Millions in aid from feds alters state budget outlook

JEFFERSON CITY, Mo. -- The infusion of up to $398 million in unexpected federal money into the Missouri treasury could allow lawmakers to restore cuts to some state programs when they begin a special legislative session next week to redo key portions of the state budget.

The extra revenue wasn't accounted for in the $19 billion state operating budget lawmakers approved earlier this month for the fiscal year starting July 1.

House Speaker Catherine Hanaway, R-Warson Woods, said the money would more than cover the $12 million that Republicans say the spending proposal is out of balance plus the $354 million in cuts that prompted Democratic Gov. Bob Holden's plans to veto certain appropriations bills.

However, Linda Luebbering, Holden's budget director, said preliminary information she received shows Missouri getting $376 million in the new federal money -- $22 million less than estimated by the U.S. Senate Finance Committee -- and that federal tax cuts would take a $100 million bite out of state revenue. Because state taxes are tied to the federal code, federal cuts impact state finances.

As a result, Luebbering expects the state to net only $276 million in additional money -- insufficient to cover the $367 million she says the legislature's budget is actually out of balance with nothing left over to restore cuts.

Whatever the amount, the new money will come from a $20 billion state aid package included as part of the $330 billion federal tax cut signed into law by President Bush on Wednesday. The state expects its first payment in July.

Based on the $398 million projection, $190 million would be available for Missouri to use as it pleases to restore cuts to education, health care, social services and other programs. The remaining $208 million is earmarked for Medicaid but would allow the state to shift general revenue currently going into the program to other purposes.

Holden plans to veto the four budget bills that set spending for five departments -- elementary and secondary education, higher education, mental health, health and social services. The special session to recraft those bills begins Monday.

While Republicans, who control the legislature, initially vowed to send roughly the same budget back to the governor, the new federal funds have changed the situation, requiring lawmakers to authorize additional expenditures.

However, Hanaway said the development torpedoes the governor's case for new taxes.

"His call for a special session should not include a call for a tax increase," Hanaway said. "There is no need for a tax increase."

mpowers@semissourian.com

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