Nixon cuts $59M in funding after tax-break veto override

JEFFERSON CITY, Mo. — Gov. Jay Nixon cut $59 million in funding for Missouri’s schools, roads and other programs Thursday to counteract new tax breaks enacted a day earlier when lawmakers overrode vetoes.

The Democrat, who previously warned lawmakers the tax breaks would strain the state financially, sought to pin the blame for his actions on the Republican-led Legislature.

“Make no mistake, these cuts are solely the responsibility of legislators who voted to enact the special-interest tax breaks,” Nixon said. “When they decide to spend money on tax breaks, that money has to come from other places.”

The state budget runs through June, meaning whoever is elected governor in November could continue or rescind the cuts after Nixon’s term ends in January.

Nixon cut more than $24 million for K-12 schools; $22 million for local highway, river port and transportation projects; more than $8 million for higher education; and more than $4 million for agricultural programs.

All, he said, were necessary to offset an income-tax deduction for agricultural disaster-aid payments and a sales-tax exemption for instructional classes such as dance lessons.

The disaster-aid tax break is retroactive to 2014, when Missouri farmers received an unusually high amount of federal aid stemming from a 2012 drought. That means people can file amended tax returns seeking refunds.

Nixon’s budget office estimates it could cost the state nearly $52 million, a figure that appears to have been calculated by taking 2014 figures and applying them to subsequent years. But lawmakers contend that’s flawed, because disaster payments were significantly lower in other years.

“I completely disagree with the justification for the withholds,” House Budget Committee vice chairman Scott Fitzpatrick said. Lawmakers have cited an analysis by a University of Missouri agricultural economist that put the cost closer to $12 million.

Nixon asserted that analysis was flawed because it focused only on two main disaster-aid programs and assumed farmers with fewer than 50 cattle wouldn’t find it financially worthwhile to seek a tax refund. Some of his cuts affect programs for beef and dairy farmers — a move Nixon said was no coincidence.

The Missouri Cattlemen’s Association said Nixon’s projections for lost tax revenue were “hugely exaggerated.”

“It’s a shame that this governor holds appropriations hostage and uses them as leverage to influence policy,” association executive vice president Mike Deering said in a written statement.

The tax break for instructional classes, such as dance or yoga lessons, is projected by Nixon’s administration to cost the state $8 million this year and an equal amount for local governments. An analysis by legislative research staff said the cost was unknown but could exceed $100,000 for state and local governments.

Some Republican lawmakers said the budget cuts weren’t necessary, and Nixon should have chosen targets other than schools and roads.

The new tax breaks “are not going to cause Missouri’s $27.5 billion budget to go into a tailspin — neither of those bills will,” Senate Majority Leader Mike Kehoe said Wednesday.

The latest cuts are on top of $115 million of spending Nixon blocked shortly after the state budget took effect in July, which affected 131 budget items, including increases for tourism promotion, the public-defender system, school busing and new programs at public universities.

Nixon said the original cuts were necessary in part because revenue grew only 0.9 percent in the 2016 fiscal year. Through the first two months of the new budget year, net general revenue was up 2 percent, again short of projections.

Associated Press writer Summer Ballentine contributed to this report.