Gov. Bob Holden riles GOP with tax talk

JEFFERSON CITY, Mo. -- Gov. Bob Holden bluntly threw down the gauntlet in his fourth State of the State address Wednesday, setting up another protracted budget fight with the Republican-led Missouri Legislature.

For the second straight year, Holden, a Democrat, offered a package of tax increases and other revenue-boosting measures, antagonizing GOP lawmakers in the process.

"I will not rest until we have restored the funding you cut from schools in this state," Holden said. "If you thought this issue was settled, think again."

The governor proposed an $18.82 billion state operating budget for fiscal year 2005, which begins July 1. His plan would increase state spending by $743 million, a 4.1 percent rise.

To cover the new spending, Holden called for raising tobacco taxes, eliminating certain corporate tax breaks, boosting income taxes on wealthier Missourians and increasing levies on casino operators while repealing the per-patron gambling loss limit. Republicans, who outnumber Democrats 20-14 in the Senate and 90-72 in the House, rejected all those ideas last year.

His proposal would generate $520 million in additional revenue. Most of the components ultimately would have to be endorsed by voters in August because the Missouri Constitution empowers lawmakers to raise taxes by only $75 million this year without a public vote.

Holden said higher taxes are an unfortunate necessity.

"I've never said it was the politically popular thing to do," Holden said. "But it's the right thing to do for the schoolchildren of this state."

Holden suggested another $220 million be found by cutting existing spending, including a $51.9 million hit to Medicaid, closing some mental health facilities and shuttering the aging women's prison in Chillicothe.

Spending for elementary and secondary education would increase by $161.5 million under Holden's plan, with higher education getting a $39.3 million boost.

Republican leaders, who for weeks have been preemptively criticizing the governor's anticipated tax request, responded with anger.

"The governor's proposal today for another half-million dollars in higher taxes, if passed, would halt our economic recovery in its tracks and cost Missourians jobs," said Senate President Pro Tem Peter Kinder.

Basing a budget on taxes voters might not authorize isn't responsible public policy, said Kinder, R-Cape Girardeau. He noted a 55-cent-per-pack hike in the cigarette tax -- the same amount Holden suggests -- failed in a statewide vote in November 2002.

House Speaker Catherine Hanaway, R-Warson Woods, accused Holden of "telling lies" about how Republicans have dealt with education funding.

The speaker also lambasted the governor for topics that went unmentioned during the speech. Among them were limiting civil lawsuits, workers' compensation reform and overhauling the unemployment insurance system -- key GOP initiatives that last year were either blocked by Democratic lawmakers or vetoed by Holden.

This year's spending plan marks a change in how the size of the budget is calculated. Money collected from taxpayers but returned as refunds was previously counted as both revenue and an expenditure. State budget director Linda Luebbering said she and the House and Senate appropriations committees agreed no longer to count refunds in the operating budget.

"Refunds are not money the state can spend," Luebbering said. "It inflated the size of the budget."

Including refunds would make the budget for the current year $19.1 billion and put the governor's fiscal year 2005 proposal at $20.15 billion.

mpowers@semissourian.com

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