GOP kills budget fix in House vote; Holden to consider funding

Friday, May 10, 2002

JEFFERSON CITY, Mo. -- House Republicans on Thursday blocked a plan to use state savings to balance the current Missouri budget, a move Gov. Bob Holden said could result in temporary layoffs for some state workers and the withholding of state payments for education and social services for May and June.

If Holden, a Democrat, resorts to withholding, it could cost Southeast Missouri State University another $7 million on top of $4.5 million the governor has already cut from its current budget. The potential funding loss coupled with its timing would hit the school hard, Southeast president Dr. Ken Dobbins.

"There is very little we could do -- there is nothing we could do," Dobbins said. "The year is basically over. There is no other way to generate revenue or cut expenses for this year."

The unanticipated revenue loss would wipe out the university's $2.9 million in undesignated fund balances, forcing the school to eliminate planned spending.

On a near unanimous vote, the Republican-controlled Senate had already passed the bill, which would have given lawmakers $170.7 million to help cover a $230 million shortfall for the budget year ending June 30.

The plan called for taking $120 million from Missouri's Rainy Day Fund, plus $50.7 million previously earmarked for life sciences programs and anti-smoking initiatives. Holden would made another $60 million in cuts on his own to plug the budget hole.

United majority Democrats in the House, joined by only seven Republicans, voted 94-64 in favor of the bill. However, the Constitution requires a two-thirds majority to tap into the Rainy Day Fund. The effort fell 15 votes short of the 109 needed.

Of the nine Republicans from Southeast Missouri, only state Rep. Lanie Black of Charleston voted for the bill. All five area Democrats favored the measure.

The bill's supporters saw a ray of light when the House took a break at 8 p.m. so Republican Caucus could meet privately. They returned to the chamber at 9:45 p.m., but only a couple GOP lawmakers switched sides.

Earlier in the day, House Speaker Jim Kreider, D-Nixa, and Minority Floor Leader Catherine Hanaway, R-Warson Woods, spent hours in closed-door negotiations aimed at striking a deal, but the talks eventually broke down.

Hanaway said using the Rainy Day Fund would have been fiscally irresponsible.

"The last option should be to go out and borrow money, particularly when next year is not going to be any better," Hanaway said.He said $91 million in unspent money could be used to partially address the problem. State budget officials have said taking that money, which serves as a buffer in the budget, is theoretically possible but unworkable.

State Rep. Denny Merideth, D-Caruthersville, said lawmakers had few alternatives to using the Rainy Day Fund.

"We have a shortfall right now and have to do something to make sure this state continues to operate," Merideth said.

The Constitution requires that rainy day money fund be paid back with interest over three years, though an amendment aimed at building Republican support would have forced lawmakers to repay it in half the time.

Passage would have required lawmakers struggling to finish the budget for the upcoming fiscal year, which begins July 1, to come up with the first $40 million rainy day payment.

While waiting for House action to address the fiscal year 2002 problem, work on the fiscal year 2003 budget came to a standstill. Lawmakers will be forced into a special session unless they finish the upcoming budget by 6 p.m. today.

The unexpected shortfall in the current budget came to light just two weeks ago when the Department of Revenue reported that Missourians paid less than expected on their income tax returns while getting bigger refunds.

Holden said the House's failure on the rainy day bill leaves him with only three sources to find the money needed to balance the budget, as required by the Constitution:

Delay or cancel May and June payments due to local public school districts and state universities.

Cut social service benefits to low income families for the final two months of the fiscal year.

Furlough state employees to reduce the state payroll.

Holden has made K-12 education funding his top priority, and thus far it has been spared from the $650 million in cuts he has already made from the FY 2002 budget.

"That is how difficult this situation is that I'm even considering this," Holden said.

Deferring payments for education until the new fiscal year begins has been a widely discussed option in recent weeks. However, Holden said pushing back paying the state's bills would only make the FY 2003 problem worse.

Holden hasn't decided exactly what course of action he will now take.

The bill is SB 1281.

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