Lawmakers want to tap reserve fund

JEFFERSON CITY, Mo. -- Two St. Louis lawmakers want to tap into a state reserve fund to help cover a budget shortfall that governor-elect Jay Nixon has pegged at more than $300 million.

Missouri's Budget Reserve Fund has about $550 million, and half can be used for emergency budget needs. In letters sent this month to Nixon, Rep. Jamilah Nasheed and Sen. Jeff Smith urged Nixon to plug the budget with money from the reserve fund and limit spending cuts.

A spokesman for Nixon's transition office said the incoming governor doesn't plan to use the reserve fund for the projected shortfall.

Nasheed and Smith, both Democrats from St. Louis, said the rainy day fund was created for budget emergencies. The lawmakers argue that using money from the fund would help prevent cuts to education, social services and other state programs.

"Moreover, it will help us both provide responsible representation for our constituents, while fulfilling the important promises that we made on the campaign trail," Nasheed wrote.

Nixon's "plan is to balance the budget by making government smaller, more efficient and more responsive," spokesman Oren Shur said.

Nixon's transition office budget adviser has warned that the state could face a $342 million shortfall in the current fiscal year that started July 1. Gov. Matt Blunt's office questions whether there will be a budget shortfall, much less one the size projected by Nixon. The House Budget Committee chairman, Allen Icet, R-Wildwood, said he thinks the projection is pessimistic.

To deal with the budget, Nixon plans a temporary freeze on new long-term state contracts for goods and services and a review of all construction projects that have not already broken ground. Nixon also has insisted that he will try to make good on campaign pledges to expand Medicaid health care coverage and college scholarships, which would cost $326 million.

Missouri's rainy day fund has been used only once previously, when $16 million was used after the 1993 flood. In 2002, Gov. Bob Holden suggested using reserve funds to boost the state's budget during a previous round of economic troubles, but House Republicans balked at the idea.

Incoming House Speaker Ron Richard, R-Joplin, said earlier this year that he doesn't like the idea of using the reserve funds for a budget shortfall.

The state constitution allows reserve funds to be used in two circumstances: when the governor reduces state expenditures below appropriations during any fiscal year and when "there is a budget need due to a disaster, as proclaimed by the governor to be an emergency."

It takes a two-thirds vote in the House and Senate, and lawmakers in the following year, must start annual payments of one-third of the borrowed funds plus interest.

Nasheed said that the mandatory quick payback of the borrowed funds makes the reserve essentially unusable and plans to file a proposed constitutional amendment to give lawmakers a larger window before payment must begin. Nasheed's proposal is still being drafted but wouldn't require the installment payments to begin until the third year after the loan.