House, Senate, governor all differ on budget solution

JEFFERSON CITY, Mo. -- The process of writing the next state budget has been anything but normal this year in the Missouri Legislature.

The House of Representatives was the first to deviate from tradition in March when it passed an $18.6 billion spending plan that proposed doling out funds to the various state departments in lump sums without specifically stating how the money must be used.

While the Senate found that approach unacceptable, it too encountered difficulty in trying to make deep spending cuts. As a result, it essentially approved two state budgets last week -- an $18.8 billion plan based on known available revenue and a $19 billion proposal that covers the difference with as yet unapproved funding sources.

Even though the more optimistic of the Senate plans would be a mere 1.3 percent reduction from the $19.3 billion budget Gov. Bob Holden recommended in January, the Democrat has vowed to exercise his veto power unless lawmakers close the gap.

Because the Senate approach relies on more federal money, which comes with limitations on how it may be spent, and the costs of entitlement programs are rising, the chamber's favored plan would still result in large cuts to areas that rely heavily on general revenue, the state's most discretionary fund.

The state's two education departments would take the biggest hits. Spending for elementary and secondary education would be at least $236.7 million less than Holden recommended, while higher education funding would be $54.5 million under the governor's suggestion.

Those cuts would be even deeper if lawmakers can't come up with the $200 million needed to pay for the preferred Senate plan.

Patchwork of tax increases

The upper chamber spent several hours Friday debating a bill that would raise at least $180 million, though perhaps much more, through a patchwork of small tax increases, accounting maneuvers and the closing of some loopholes in the tax code.

Displaying their creativity -- and maybe desperation -- the bill includes some interesting provisions.

One would raise $5 million through a 5 percent gross receipts tax on the sale of pornography and nude dancing establishments. Another, dubbed the pot tax, would generate $6 million by taxing illegal drugs. Since it isn't anticipated that drug dealers would purchase the tax stamps necessary to keep them on the good side of tax collectors, the provision would allow the Department of Revenue to seize the property of those busted for possession.

While there was little opposition to the individual components of the Republican-sponsored bill, minority Democrats were worried the measure contains too many unrelated provisions in violation of the constitutional requirement that limits bills to a single subject.

"I can't imagine it withstanding any type of court challenge," said Senate Minority Floor Leader Ken Jacob, R-Columbia.

State Sen. Bill Foster, R-Poplar Bluff, said he too has concerns and suggested the various provisions be split into multiple bills.

"I think they have some valid points there," Foster said. "In trying to get this all in one bill, I'm not for sure that we won't end up with potential lawsuits."

While the Senate grapples with the funding issue, the budget is back in the hands of the House.

Fighting for lump sums

House Speaker Catherine Hanaway, R-Warson Woods, says she dislikes the two-tiered Senate budget and plans to fight to retain her chamber's lump-sum approach.

House Republicans were heavily criticized for their broad budget, under which individual department directors would decide how to spend the money allocated them.

"The whole objective is to get the most we can out of every dollar taxpayers pay into state government," Hanaway said. "I am not certain cranking it down to the line-item level gets the most out of every dollar."

She also dismisses complaints that lawmakers would be turning over too much power to appointed bureaucrats. Because of state and federal laws, Hanaway estimates that only 15 to 25 percent of the budget is truly discretionary.

Hanaway's enthusiasm for lump-sum budgeting notwithstanding, the Senate is expected to insist on a more traditional approach when negotiators from both chambers hammer out a final budget, which must be sent to the governor no later than May 9.

Hanaway says House Republicans still have no interest in a major tax increase, which is the governor's favored method of solving the problem. She says the chamber is open to many of the ideas being discussed by the Senate, provided they pass a simple litmus test.

"If it creates jobs we're for it. If it kills jobs we're against it," Hanaway said.

She also notes that with the Senate's $200 million revenue plan and $185 million from the sale of bonds both chambers approved earlier in the session, lawmakers would have given Holden more than half of the $700 million in new revenue he requested.

The Senate last week considered and rejected on a straight party-line vote a Democratic bill that contained many of Holden's tax ideas, including a higher tax on cigarettes and an income tax surcharge on wealthy Missourians.

Because of a constitutional amendment adopted in 1996, any major tax increase must be approved by voters. Lawmakers can raise at least $75 million without a vote. However, an untested provision allows lawmakers to increase taxes to offset revenue losses and some feel the cap could be as high as $250 million.

Jacob said the amendment essentially shifted the power of taxation from the legislature to the people. As a result, voters should have the opportunity to weigh in on the situation.

"There are only a few ways to resolve this revenue crisis, and they're all bad breath," Jacob said. "In this case, bad breath is better than no breath at all."

mpowers@semissourian.com

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