Officials - Economy improving despite decline in tax revenue

JEFFERSON CITY, Mo. -- Although state tax revenue continue to fall, Missouri's economic development director is picturing a rosy future for the state's overall economy.

"Missouri's economy is fundamentally strong, and we're seeing definite signs of improvement," Joe Driskill, director of the state Department of Economic Development, said Tuesday. "We think the recession is ending in Missouri."

Driskill stressed the positives while releasing a periodic report that nonetheless shows Missouri suffered a net loss of 93,000 jobs from March 2001, when the recession began, through the end of May.

However, the total number of Missourians employed in non-farm jobs has grown in both April and May -- one of the positive signs cited by Driskill. The state's unemployment rate remains below the national rate.

Other positive indicators, Driskill said, include:

Missouri's per capita personal income grew by 2.8 percent in 2002, slightly higher than the national rate of 1.7 percent. However, Missourians' average income of $26,000 remains about $2,000 below the national average.

Missouri had an 155,973 businesses in 2002, up 1.5 percent from 2001 and an almost identical percentage increase as occurred the previous year, according to the department's Missouri Economic Research and Information Center.

As Driskill was trying to convey good news, however, the state's budget director was projecting more poor times for Missouri government.

"We are in very unusual budget times," said Linda Luebbering, Gov. Bob Holden's budget director. "The state's collections are even worse than what the economy would predict."

Trends in tax revenues typically lag behind the economy as a whole.

During Missouri's 2003 fiscal year, which ended Monday, the state's general tax revenues declined by $285 million -- or 4.6 percent -- compared to the previous year.

That marked the second straight year of declining state revenues -- something unparalleled in about 50 years, according to state records, and perhaps even longer.

The revenue decline in the 2003 fiscal year was offset somewhat by a late infusion of about $95 million in federal funds. With that money included, state general tax revenues only fell by 3.1 percent.

But that decline becomes more pronounced when contrasted with the fact the 2003 budget was based on an expected general revenue growth of 3.1 percent in 2002.

Missouri's individual income taxes, which comprise 60 percent of its general revenues, declined 2 percent in the 2003 fiscal year, according to a Department of Revenue report released Tuesday.

State sales taxes, which comprise about 25 percent of general revenues, declined 1 percent. Corporate income and franchise taxes, which comprise a comparatively small portion of state tax revenues, declined by 14 percent.

Legislators recently passed a budget for the 2004 fiscal year, which began Tuesday, that assumes Missouri's revenues will grow in the coming year. However, Luebbering's office is projecting that general revenues will once again decline.

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On the Net

Economic Development: www.missouridevelopment.org

Revenue Department: www.dor.state.mo.us