Legislature authorizes sale of revenue bonds

The Associated Press

JEFFERSON CITY, Mo. -- The state House gave final approval Thursday to a plan that would pump $150 million into the state budget this year by selling bonds backed by general tax revenue.

But the move still leaves the state $82 million shy of covering a projected $410 million shortfall. Gov. Bob Holden, who had already cut funding for other state agencies to start covering the projected deficit, has said he would cover the remaining difference with cuts from public education.

"I wish they would have put more than $150 million in it," Holden told media visiting the Governor's Mansion shortly before the House vote, "but if that's what they're going to do, then I need to know and schools need to know that."

Holden, noting that other areas of government have already been cut, said he would withhold $61 million from public elementary and secondary schools and $21 million from state colleges and universities.

Republicans insist there are other ways to cover the $82 million gap. Specifically, they say Holden could spend some of the money that normally is held in reserve for the next fiscal year. But Holden says that would be financially irresponsible.

Goes before Holden

The bonding plan, which had passed the Senate on Wednesday night, was approved by the House on Thursday by 127-26 vote and now goes to Holden.

The plan would sell about $400 million in bonds immediately. After taxes and other upfront charges, the net gain would be about $335 million. Then, $150 million could be spent in the current fiscal year, which ends June 30. The rest would be used in the next fiscal year, when the state is facing a budget shortfall of as much as $1 billion.

For much of the past year, lawmakers and Holden had been planning to issue bonds backed by the state's future tobacco settlement revenues. But that plan proved more costly than expected.

After trying to reduce the tobacco bonding costs, lawmakers finally decided to scrap the whole idea in favor of the revenue bonds, which carry less risk to buyers and thus cost the state about $220 million less over the life of the bonds.

Some Democrats in the House derided the revenue bond plan as simple borrowing and spending.

"We might as well just repeal the constitutional requirement that we have a balanced budget," said Rep. Rick Johnson, D-High Ridge. "Basically with revenue bonding, we are increasing the state's credit card limit ... and then maxing that credit card out."

Necessary move

But House Speaker Catherine Hanaway, R-Warson Woods, defended the move as necessary in these "extraordinary circumstances." Asked whether she was condoning deficit spending, she replied, "It sort of depends on how you define it."

Hanaway said the revenue bonds are not desirable but necessary to prevent larger cuts to education and generate money for next year's troubled budget.

Technically, the revenue bonds would pay for construction and renovations that already are under way at state buildings and higher education institutions and would pay off other short-term state debt. That would free up existing state tax revenue to go toward the budget shortfall.

Traditionally, revenue bonds are issued only for state building projects. The legislation had to expand that to include buildings at state colleges and universities in order to generate enough bond revenue to help address Missouri's budget troubles.

House Republicans had floated a plan Thursday morning that would have bought back bonds sold to build a new basketball arena at the University of Missouri-Columbia and then resold the bonds as part of the bigger package. But the GOP later dropped that plan.

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Bonding bill is HB401.

On the Net:

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