Holden warns of possible $162 million cutback in education

JEFFERSON CITY, Mo. -- Democratic Gov. Bob Holden embraced half of a Republican legislative plan to cover this year's budget shortfall but warned Monday that a compromise on the remaining amount must be reached soon to avoid a $162 million cut in education.

Holden called on lawmakers to cover the full amount by authorizing bonds secured by the state's future revenue from a settlement with big tobacco companies.

"The opportunities for cuts outside the areas of education have been exhausted," Holden said. Lawmakers can authorize the use of tobacco bond revenue "or they can effectively impose $162.3 million in cuts in education. The choice is clear."

Holden gave lawmakers until this weekend to show support for his bond plan or come up with another workable idea. As it stands, "their plan for covering the remaining shortfall does not work," he said.

Republicans, who control both the House and Senate, urged Holden to revisit their proposals and suggested he was using education funding as a bargaining tool.

"We have proposed many alternatives to the governor's education cuts," said House Speaker Catherine Hanaway, R-Warson Woods. "Yet the governor has placed a bull's eye on the backs of Missouri's students and educators."

Holden already has cut $127 million in state agency expenditures.

But Missouri needs to come up with roughly $350 million more -- either through cuts or new revenue -- to balance its budget for the fiscal year that ends June 30, said state budget director Linda Luebbering.

Last month, Holden proposed to cover that $350 million entirely through a tobacco settlement bond sale, warning the alternative would be a similar size cut to public schools and state colleges.

Republicans countered with a plan sparing education and using just $100 million in tobacco bond revenue this fiscal year while saving the rest for the 2004 fiscal year, which starts July 1.

On Monday, Holden said he agreed to $187.7 million worth of savings included in the Republican plan -- leaving the $162.3 million gap. The agreed-upon figure includes a minimum of $100 million in tobacco bond revenue.

Other agreements, Holden said, include:

Delaying until next fiscal year the payment of an estimated $50 million tax refund that resulted from a state Supreme Court ruling on telephone company equipment. Luebbering said Missouri traditionally has budgeted for such payments during the year in which the cost was incurred. but Holden said he agreed to break with precedent because of the dire budget situation.

-- Reducing by $10 million the state's beginning cash balance for the 2004 fiscal year. Republicans had suggested the beginning cash balance could be reduced by $33.9 million.

Holden rejected two Republican proposals. One would have spent $50.6 million this year that otherwise is projected to lapse into the next fiscal. The governor called that plan "very risky" because it would leave little money for dealing with emergencies.

Holden also rejected a Republican plan to withhold $30.5 million for construction of a pharmacy building at the University of Missouri-Kansas City.

"This could be financially feasible, but would have long-term consequences in Missouri's role as a life sciences leader," Holden said.

Holden and Republican legislative leaders all said that budget negotiations were continuing.

Meanwhile Monday, the governor's budget director acknowledged that January's budget shortfall was twice as large as initially thought, due to a simple typo.

Missouri's revenues fell $47 million short of what was budgeted last month -- not $24 million short as the state had reported last week, Luebbering said. The error occurred in the amount of money the state reported paying in tax refunds, she said.