Blunt- Budget plans predict anemic growth in revenue

Friday, December 31, 2004

JEFFERSON CITY, Mo. -- Governor-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 that budget, but Blunt outlined no specific cuts Thursday.

The revenue agreement itself 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 more than $6.7 billion in net general revenue during the 2006 fiscal year, which starts in July 2005. That's an increase of $146 million -- or 2.2 percent -- over the current year.

General revenue comes 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 all depend heavily on general revenue, over which lawmakers can exercise the greatest control.

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

For example, about $30 million will be shifted next year from general revenue to the state road fund as a result of a constitutional amendment passed by voters 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 revenue 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 year, for example, 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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