April 24, 2009

The “perennial logjam” has occurred in the Missouri General Assembly this week.

House Speaker Richard is intent on passing an economic development / jobs bill this year. An impasse has occurred in the Senate over the tax credit portion of the legislation and Senator Lager and Crowell have not reached a resolution on the issue.

Consequently, Speaker Richard has held the state budget bills in the House and unless the Senate passes economic development legislation pressure will build to pass the budget by the may 8th deadline.

The House has “loaded up” the House bills utilizing stimulus funds with state building projects and other onetime funds. However, in a heated meeting the House members not on the Budget committee took exception to Budget committee members receiving projects and they did not have an opportunity to place building projects in their district.

The current rumor is that the budget bills 18, 19, 20 and 21 will return to the committee with drastic changes. The House Budget Chairman has filed another “special appropriations bill”, House Bill 22 that would use $1 Billion of the Federal Economic Recovery (Stimulus) funding for a temporary tax cut. Some critical points on this proposal:

• Although the details of the plan have not been fully disclosed, based on media reports the average family would receive a “rebate” of $25 per month - or approximately enough for a fast food meal for a family of four;
• What is at risk with this proposal, however, is significant. Congress specifically sent the economic recovery funds to the states in order to prevent cuts in critical services including health care, education, transportation and infrastructure during this difficult economic time. Without the use of this funding, Missouri will be facing a significant budget shortfall that could require large cuts to an array of services.;
• If lawmakers pursue this tax cut concept, Missouri will also be at risk of losing a significant portion of the federal dollars, because non of the major streams of federal money are actually permitted to be spent on tax cuts. Not one other state is considering this type of tax cut because it would place an increased burden on future budget years, deepening the budget shortfall in Missouri, and could lead to greater fiscal problems for the state.

The Senate will “revamp” the House recommendations and differences will be hammered out in conference.

Of course, this won’t occur until the Speaker moves the bills.

News of interest this week includes:

HB 11

HJR 36
HJR 36 would eliminate the individual and corporate income tax in Missouri and replace the lost revenue with a significantly expanded sales tax and increased state sales tax rate. The dangers of HJR 36:

• The new Missouri general revenue sales tax rate would increase from 3 percent to at least 5.11 percent and likely will need to increase to 9 percent;
• Missouri Sales Tax would be applied to all services including medical care, nursing homes, child care and school tuition;
• The Sales Tax rate would be applied to all housing related costs as well including rent, Utilities, Phone Service;
• The new general revenue sales tax rate would be applied to all purchasing including food, retail sales and prescription drugs;
• Consumer purchasing could dramatically decrease, impacting Missouri retailers and other businesses;
• The measure places Missouri at risk for a significant reduction in state revenue and cut to state services.

The Senate may hear this next week. Leadership is not inclined to keep this moving.

Contracts
I will be visiting with Representative Nolte to ascertain if a “fix” could be accomplished at this late date for the continuous verification requirement OA places on government agencies with state contracts regarding illegal immigrants working for the agency.

Property Tax
The Senate Governmental Accountability and Fiscal Oversight Committee heard SJR 18 sponsored by Senator Cunningham. This bill would place before the voters a constitutional amendment, which would limit the increase in assessed valuation for real property to two percent every two years until such time if the property is sold. This could cripple political subdivisions. The two percent increase every other year does not take into account the cost increases that affect public entities each year such as health premiums, transportation costs, utility cost increases etc. After the hearing on the bill the committee voted to not forward the bill to the Senate for debate. Senators Stouffer , Schaffer, Days and Shoemyer voted against the bill.

Next Week
Only three weeks remain in the 2009 legislative session.

As always a great deal remains to be accomplished according to the early goals of the Governor and General Assembly.

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