Missouri facing $500M hole in upcoming budget

JEFFERSON CITY, Mo. -- Missouri budget leaders are warning of a half-billion-dollar gap between projected expenses and revenue for the upcoming financial year.

Such cautions have become so common in recent years that they may seem a mere formality as lawmakers convene their 2012 session Wednesday. Yet this time, the cuts really may be more difficult to make.

"If there were any programs that everybody agreed needed to go away, that happened a couple of years ago," Linda Luebbering, the budget director for Gov. Jay Nixon's administration, said Tuesday. "We're now to the point of making decisions about cutting spending that, really, we wouldn't be cutting if we had more revenue."

For several years, Missouri and many other states have used federal stimulus money to prop up their budgets for public schools and Medicaid health care services for the poor. But that is coming to an end for the 2013 budget that will begin July 1. That means Missouri will have to dig deeper into its own tax revenue to continue funding public schools and paying medical bills and, as a result, will likely have to make deeper incisions to many government programs and services.

'Over the cliff'

"This is the year we go over the cliff, and there's nothing you can really do about it," said House Budget Committee chairman Ryan Silvey, R-Kansas City. "The silver lining that I try to give everyone is once you go over the cliff and you're at the bottom, then you start to climb back out."

Missouri's $23 billion operating budget for 2012 includes about $650 million from one-time sources, primarily from a federal stimulus program aimed at stabilizing state budgets. That will be gone for the 2013 budget. Missouri also expects to lose $90 million in 2013 because the federal government will be reducing its Medicaid reimbursement rate to Missouri.

The state also will face increased spending demands because of the rising cost of health care. For example, the Department of Health and Senior Services estimated this fall that it will need an additional $17 million in state funds and nearly $30 million in federal funds to handle an increase in the number of elderly and disabled Medicaid patients making use of home-based services. The Department of Corrections estimated that it would need an additional $11 million to cover its contract for providing medical care to prisoners.

Both the home-based and prison health measures would amount to an 8 percent increase over the current year's budget.

The state's general revenue, meanwhile, is projected to grow at just half that pace, generating an additional $285 million over the current year.

The net result is that, even with growth in state tax revenue, Missouri's 2013 budget could face a gap of around $500 million, Luebbering said.

Senate Appropriations Committee chairman Kurt Schaefer, R-Columbia, provided a similar estimate of the budget gap. Silvey's estimate puts the gap at more than $600 million.

No tax increases

Republican legislative leaders and the Democratic governor all have pledged not to seek tax increases. Efforts to raise revenue through other means -- such as an amnesty period for overdue taxpayers to come forward -- failed to win approval during the 2011 legislative session and likely will be back on the agenda this year.

That means the budget gap may have to be closed primarily through spending reductions.

The budget chiefs for the governor, House and Senate all have said that they hope to spare public elementary and secondary schools from the budget cuts that are likely to hit every department of state government.

Schaeffer notes that the Missouri Constitution prioritizes the appropriation of money, with the payment of debt topping the list followed by public education. Funding for public health and welfare programs is closer to the end of the list. Schaefer said that means that social services programs should bear a greater share of the cuts than schools, but he wants to first see Nixon's budget proposal which is expected to be released Jan. 17.

"A lot of the low-hanging fruit is gone. The reality of it is there are more cuts. The question is where are those cuts going to come from," Schaefer said.