Assessments differ, but reports call for spending controls

Tuesday, January 22, 2002

JEFFERSON CITY, Mo. -- The authors of two reports offered conflicting assessments of state revenue growth on Monday but agreed lawmakers must make major cuts to keep the state budget in balance.

Ray McCarty, the director of fiscal affairs for the Missouri Chamber of Commerce, and James R. Moody, the state budget director during the administration of former Republican Gov. John Ashcroft, discussed their independent findings before the House Budget Committee.

Gov. Bob Holden, a Democrat, will unveil his proposed fiscal year 2003 budget on Wednesday. Because of the current economic recession, the governor is expected to ask for less than this year's $19 billion budget.

Could cut 13 percent

McCarty said state spending far outpaced the rate of inflation throughout the 1990s and in recent years revenue has been growing at about $1 billion a year.

"You could cut the state budget 13 percent across the board and still spend more than you did in fiscal year 2001," McCarty said.

McCarty also said through the first half of FY 2002, which ends June 30, state revenues had grown at about 5 percent over the previous year. State budget officials are projecting 0.6 percent decline in revenue for the current fiscal year.

While McCarty admitted that much of the data he used in his report was a year old, committee members criticized his assessment of revenue growth.

State Rep. Tim Green, D-St. Louis and committee chairman, noted that McCarty counted taxpayer refunds as revenue growth. The state expects to refund more than $1 billion this year. Refunds have nearly doubled since FY 1999.

State Rep. Ted Farnen, D-Columbia, said McCarty was being critical of growth in state spending while ignoring the factors that required spending to increase. For example, Farnen said the federal government passed on many responsibilities -- and their costs -- to states.

"When you present us those numbers, you don't present the facts behind those numbers," Farnen said.

Projections on target

Moody, who analyzed state budget trends for the St. Louis Regional Commerce and Growth Association, said the 0.6 percent decline in revenues this year is on target, as is state budget officials' projection of 2.3 percent growth for FY 2003.

Moody said taxpayer refunds shouldn't be considered when calculating revenue growth.

"Some argue that the state is receiving more revenues this year than last and that there is no fiscal problem," Moody said. "This argument ignores the fact that real growth in revenues is new revenues minus refunds. You cannot spend money that you refund."

However, Moody said lawmakers still must control spending. Moody said the state expects to get $150 million in additional revenue but he identified $513 million in required spending increases and said a closer examination would likely yield even more mandated spending.

Moody said the state's financial situation will likely get worse before it gets better because some ongoing spending programs have been funded with one-time revenues the state will no longer have.

"In terms of the budget, I think you've got a severe problem on the way," Moody said.

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