grow by 3.4 percent compared with 2008. But as the economy worsened, officials in January revised that forecast to a 4-percent decline.

Now even that appears optimistic.

Luebbering said Thursday that general state revenues probably will decline by about 6 percent for the 2009 fiscal year. That means Nixon might have to start the 2010 fiscal year with line-item budget vetoes or administrative withholdings of money from agencies. State employee layoffs also are possible, Luebbering said.

"The situation is going to be extremely challenging next year," she said.

Missouri expects to receive about $4.5 billion from the federal stimulus package over the next two years.

The Missouri Budget Project, which analyzes state fiscal issues for their effect on low-income Missourians, said Thursday that the budget bills passed by the Legislature would allocate about $3.8 billion of that money. The group posted on its Web site, mobudget.org, a list detailing how that money is budgeted to be spent through each state department.

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