JEFFERSON CITY — As some in the capital warn that Missouri won’t generate the revenue necessary to meet budget demands for this year, state legislators and budget officials are stuck in a waiting game until April 15, the last day for Missouri citizens to file their taxes.

The state forecasted a 1.7 percent growth in revenue for fiscal year 2019, which ends June 30. But at the end of March, taxes had generated 4.26 percent less in revenue than last year’s totals up to the same point, according to a Department of Revenue report released Wednesday. That revenue comes from income, sales and other taxes.

Rep. Cody Smith, R-Carthage, who chairs the House budget committee, said he is concerned about the current revenue totals but that there have been some recent positive trends in the state’s collections, including smaller tax refunds, later filings and higher remittances.

“The days after April 15, we’ll have a much better idea of where revenues are at,” Smith said.

Rep. Kip Kendrick, D-Columbia, agreed that the state is trending in the right direction, but he said he is becoming less confident by the day that Missouri will reach its projection.

“If we don’t hit that 1.7 percent growth, then it becomes very possible that the FY 20 budget is immediately out of balance after being passed,” said Kendrick, the ranking minority member of the House budget committee.

One option to balance the budget would be to withhold money from certain parts of the budget for the remainder of this year. Budget director Dan Haug said it was too early to make a decision on that.

“Right now, we’re not taking any action,” Haug said.

Kendrick said withholdings would likely come from higher education, but he doubts it will happen this year.

“The later we get into the fiscal year, I think it becomes less likely that we will see any withholds for the remainder of FY 19,” Kendrick said. “The further you move along in the fiscal year, the more difficult those withholds become because a lot of that money is already spent.”

Kendrick’s larger worry is about the effects of Senate Bill 509, which was approved in 2014. The first phase of the bill, which marked the first-ever cut to the state’s income tax, began in January 2018.

“This is really only the second year of a five-year implementation, so it is going to continue to be implemented,” Kendrick said. “If — and I’m not saying this is the case — but if we don’t hit our revenue estimate and if it is because of SB 509, that problem is going to become much larger in the future as that tax bill continues to phase in.”

Smith disagreed with Kendrick’s assessment of the income-tax cut.

“I am from the philosophical camp that lower taxes lead to greater prosperity, so at the end of the day, if people have had fewer dollars withheld by the state, they have more dollars in their pockets to spend as they choose,” Smith said.

However, Smith said he wanted to investigate why their revenue estimate for fiscal year 2019 may have been off.

“We need to drill down on what has happened here and make sure that we account for what is causing this revenue to be off what we projected it to be,” he said. “But as far as long-term implication of tax cuts, I’m from the camp that lower tax liability is actually good for citizens.”

Tax collection has also been complicated by the full implementation of the federal tax cuts approved in 2017. Haug said federal tax changes can lead to fluctuations in the consensus revenue estimate, which is created through a collaboration between the House, Senate, Governor’s Office and other state officials.

“This is such a different year because of the tax changes,” Haug said. “It’s really hard to compare revenues and where they were last year compared to this year.”

Haug said he expects decisions on the budget will be made in the next few weeks. In the meantime, the state is stuck in a waiting game.

  • Summer 2019 reporter and assistant city editor. Reach me by email at tncoulter@mail.missouri.edu or on Twitter at @tomcoulter_

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