Blunt predicts weak revenue will lead to cuts

The governor-elect repeats his pledge to increase school funds.
Friday, December 31, 2004 | 12:00 a.m. CST; updated 3:36 p.m. CDT, Thursday, July 3, 2008

JEFFERSON CITY — Gov.-elect Matt Blunt warned of widespread government cuts Thursday as he predicted “anemic growth” in the money available for Missouri’s next budget.

“This is going to be a challenging budget process,” Blunt said while outlining a state revenue estimate reached with lawmakers, “but we can surmount challenges.”

Blunt reiterated a campaign pledge to increase school funding without raising taxes. That, combined with the naturally rising costs of health care and mandatory programs, means “every part of state government can expect to have less revenue than they’ve had in previous fiscal years,” he said.

Blunt will be sworn in as governor Jan. 10 and is to present a budget to lawmakers later that month. The revenue agreement will serve as a basis for the budget, but Blunt outlined no specific cuts Thursday.

The revenue agreement is an important — but not unexpected — breakthrough after recent budget battles between Republican legislative leaders and outgoing Democratic Gov. Bob Holden. For example, the two sides never agreed on a revenue estimate for the 2004 fiscal year. Blunt, like the legislative budget chairmen, is a Republican.

Their consensus revenue estimate calls for more than $6.7 billion in net general revenues during the 2006 fiscal year, which

starts in July. That’s an increase of $146 million — or 2.2 percent — over the current year.

General revenues come primarily from income and sales taxes and comprise a little more than one-third of the state’s $18.9 billion budget, which also includes federal funds and earmarked state dollars such as the vehicle fuel tax that goes toward roads.

Schools, prisons and mental health facilities depend heavily on general revenues, over which lawmakers can exercise the greatest control.

Blunt said the modest growth in net general revenues is not a true reflection of the economy but is partly a result of the loss of revenues the state had depended upon in recent years.

For example, about $30 million will be shifted next year from general revenues to the state road fund as a result of a constitutional amendment voters approved in November. The size of that transfer will grow in future years.

Also next year, the state expects a $33 million loss in estate taxes because of the federal government’s phase-out of that tax. Plus, the state expects to pay at least $50 million from general revenues to comply with a June 2002 state Supreme Court ruling that telecommunications companies are owed a sales-tax exemption for their equipment that transmits phone calls.

The loss of other funds also will squeeze the next budget. During the present and past years, Missouri’s budget used $274 million in one-time federal funds and $130 million from state revenue bonds. The loss of those funds weren’t included as part of the net general revenue figures, said Marty Drewel, director of the Senate Appropriations Committee staff.

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