JEFFERSON CITY— Missouri House leaders have declared the $23.3 billion operating budget sent to Gov. Jay Nixon to be balanced.
But it likely is not.
In fact, the budget only comes close to being considered balanced by making a variety of assumptions which may not prove accurate.
The 2011 budget approved by lawmakers assumes Medicaid costs will grow by less than originally projected; it assumes savings as a result of several bills that have yet to pass the legislature; and it tallies additional savings by shuffling money among earmarked accounts.
Faced with free-falling revenues and uncertain federal funding, Nixon acknowledged in March that more than $500 million needed to be trimmed from the 2011 budget he had proposed in January.
Legislators gave it a shot. They passed a budget that would spend $484 million less in state general revenues than Nixon originally proposed.
An Associated Press analysis of those reductions shows that only about 40 percent are actual cuts in state spending (in which programs would receive less money in 2011 than they were budgeted to receive in 2010).
A little less than one-quarter of that $484 million comes from cuts to proposed increases — meaning programs either won't get additional money that Nixon had proposed or simply won't get as much of an increase as first suggested.
The budget, for example, books $18 million in cuts to basic aid for public schools by not providing the increase proposed by Nixon in January.
It also counts nearly $19 million in savings in the Department of Social Services by assuming Missouri's Medicaid caseload will grow by 4 percent next year instead of the originally projected 6 percent. It books a few million more dollars in savings by similarly reducing the caseload growth assumptions in the Department of Mental Health.
If lawmakers are wrong, those savings are gone. Because Medicaid is an entitlement program, Missouri must pay the bills regardless.
"We'll probably have to error on the side of caution, at least for now, and assume that the caseload growth is going to be a little bit higher than what they budgeted," said Linda Luebbering, the director of the Division of Budget and Planning in Nixon's administration.
An additional one-quarter of the legislature's $484 million of budget reductions are based on assumed savings — in some cases from events that have yet to happen.
The budget assumes Missouri will save $30 million by refinancing its bond debt, which Luebbering said is scheduled to occur in early summer. It assumes Missouri will save more than $10 million from changes to its employee retirement system and a couple million dollars more by eliminating state holidays that result in overtime pay for prison guards and mental health workers. But those savings depend on the passage of legislation before the session ends Friday.
The biggest chunk of assumed savings — around $70 million — is based on information that the federal government won't require Missouri to pay it as much as originally expected under the Medicare prescription drug program.
More than 10 percent of the $484 million in general revenue reductions in the legislature's budget come as the result of fund swaps — without any real cut in total state spending.
For example, the budget swaps out $28 million of general revenues for education with federal stimulus money. It also seeks to tap other earmarked funds — for things such as water pollution control bonds, health care technology and life sciences research — to use in place of general state revenues.
But Luebbering said some of those maneuvers won't work, either because they are not legally allowed or there is not enough available money in the earmarked accounts. That means the governor will have to spend general revenues for those purposes regardless of what the budget says. And that could necessitate cuts to other areas of state government.
Luebbering's office already is working on a list of potential line-item vetoes and spending cuts for Nixon to consider when enacting the budget passed by lawmakers.
The governor's office believes the budget is not yet balanced, but it is unclear by exactly how much it is short. That depends on how many of the legislative assumptions pan out.