Missouri faces budget battle

Tuesday, January 12, 2010 | 7:40 p.m. CST; updated 8:53 a.m. CST, Wednesday, January 13, 2010

JEFFERSON CITY — Like many in the current economic climate, the state of Missouri is living paycheck to paycheck, according to Linda Luebbering, the state budget director.

So far this fiscal year, Missouri has borrowed $350 million from a budget reserve to help ease cash flow problems. Luebbering said she consistently monitors the state's account to ensure that it has sufficient funds to make monthly payments to schools, Medicaid and state employees, among others, she told a House Budget Committee on Wednesday.

"We are looking at the cash balance every day," Luebbering said. "It's that tight."

The state will be responsible for returning these funds no later than May 15.

House Budget Chairman Allen Icet, R-Wildwood, questioned how Gov. Jay Nixon plans to repay the funds, given the state's continued economic woes.

"All the numbers are going in the wrong direction," Icet said.

Luebbering said that her office will be unveiling a plan to repay the borrowed funds after Gov. Jay Nixon's state of the state address on Jan. 20. The state's challenging financial situation is expected to be one of the top issues Nixon addresses in the speech.

The repayment plan would be based on a projected 6.4 percent decline in state revenue for the current fiscal year, which ends June 30. Icet said he is concerned about challenges a greater decline in revenue would present.

"They need to be prepared for that number to not get down to 6.4 percent," Icet said.

Rep. Chris Kelly, D-Columbia, expressed confidence that Luebbering will make the right recommendations for repaying the funds, but said that he will be more comfortable when he sees the specific plan.

Luebbering also said that declining revenue from riverboat gambling and the state lottery, which supports the foundation formula for K-12 education, has made the state's budget outlook even more grim, as the state will be forced to make cuts to other areas in the budget to make up for the $80 million gambling and lottery revenue shortfall in education.

If the economy rebounds as expected, Luebbering said, riverboat gambling revenue should increase next year, but lottery funds are expected to decline even more next year because a new state lottery in Arkansas is drawing Missouri lottery business across the border.

Economic woes have swelled Missouri's Medicaid rolls, Luebbering said, with nearly 50,000 additional people in Missouri qualifying for Medicaid between January and October 2009.

As a result, the state will need to provide $150 to $200 million this fiscal year in supplemental funds for both K-12 education and Medicaid, Luebbering said. This will mean reallocating funds to education and Medicaid from other places in the budget on top of a previously reported $200 million in forthcoming budget cuts, which Luebbering said will actually be closer to $170 million.

Icet said he is concerned that these challenges, in addition to the $350 million that needs to be repaid to the budget reserve, might hamper the state's ability to offer tax refunds in a timely fashion.

"We have more problems than we have money," Icet said.


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