Moody report points to hard decisions

Sunday, October 13, 2002

James Moody, a Jefferson City lobbyist, was the budget director under former Gov. John Ashcroft. Over the last 15 years, Moody has earned a reputation as one of the foremost experts on trends in Missouri's state budget. Increasingly, he is being listened to by members of both parties when he speaks on the arcane details of budgetary matters.

(During a recent meeting of Missouri newspaper editors and publishers, Gov. Bob Holden distributed videotapes of Moody's latest presentation on the state's budget woes.)

This makes all the more important the message Moody is delivering these days. For state lawmakers and budget planners in the executive branch, Moody says the outlook is grim indeed.

First, some perspective. The state budget is often cited as $19 billion. Moody cites undisputed facts to show that, because of earmarked spending of state revenue and restrictions on the use of federal money, the $19 billion figure -- over half of which is federal revenue passing through state coffers and listed in the budget -- is misleading.

During the last fiscal year that ended June 30, gross general revenue, the state's most flexible pool of money, was $8.1 billion, or 42.6 percent of the budget. After more than $1.1 billion in tax refunds, that left just under $7 billion in net general revenue. There was another $5 billion in "hard to cut" expenditures such as the state's mandatory match for the federal Medicaid program and aid to local school districts.

Want to run for office on a pledge to slash K-12 school spending? Or medical and dental services for the poor and disadvantaged? Or to pay the few heroic medical and dental providers who still take Medicaid, and receive only a fraction of the usual and customary charges, even less?

All this leaves lawmakers with only an approximate $2 billion, or about 10.5 percent of the total budget, for what is known as "discretionary" spending. This makes the task of the lawmaker, and the budget planners in the executive branch, all the more daunting.

There's more, however. For 25 years, through good years and bad, general revenue climbed each year. Sometimes smartly and sometimes very weakly, but it nearly always rose -- even in recessions. For fiscal year 2002 that just ended, however, general revenue actually fell. This is a trend that may well continue for the current fiscal year and even beyond.

Couple this trend with expanding spending demands in most programs, and it isn't hard to see the squeeze facing the state.

In the misery-loves-company department, Missouri isn't alone. Owing to incredible mismanagement, states such as California are in even worse shape: The Golden State faces a $25 billion deficit. Many others are in comparably abysmal shape.

The one trend common to all is that during the fat years of the 1990s, state governments went on a tremendous spending splurge, both in existing programs and through adding new ones. Missouri, under the late Gov. Mel Carnahan, was no exception.

Missouri also has the Hancock Amendment, which mandated the tax refunds the state paid during the 1990s. Some politicians like to decry this tax-limitation amendment, saying it is the root of our problems. But, in Moody's words, its revenue limits are "irrelevant," because there is little possibility of them being triggered again.

There are no easy answers. State government leaders have their work cut out for them, struggling to live within the means that taxpayers have provided.

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