January 21, 2011

Governor Nixon delivered his State of the State message regarding a state budget that would cut aid for colleges, hold public school spending flat, eliminate about 860 full-time state employees and scrap or cap some of Missouri’s many tax credit programs for businesses and developers.

Nixon proposed a $23.1 billion operating budget for the fiscal year that begins July 1 down at least two hundred million dollars from the budget lawmakers approved for the current fiscal year. The discretionary budget dollars were $9 billion two years ago. That amount is down to $7 billion this year.

His plan would provide K-12 schools an additional $112 million during the current year, thanks to an influx of $187 million federal money that must be spent this school year. However,  it would cut schools by that same amount next year. Nixon’s budget director, Linda Luebbering, says schools will be asked to carry over some of this year’s additional money into next year.

Even so, schools would be getting far less than the amount they are due. Schools were budgeted to get about $3 billion in basic aid this year. They would be due an increase of about $233 million next year if Missouri were to provide the full amount called for by its funding formula. The federal money was accepted with the caveat that the foundation formula cannot be cut according to the federal stipulation.

Not reducing the foundation formula which is half the discretionary budget or $3 ½ billion means more pressure will be on the other half of the budget for additional cuts. Consequently, a legislature will either not agree to keeping funding for education the same as 2006 levels or focusing on a smaller “pot” of money.

School transportation Nixon cut by nearly half this year, would rise slightly under his plan for next year by $7 million.

Public colleges and universities would take a 7 percent cut next year under Nixon’s proposal — an additional $64 million reduction on top of the $50 million cut they received this year.

Nixon proposed to reverse a small portion of the cuts he made this year to Missouri’s main college scholarship programs. He proposed a bonus college scholarship to high school students who score well on certain math and science tests. Nixon said he wants to expand a community college scholarship to graduates of all high schools, instead of only some schools — receiving bipartisan applause while reviving a pledge from his 2008 gubernatorial campaign.

The governor’s budget plan estimates the expanded scholarship would cost $8 million. It was one of the few new programs in his budget.

Nixon proposed using private contractors to replace some of the several hundred state employee positions he is seeking to eliminate.

Nixon’s budget includes about $45 million of assumed savings that are dependent upon legislators changing state laws.

One such change would provide an amnesty period for taxpayers who owe Missouri money but have not yet been cited by the Department of Revenue. If the businesses or individuals pay up, they can avoid penalties and be charged only half the interest they otherwise would owe. The governor’s budget assumes the program will bring in $20 million that otherwise would not have been paid. In total Nixon’s plan could reduce the budget by $700 million if all proposals are approved by the strongly held Republican legislature. That will not occur.

Nixon also assumes savings from the elimination of several tax credits, including ones for filmmakers and he also wants lawmakers to reduce the amount of annual tax credits that can be issued for the renovation of historic buildings.

House Speaker Steven Tilley said he was willing to consider eliminating tax credit programs that are not working but opposed shrinking the historic tax credit program. In addition, Tilley said prior to the session that no tax increases or fees would pass this year.

News this week includes:

CORE Public Health Funding
The state funding for local public health funding remains the same after the withholds of last year at $7.6 million.

This is significant as last year the Governor made major cuts to the previous year’s budget.

You will recall we replaced the money after a great deal of work only to have the Governor make the withholds.

Your contacts to the Governor were very helpful.

Smoking
The Governor did recommend $388,000 for the federal Family Smoking Prevention and Tobacco Control Act of 2009. They are federal pass through funds.

Senate Transportation
The Senate Transportation committee heard SB 28 (Brown) on Wednesday.

The bill exempts persons 21 years of age or older from wearing protective headgear except when operating or riding motorcycles or motortricycles (Section 302.020).

This act is substantially similar to SB 1067 (2008), SB 252 (2007), SB 635 (2006), SB 12 (2005), SB 744 (2004), SB 226 (2003), SB 646 (2002), SB 18 (2001), SB 610 (2000) and SB 294 (1999).

The same cast of characters were present for the hearing as in past years.

Medicaid
Although the Governor was not terribly specific, Medicaid will be cut by approximately $20 million.

It appears that cuts will be centered around the costs of MRI, Pet Scans and other diagnostic procedures. However, this “target” may not reach the $20 million goal and hospitals payments would be reduced across “the board”.

A great deal of negotiation will occur as the budget moves through the legislature.

The Governor did not come out in favor of managed care. It was not referenced in his speech. Dr. MCaslin is still moving forward on expansion of managed care.

Centene, the managed care insurance company, has “lobbied up” and hired over 15 lobbyists to move managed care forward. It will be difficult to defeat this proposal. However, if it can be shown that the proposal does not save the state money then the case for stopping managed care will be stronger.

Next week
The General Assembly begins the major task of receiving the Governor’s proposed budget and committee hearings begin in earnest to review bills introduced thus far.

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