Changes to state budget process on table

JEFFERSON CITY, Mo. -- In about a week, legislative and executive branch budget officials with the help of outside economic consultants will develop the financial estimate that will be used to draft the next state budget.

Missouri has long used this process for forecasting available revenue, but in recent years the estimate has been off, in large part due to a prolonged downturn in the economy. As a result, state budgets that were thought to be in balance when approved ended up hundreds of millions of dollars in the red, forcing midyear spending cuts by the governor.

A bill the Senate will consider when the legislature convenes for the 2003 legislative session on Jan. 8 would scrap the current system, known as the consensus revenue estimate.

Instead of attempting to predict the future economic climate and its impact on the state treasury, state Sen. Chuck Gross, R-St. Charles, said the budget should be based on actual revenue received during the last completed fiscal year.

The way the state determines its revenue hasn't been accurate, said Gross, a member of the Senate Appropriations Committee. "That wasn't a problem when revenue was going up -- in no case did anyone get cut. Now it is a different story."

$152 million short

The latest projection by Gov. Bob Holden's budget director shows revenue for fiscal year 2003 currently running $152 million short of what was expected when lawmakers passed the budget last spring. Without action, the shortfall could top $300 million by the time the fiscal year ends on June 30.

Later this month, Holden is expected to announce withholdings aimed at keeping the budget in balance. He wasn't ready to discuss details of that plan last week, but the Department of Higher Education, as it has in the past, is expected to take the biggest hit because it is one of the few agencies that receives a large amount of discretionary revenue.

The trend of declining state revenues isn't limited to Missouri. As a November report by the nonpartisan National Conference of State Legislatures succinctly put it: "State fiscal conditions continue to deteriorate."

According to the report, 31 states had already reported budget shortfalls in the early months of FY 2003. As time goes by, more states are expected to experience budget gaps. Revenue forecasts had been lowered in 26 states.

Even if passed by the legislature next year, Gross' bill wouldn't affect work on the budget for FY 2004, which begins July 1. However, if it were currently in effect, it would work like this:

Instead of trying to guess in December 2002 how much money the state would have to cover its spending at the end of June 2004, budget planners would base FY 2004 spending on actual revenue it received for the fiscal year 2002, which ended June 30.

The bill would allow a 1 percent increase over actual receipts from that year, plus the addition of revenue from any new taxes approved by voters.

House Speaker Pro Tem-elect Rod Jetton, R-Marble Hill, said the plan is far from perfect but that lawmakers need to be willing to try new ideas.

"The bottom line is -- whether you like this or not -- we have got to do something different," Jetton said. "I know one thing: The old plan is not working, and it's time to try new courses of action."

A downside

However, state Sen. Wayne Goode, D-Normandy, sees a downside to basing spending on actual revenue from a past fiscal year.

"I would say that is impractical because the state's costs go up every year, particularly health care costs that are beyond our control," Goode said.

The NCSL reports says rising costs for Medicaid and other health care programs are contributing to the budget woes in at least 24 states, including Missouri.

While the consensus revenue estimate has been off in recent years, Goode said it has proved accurate overall since its implementation in the 1980s.

The ranking Democrat on the Senate appropriations panel and a 40-year veteran of the legislature, Goode is known as a fiscal conservative and a respected authority on the state budget.

Before the consensus revenue estimate, the governor and the two legislative chambers would each develop their own competing revenue projections, which led to frequent disagreements.

"You not only argued about how close you should be to the budget numbers, you argued over what those numbers were," Goode said. "If you try to use 2-year-old figures, it will probably degenerate into that again."

mpowers@semissourian.com

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