Analysis: Missouri lawmakers pursue mixed financial policies

Sunday, April 27, 2014 | 3:54 p.m. CDT

JEFFERSON CITY — A majority of Missouri lawmakers want to cut taxes. They also want to increase taxes. And borrow more money.

Those seemingly contradictory goals have caused some people to question the financial planning at Missouri's Capitol.

"That's all pretty stupid," said Sen. John Lamping, a St. Louis County Republican who is a financial adviser in his private sector job. "There's no overarching thought."

Lamping has often been at odds this year with many of his GOP colleagues. The Republican-led Legislature already has passed a $620 million income tax cut, which is pending before Gov. Jay Nixon. This week, the Senate will consider a $720 million sales tax increase for transportation that already has passed the House. The House, meanwhile, will consider a $400 million bonding plan for public buildings that already has passed the Senate in an even larger amount.

All of the measures have support from Republican legislative leaders. If all three become law, the net result would be an increase in state revenues brought about largely by members of a Republican Party whose platform espouses lower taxes and governments that "must learn to live within their means."

Nixon, a Democrat, claims the income tax cut could have devastating consequences for state-funded schools. He also has chided lawmakers for voting "to raise sales taxes on Missourians" and "borrow money for unnecessary building projects."

Republican leaders contend the proposals are not as incongruous as they at first may seem.

"The commonality is job creation and infrastructure repair," said Senate Majority Leader Ron Richard, a Republican from Joplin who supports all three measures.

Part of the reason that lawmakers are looking to simultaneously raise and lower taxes stems from the way Missouri government is structured.

Roads and bridges have historically been funded with dedicated revenues such as state and federal fuel taxes and vehicle sales taxes. They have not typically been funded from general state tax revenues, which go toward such things as schools, prisons and mental health facilities.

The Missouri Department of Transportation has been warning for years that its dedicated revenues are running short. Its construction budget for roads and bridges is projected to dip to $325 million in 2017, down from $1.3 billion just a few years ago.

A proposed constitutional amendment pending in the Senate would ask voters to impose a 1 cent sales tax for transportation projects, generating about $720 million annually for the next 10 years.

The income tax cut would not affect the transportation money. Instead, it would reduce the state's net general revenues by an estimated $620 million annually once fully phased in. It would do so by cutting the top individual income tax rate, creating a new tax deduction for business income and expanding an existing deduction for lower-income individuals. The incremental income tax cuts would begin in 2017, but only if annual state revenues keep rising by at least $150 million.

The bonding plan also would affect general revenues. It would borrow money to build new mental health facilities at the Fulton State Hospital and, potentially, to construct or repair numerous other state and university buildings. Then the state would be obligated to pay off those projects for years to come.

Lamping voted for the income tax cut. But he says a more logical approach would have been to skip the tax cut and redirect that money to transportation while financing the building projects from general revenues without need of bonding or a sales tax increase.

Sen. Mike Kehoe, a Jefferson City Republican who supports all three proposals, said Lamping's approach wouldn't work politically. If lawmakers try to redirect general revenues to transportation, "a lot of concerned people will come up to voice opposition to that plan" for fear it would cut their favorite programs, he said.

Yet the approach of simultaneously cutting taxes, raising taxes and borrowing money "appears to be schizophrenic," said George Connor, head of the political science department at Missouri State University.

"I don't think that there is an overriding financial or fiscal philosophy in the General Assembly, or in Jefferson City, for that matter," Connor said.

Lamping believes that's partly because Republicans haven't held the governor's office since 2009 and have instead functioned under House and Senate leaders who sometimes have different agendas.

"We're lacking kind of a unified vision of what we should be doing," Lamping said. "We deal with individual pieces, and we don't put them all together."

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