Next state budget likely to be smaller than this year's

JEFFERSON CITY -- Missourians having trouble balancing their checkbooks should consider the plight of state budget officials:

Revenue for fiscal year 2001 ended $98 million below the revised projections developed in December 2000.

All revenue increases collected in the current calendar year will be needed to alleviate the shortfall in fiscal 2002 and ensure mandatory funding required in the budget year starting July 1.

Any increases in the working fiscal 2003 budget will have to come from reductions in the core budgets of the state's 16 departments and from any non-general revenue funds that may become available in the future.

The deadline for proposed departmental budgets was to have been Oct. 1. Three departments had failed to submit their final budget requests as of Nov. 26.

Gov. Bob Holden's annual State of the State address, in which he recommends executive departmental fiscal requests for the year beginning July 1, is less than 45 days away.

According to deputy budget director Mark Reading, all of these circumstances will produce these results:

A mandatory balanced budget for current fiscal 2002 will only be balanced with the one-time addition of $338 million transferred from the state's tobacco company lawsuit collections.

Bonds totaling $270 million approved to provide funding for new highway construction by the Department of Transportation will be transferred from the current year to fiscal 2003.

Unless a financial miracle appears, next year's budget will be the first smaller-than-previous-year budget since 1989, meaning that despite inflation and mandatory increases in federal-assisted welfare benefit programs, Missourians will receive fewer services from their state government than they are receiving in fiscal 2002.

Difficulty in arriving at expected total budget spending for fiscal 2003 stems primarily from late submissions by the state's largest-spending department, Social Services, and the departments of Corrections and Natural Resources. Budget officials say these problems are more the result of delayed federal mandate orders than procrastination by personnel in the three agencies.

Even when all 16 departments have submitted their core requests and proposals for expanded services, these figures must be studied and recommendations made by budget and planning staff members for final decision by the executive office. As the state's chief executive, Holden is responsible for making the final decisions on all amounts to be recommended to the General Assembly in January.

Some financial pressure in the preparation of any fiscal 2003 spending totals will be lessened, however, with action taken earlier this year. In the current fiscal year, the statewide leasing budget was converted to a biennial appropriation bill, with money earmarked for fiscal 2002 and 2003. The next biennial leasing budget will be for fiscal years 2004 and 2005. During fiscal 2003's budget cycle, officials are not expecting any leasing deductions, helping to relieve their current cash-flow problems.

Some additional funding for required state programs may be found in tobacco settlement payments, but these requests must be consistent with core appropriations increases in previous years, Reading said.

Inflation's role

The other obstacle in reaching the mandatory balanced-budget requirement is inflation, which, according to budget director Brian Long, may reach as high as 4.5 percent for the state's medical-care programs in fiscal 2003. Officials are also predicting the state will experience a 3.5 percent increase in spending for electricity, natural gas, motor fuel and fuel oil. The state's food costs are expected to increase 2 percent as a result of inflation, while all other spending items should have a 2.7 percent inflationary cost increase.

Funding for state employees' salaries should remain fairly consistent with existing outlays, according to budget and planning officials, since increases were inaugurated in the current period. It is believed that personnel turnover and the hiring of new workers should provide the money necessary for the one-step increase approved by the Personnel Advisory Board.

Some additional outlays may be experienced as the state seeks to retain workers on the lowest pay scales and certain workers such as those in the Department of Mental Health, which has experienced difficulty in retaining employees at the bottom of the state salary scale.