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Missouri officials: No short-term snags from debt issue

Saturday, July 30, 2011 | 4:04 p.m. CDT

JEFFERSON CITY — Missouri officials say there should not be immediate problems for state government if Congress and the White House cannot reach an agreement to raise the federal debt ceiling before an impending deadline this week.

Linda Luebbering, the Missouri budget director, said the state would have a short-term cushion even if there was a temporary hiccup in the federal money that flows to Missouri. However, it was unclear exactly for how long that would last.

"I am hopeful that they will come up with a plan and get it done," Luebbering said.

Congress has been working toward a possible deal to cut spending and raise the federal borrowing limit. The federal government reached its debt limit in May, and the Treasury Department since then has used "extraordinary measures" to free up $232 billion. Officials say that runs out Tuesday and that the federal government eventually could be unable to pay all its bills.

Missouri's spending plan for the 2012 budget year that started this month is about $23 billion. Of that, about $7 billion is federal money. A significant recipient of that federal money is the Medicaid program, which is jointly funded by the state and federal government and provides health care to those with low-incomes. Federal money also goes for road construction projects.

Roberta Broeker, the chief financial officer for the Missouri Department of Transportation, said the agency pays for projects and then periodically bills the federal government to be reimbursed for its share of the costs. She said the agency has some money in the bank.

"We could continue to operate for some period of time even if we didn't get immediate federal reimbursement," Broeker said.

Broeker said the summer is a relatively slow time for releasing new road projects because many are approved in the fall and winter so that they are ready for the construction season. In recent years, Missouri has spent about $1.2 billion per year on construction projects and gotten around $800 million in federal reimbursement. However, budgets for highway projects have tightened in Missouri and that figure is to decrease.

The debt ceiling issue was not likely to affect many state-funded programs and a bond rating agency has said it sees no reason that Missouri's own AAA-bond rating would need to be lowered, Luebbering said. However, she said it has been a new twist and creates the potential for some issues down the road.

"The state of Missouri is not in a position to backfill for the lack of federal money on a long-term basis," Luebbering said.

Debate in Washington about federal spending and the debt ceiling also has been on the minds of Missouri residents.

U.S. Sen. Claire McCaskill held a conference call to discuss the issue with five people, who were among an influx of constituents that have written letters to her office this past week.

McCaskill, a Democrat from Missouri, said state government could feel a pinch if federal money is cutoff and if the overall economy suffers and state tax revenue is dampened.

The letter writers who spoke with McCaskill said it is important for members of Congress to be willing to compromise. Some raised concerns about what could happen if an agreement to raise the borrowing limit is not reached.

Greg Stine, who said he runs a consulting business, said the uncertainty surrounding the debt ceiling could reverse some of the gains and increasing confidence about the economy since the recession.

"We were kind of inching our way back out of that, but the debt crisis has brought all of that back to the forefront," said Stine of Wildwood.

A small-business owner from Kansas City said the potential fallout could affect everyone.

"We have to be aware that the country's credit rating, the country's standing in the world impacts not only us as the United States. It also affects everybody in the world, and it affects every single person in the United States," Christine Schloss said.

 


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