Audit: State doesn't follow up on cost projections

JEFFERSON CITY, Mo. -- Legislators considering the creation of new state programs, or changes to existing ones, are good at asking the question: What will it cost?

In fact, the legislature has an entire office dedicated to developing cost estimates for each of the hundreds of pieces of legislation introduced each year.

Yet a new state audit suggests that legislators are less adept at asking the follow-up question: What did it cost?

State Auditor Claire McCaskill last week cited numerous examples in which legislators received cost estimates while considering proposals, but never tracked the actual costs after the proposals became law.

A few examples:

* In 1991, before the legislature made its first annual $12 million appropriation for the St. Louis convention center and dome, the state hired a private firm that estimated the facility could generate $17 million annually in new state taxes.

McCaskill said the state never did a follow-up study to determine whether the financial projections came true. Her audit suggests they may not have, noting the 1991 study projected the convention center would host 39 national and regional events in a year, but the actual number of such events had not surpassed 30 as of the 2004 fiscal year. (The St. Louis Convention and Visitors Commission says McCaskill's tally wrongly excludes the Rams' 10 annual football games.)

* In 1998, the legislature tripled the dependency income tax deduction to $1,200 per child and created a $1,000 deduction for adults caring for their elderly parents. The legislature's Oversight Division projected the tax breaks would cost the state $68 million a year.

McCaskill's auditors were told by the Department of Revenue that the actual cost of the tax breaks was not readily available and had not been requested by the legislature since the measure passed.

* In 2003, the legislature required residents from other states to report and pay taxes on their Missouri casino and lottery winnings. Legislative researchers projected the law would generate $6.6 million annually.

The Revenue Department told auditors the gambling law increased state revenue by $10.2 million in the 2004 fiscal year. But the audit said there was no indication that information had been requested or provided to the legislature.

Legislative number crunchers "have only done half the job," McCaskill said, "because the legislature has no idea if these costs are accurate."

The Oversight Division of the Joint Committee on Legislative Research hasn't performed cost verifications because legislators haven't requested it, said director Mickey Wilson.

But even if they did, "the problem is some agencies don't capture the information," Wilson said.

"So there's no way to be able to analyze the projections vs. what the actual results are."

McCaskill says the Legislature should develop a way to do that.

A 2003 law could provide a framework for a cost analysis, Wilson said. That law requires new programs to either expire or be renewed within six years and allows the Committee on Legislative Research to order a review of any existing program to determine whether it should continue.

But legislators have not requested any reviews under that law, Wilson said, adding that he's still in the process of determining how those reviews would be done.

Sen. Gary Nodler, chairman of the Committee on Legislative Research, said McCaskill raises a good point about the need for financial follow up. At the committee's meeting on Wednesday, Nodler plans to raise the idea of creating a legislative budget office that would present lawmakers an array of budgeting options, based partly on the cost-effectiveness of programs. Nodler, a congressional staff member for nearly two decades, compares it to the Congressional Budget Office in the nation's Capitol.

But the senator said McCaskill's suggestion sounds similar to an audit, which the Legislature is barred from doing. The Supreme Court ruled in 1997 (in a case initiated by McCaskill's predecessor) that legislative Oversight Division audits of executive branch agencies violated the constitutional separation of powers.

Yet "I'm obviously in favor of a mechanism that give us more information" about the actual costs of laws, said Nodler, R-Joplin.

McCaskill said she's not proposing legislative audits, nor anything too complex.

"If the Legislature is interested in being fiscally accountable, it seems that this should be a standing request: After legislation is passed that has a fiscal impact, positive or negative, that after two budget cycles or three budget cycles, they get a report back as to whether what they were told was correct," McCaskill said.

The Legislature typically passes a couple hundred laws a year. To prepare financial reviews on every law that costs or generates money likely would require an expansion of the Oversight Division's 10-member professional staff, Wilson said.

In essence, that would mean spending more money to determine how much money actually was spent or received as a result of legislative actions.

Sometimes, knowledge comes at a price.

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EDITOR'S NOTE: Capitol Correspondent David A. Lieb covers Missouri government and politics for The Associated Press.