Holden signs $18.9 billion budget with few cutbacks

JEFFERSON CITY, Mo. -- Gov. Bob Holden signed a precariously balanced $18.9 billion budget Wednesday that boosts funding for public schools but cuts money for state colleges and social services.

The budget for the fiscal year that starts Monday is $373 million smaller than the current budget, marking the first decline in planned state spending since 1982.

To meet the constitutional requirement of a balanced budget, lawmakers assumed that new taxes, bond sales, fund transfers and a lottery game will produce hundreds of millions of dollars.

Yet the budget doesn't account for some legal disputes that could cost the state money. For example, a Supreme Court ruling earlier this month could force state and local governments to pay as much as $130 million in tax refunds to telephone companies, state officials said Wednesday.

Holden left open the possibility of future budget cuts if revenues and expenses don't work out as planned.

"The General Assembly presented a budget that we all agreed was balanced," Holden said. "However, it is a delicate balance."

Still, the governor said, "it is a budget, which in this difficult economic climate, invests in what must be Missouri's priorities for the future."

Lawmakers, with Holden's support, provided a $135 million increase in the basic formula that funds public elementary and secondary schools, bringing total funding to $2.2 billion for next year. But state colleges and universities took 10 percent cuts. Among other agencies cut were the state Department of Economic Development and the Department of Social Services, which oversees Missouri's Medicaid and welfare programs.

Several dozen disabled residents protested at the Capitol, and one man repeatedly interrupted Holden's bill signing news conference to complain about Medicaid cuts.

Included in the budget is a Medicaid change requiring people slightly above the federal poverty level to pay a certain amount in monthly medicine bills before Medicaid will pick up the rest.

In the past, recipients under Medicaid's "spend-down" provision only had to incur a certain amount of costs quarterly, then the state would pay their full bill.

Dan Kent, disabled because of a hunting accident, said he and his wife, who has muscular dystrophy, cannot afford to stay at home without their current level of Medicaid help.

"We'll have to foreclose everything we've got and end up in a nursing home," said Kent, 35, of Festus, who added that their 15-year-old son would likely have to live with relatives.

In response to Kent's interruptions, Holden said the Medicaid change was necessary to comply with federal rules.

"We're trying to be as responsive as possible" to people's concerns, he said.

The budget, as originally passed by lawmakers, was an estimated $167 million out of balance.

But under a veto threat from Holden, lawmakers on the last day of the legislative session on May 17 approved a bill allowing the sale of bonds against the state's tobacco settlement revenues. That is estimated to generate $50 million this year.

Lawmakers cobbled together a revenue bill covering the rest of the gap by imposing a new tax on pharmacies, suspending a business tax break and transferring money from numerous special accounts into the state's general revenues.

Also included in that bill is an enticement for people and businesses to pay overdue taxes during a penalty- and interest-free period later this year. The budget counts on generating $20 million through the gimmick.

The spending plan also assumes nearly $21 million for public schools as a result of a new keno-style lottery game that opened in restaurants and bars within the past month.

The state also is in a dispute with the federal Environmental Protection Agency over the use $19 million in a state water project loan fund. The state budget calls for the money to go toward bond payments, but the EPA says that would violate its rules and jeopardize the state's receipt of $74 million in federal clean water funds.

Holden said the state will likely have to ignore the budget language and pay off the bonds with general revenues intended for other areas of government.

"Due to the uncertainties ... we must make prudent use of our cash reserves," Holden said. "To do otherwise would be irresponsible fiscal management."

The state was expected to enter the 2003 fiscal year with a general revenue balance of around $300 million -- about one-third less than the amount with which it began this year.

On Wednesday, Holden made just three line item vetoes, cutting $357,391 in appropriations. The governor eliminated funding for a new lieutenant colonel in the Missouri State Water Patrol and two new supervisor positions in the Department of Social Services.

The third veto corrected a $181,815 technical error in the governor's office budget.

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Budget bills are HB1101-1112, 1120 and 1121 (Green).

On the Net:

Gov. Bob Holden: http://www.gov.state.mo.us

Missouri Legislature: http://www.moga.state.mo.us