More cuts expected as Missouri revenues drop

Tuesday, October 6, 2009 | 12:01 a.m. CDT; updated 10:20 a.m. CST, Tuesday, December 8, 2009

JEFFERSON CITY — Two of Missouri's top budget officials predicted Monday that Missouri's governor will make further budget cuts in response to an unexpectedly high drop in state collections.

Administration officials reported a 10 percent drop in revenue collections — or nearly $189 million — for the first quarter of the current fiscal year compared to the same three months in fiscal 2009.

State Budget Director Linda Luebbering called the decline "worse than anticipated." Luebbering said she expected the governor to make further reductions in addition to the $430 million he already cut from the current year's budget.

House Budget Committee Chairman Allen Icet, R-Wildwood, agreed with Luebbering's assessment. In order to reach a balanced budget by April — as required by the Missouri constitution — Nixon will have to make cuts throughout the year, Icet said.

"It does look like there will need to be additional restrictions on spending," Scott Holste, a governor's spokesperson, said Monday. He added, though, that Nixon is "committed to keeping (funding) for essential programs in place."

One of these "essential programs" is the state's funding formula for K-12 education. Nixon will not look at cuts to the education fund, Luebbering said, adding that cuts to programs such as Medicaid were also off the table because of restrictions in the American Recovery and Reinvestment Act.

The budget office is preparing recommendations for spending cuts and will present those options to Nixon sometime in the next few weeks, Luebbering said.

While both Luebbering and Holste said no specific cuts have yet been targeted, Icet expects these cuts to come from the elimination of open or current positions.

Jobs funded by revenue collection have on average a 15 percent yearly turnover, Icet said, but the current decline may require Nixon to go beyond leaving current positions unfilled.

Luebbering said that a good portion of the open position cuts have already taken place but that more layoffs are still to come.

Ironically, statewide unemployment is directly responsible for the decline in tax collection. Individual income taxes, which provided $1.3 billion for the state last year, have only brought in $1.2 billion this year. Missouri's unemployment rate is 9.5 percent according to the Bureau of Labor Statistics.

The revenue collection figures cover the months of July, August and September.

While the stock market's sharp decline occurred in September 2008, Luebbering cautioned against making a direct comparison between this September and a year ago. While the market crash occurred in September, she said state revenue collection remained strong for several more months.

State revenue collection looked good through January, Luebbering said. She said an appropriate comparison may have to wait until February, the first month state collections began seeing an impact.

While caution may be necessary for comparisons to be made, neither Luebbering nor Icet see few positives in the current numbers.

"The trend is not going in the right direction," Luebbering said.

Icet, while attributing a good portion of the revenue decline to unemployment, said money received from capital gains provided another cause for concern. Capital gains are any positive returns from an investment.

He described the stock market as "impossible to predict" and said he fully expects this source of revenue to drop as well.

"We're in for a rough ride," Icet said.

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