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State of Missouri Could Face Even Harder Economic Times

The state of Missouri is likely to face difficult economic times in the months ahead. KSMU’s Missy Shelton files this report.

Shelton: Just this week, Missouri State University President Dr. Michael Nietzel held a town hall meeting to discuss possible cost saving measures involving personnel. He held the meeting because he’s anticipating a bleak picture for higher education funding from the state over the next few years. Joining me on the phone to discuss the state’s fiscal outlook is Phil Brooks, Dean of the Statehouse Press Corps. It’s my understanding that things are looking pretty bad for the state.Brooks: They’re absolutely horrid. We’ve all been covering the e. coli story but I think the budget is the bigger looming issue facing the state. The budget situation potentially is worse than I’ve seen it in decades. To give you a sense of what the state’s facing, the first quarter of the fiscal year (which begins July 1), state tax collections were 10% lower than they were a year ago. A 10% drop in state revenue collections. I can’t remember ever seeing that kind of a drop. The international stock market/economic collapse occurred in the middle of that period and the tax collection effects of that collapse may not have been felt until the first of the year so it’s a little bit of comparing apples to oranges. Even still, the state budget upon which government finances are based, is based on an expected revenue growth in tax collections and you’re starting the first part of the fiscal year with a 10% cut. I don’t see how the state can get out of this fiscal year without there having to be some really deep withholding beyond what the governor’s already done.Shelton: Let me have you talk about that withholding process for listeners who may not know how that works.Brooks: The governor can do it and it is not appeal-able to the legislature. The legislature has no authority to override it. Anytime the governor’s office determines that they think state tax collections will not be sufficient to meet the spending obligations of the state, the governor’s empowered to withhold authorization to spend money among the various agencies. He can pick and choose where to cut. It is a completely unappeal-able that the governor of Missouri has to balance the state’s budget. That may sound drastic but it’s one of the reasons Missouri is consistently ranked among the national financial managers as one of the better financially managed states.Shelton: Phil, are there any kind of funds, emergency funds or other types of funds that are available to state lawmakers to try to bridge this apparent shortfall in state revenue.Brooks: The state’s already dipped into the cash balance fund. It’s a fund to help balance out months when you don’t have good tax collections but high expenditures with months when you have high tax collections and low expenditures. The state’s already borrowed out of that fund and will have to pay it back by the end of this fiscal year. The other cushion is the hundreds of millions of dollars of federal stimulus money. The state of Missouri has left a good chunk of that unspent to provide a cushion for tough economic times. It’s an argument the governor made when he cut huge amounts of money from the building construction budget this year. The Republican legislature has been reluctant to spend that money for operating expenditures because it’s one-time money. So that becomes a political battle. It’s an issue that could come before the General Assembly early next year.