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UPDATE: Nixon, education leaders back limits on Missouri tax credits

Wednesday, April 21, 2010 | 3:26 p.m. CDT

JEFFERSON CITY — Education officials from across Missouri joined Gov. Jay Nixon's call to rein in tax credits, asserting Wednesday that escalating incentives are diverting money from financially strapped schools and colleges.

Missouri House leaders accused Nixon of using educators as props and denounced the effort to curtail tax credits as a "horrible idea" that could harm the economy. They pledged it would not pass during the legislative session that ends in mid-May.

The stalemate highlights the difficulty that Missouri and other states face as they try to balance budgets hit hard by slumping tax revenues and rising spending demands.

Nixon, a Democrat who last year backed an expansion of state tax credits for businesses, now says tax incentives have grown so greatly that they are threatening other essential government functions. About $585 million of tax credits were redeemed last year — up 86 percent over the past decade, he said.

"Our commitment to public education must not be jeopardized by the rapid and unchecked growth of these programs," Nixon said at a news conference while flanked by about 70 teachers and administrators representing K-12 schools, community colleges and universities.

In Missouri's proposed budget for next year, elementary and secondary schools would receive flat state funding instead of the more than $100 million increase due under the state's school funding formula. Public colleges and universities would see funding cut roughly 5 percent; they have pledged not to raise undergraduate tuition in exchange for not being slapped with an even deeper cut.

"Public higher education is a pretty important priority, and (university leaders) would support a process that limits or otherwise critically examines the state tax dollars that are dedicated to tax credits," said Carolyn Mahoney, president of Lincoln University and of the state Council on Public Higher Education.

"Every dollar that goes to tax credits is a dollar that does not go to public education," added Chris Guinther, a special education teacher in St. Charles County who is president of the Missouri chapter of the National Education Association.

Other state chapters of the teachers union — including in Illinois, Michigan and Wisconsin — also are backing efforts for a balanced approach to tax, economic development and education funding policies, Guinther said.

To free up money in future budgets, Nixon's administration proposed last month to cap Missouri's annual authorization of tax credits at $314 million. His plan also would reorganize the state's roughly 60 tax credit programs under six general categories, with greater flexibility for the Department of Economic Development to decide how much should be spent in each area.

Some Republican senators have been pushing for two years to limit Missouri's tax credits. One of their proposals would give greater authority to legislative budget writers to determine how much to allot to each program.

But moments after Nixon concluded his event, Republican House leaders pledged to stand firm against efforts by Nixon and senators to significantly curtail tax credits.

"It's unfortunate that the governor has used educational leaders from across the state as props and as a pawn for his power grab on tax credit reform," said House Majority Leader Steven Tilley, R-Perryville.

House Speaker Ron Richard, R-Joplin, said it would "send shock waves through the whole economy" if the Legislature were to sharply reduce tax credits or make them subject to the annual budgeting process. Businesses and developers would face uncertainty over their financing and thus be less likely to proceed with projects, he said.

Almost immediately after Nixon's news conference, the House endorsed a bill extending the life of a tax credit for contributions to crisis pregnancy centers. On Tuesday, the House endorsed a bill that would authorize new tax incentives for large collegiate or amateur sports events held in Missouri.

Republican House leaders said they preferred to study potential tax credit changes for the 2011 legislative session and conduct a cost-benefit analysis of each program.

But Nixon said now is the time to act.

"With term limits snuffing out a significant number of folks (in the November elections), this is the moment, this is the time in which you have the most experience," Nixon said.


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