$1 billion revenue shortfall pondered for state

JEFFERSON CITY, Mo. -- Inmates freed. More than 5,000 state workers laid off. Cash-strapped schools dismissing thousands of teachers.

That's the "horrible" -- but admittedly speculative -- scenario laid out Tuesday by Gov. Bob Holden's budget director for what could happen if Missouri were forced to slash $1 billion in general revenue spending across the board from its next budget.

But on the eve of the 2003 legislative session, budget chief Linda Luebbering said Holden isn't proposing any such dramatic cuts to deal with the previously announced projection of a $1 billion shortfall.

The alternative is finding new revenue. And the scary scenarios could help lay groundwork for asking voters to raise taxes -- an option Holden isn't ruling out after two years of sluggish revenue and $892 million in core budget cuts.

"There's nothing off the table," Luebbering said when asked whether Holden was considering asking lawmakers and voters to raise taxes.

Specific plans won't be divulged, she said, until the Democratic governor delivers his State of the State speech Jan. 15 to the Legislature, which is convening at noon today under Republican control for the first time in half a century.

"We are working on how do you do as much as possible with reduced spending," Luebbering said.

But Luebbering added that she saw no way to close the $1 billion gap without finding new revenue, short of making what the worst-case scenario list called "unacceptable cuts to vital state services."

Such cuts would be politically unpopular. But so are tax increases -- and Missouri requires any sizable tax increase to be submitted for voter approval.

Senate Appropriations Chairman John Russell, R-Lebanon, said he expects Holden is preparing to ask for higher taxes.

"It's going to be presented, and I think there is a probability that it will have to be considered by the General Assembly. As to whether it will pass, that is the question," Russell said.

House Budget Chairman Carl Bearden, R-St. Charles, rejected any suggestion of increasing taxes.

"We're going to be pushing to reform government from a budgeting standpoint," Bearden said.

The list of agency-by-agency impact of an across-the-board $1 billion budget cut was requested by the media, Luebbering said, but her office is also sharing it with lawmakers.

"All these are horrible things," she said of the speculative list.

It's speculative, in part, because budgets historically haven't been cut across the board; certain areas of spending, such as public schools, have been spared while pain has been spread elsewhere.

Last week, Holden eliminated 870 jobs and sliced more than $67 million from the current year's budget, which runs through June 30.

Future cuts weren't ruled out.

The state projects a $300 million shortfall through the end of the current budget year. Holden hopes to close that gap by selling more than $300 million in bonds secured by revenue that Missouri expects to collect from the national legal settlement with tobacco companies.

The cuts were necessary because Missouri's budget assumed 3.1 percent growth in general revenue compared to last year, when tax revenue fell for the first time since the 1955 fiscal year. Now, Holden's budget office expects revenue to fall about 3 percent this budget year from last year.