Nixon looks to tax credit reform to solve education funding crisis

Tuesday, April 27, 2010 | 10:14 p.m. CDT; updated 8:38 a.m. CDT, Wednesday, April 28, 2010

JEFFERSON CITY — Gov. Jay Nixon held public teleconferences Tuesday to discuss his plan to revamp Missouri tax credits even though the General Assembly has less than three weeks to take action.

MU Chancellor Brady Deaton opened the first conference call, applauding Nixon for his commitment to higher education and and saying it was critical to pass some sort of reform immediately.

Last week, the governor met with public school teachers and leaders from elementary and secondary schools, as well as community and four-year colleges and universities, to discuss making a comprehensive plan for tax credit reform legislation.

Teleconference participants were mainly from higher education boards throughout the state, and most callers who posed questions supported Nixon's initiative to reduce or eliminate certain tax credits.

During the teleconference, Nixon outlined three general ideas for tax credit reform: tax credit caps, accountability and transparency.

"The growth of entitlement tax credit programs in Missouri is simply unsustainable," Nixon said. "Over the last 10 years, the use of state tax credit has ballooned to $585 million a year. That's an 86 percent growth."

Nixon said Missouri has 60 tax credit programs. He singled out two programs, Missouri's historic tax and low-income tax credits, as areas where the state could save between $150 million and $170 million in expenditures with his proposed reductions.

In 2008, Nixon said Missouri spent nearly $161 million on historic tax credits, and in 2009, the state expended the program by $186 million.

Referring to a report by State Auditor Susan Montee, Nixon said Missouri approved $176 million in low-income tax credits in 2007, the second highest of any state in the U.S. The governor said California, whose population is about six times the amount of Missouri's, spent half the amount Missouri did on low-income tax credits in 2007.

But there are only three weeks left in the legislative session, and the tax credit reduction bill would have to pass both the state House and Senate before appearing on the governor's desk to be passed into law. Nixon said he is optimistic that the General Assembly will act swiftly and with support for tax credit reduction.

"The vast majority of both the House and the Senate support the controlling, the accountability and the transparency of (reform)," Nixon said. "We just have massive special interests pushing on the other side."

In 2007, Missouri spent $470 million on tax credits, and State Budget Director Linda Luebbering said tax credits for fiscal year 2011 have been projected to reach $670 million.

"At the same time that we've had to make some serious reductions in basically every area of state government, tax credits have continued to climb," Luebbering said.

Nixon has restricted nearly $1.2 billion in budget spending since becoming governor and $900 million this year alone. He has recommended the House and Senate trim an additional $500 million from the fiscal year 2011 budget to maintain a balance budget for the following fiscal year.

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