Senate passes new way to address budget troubles

JEFFERSON CITY, Mo. -- State senators have endorsed a new way to address Missouri's budget troubles. But it still could result in an $82 million gap the governor has pledged to cover with education cuts.

The state Senate voted 27-6 Wednesday night for legislation allowing the issuance of revenue bonds to help cover the state's shortfall for the fiscal year that ends June 30. The bonds would be backed by the state's general tax revenue.

Last week, the House also endorsed bonds as a means to cover part of the shortfall. But the House plan would have pledged the state's future tobacco settlement proceeds to pay off the debt, with general tax revenue as a backup.

The plan passed by the Senate could save about $220 million in interest payments over the life of the bonds, according to the state budget office. That's why some state officials consider it a better financial deal.

But under either option, Republicans -- who control the Legislature -- want to limit the use of the bond proceeds this year to $150 million, saving a slightly greater amount for use in the fiscal year that starts July 1. The Senate voted 20-13 against an attempt to allow the use of $263 million of bond revenue this year.

$140 million shortfall

The $150 million spending cap would mean Democratic Gov. Bob Holden still would have to find a way to cover $82 million of what is now projected as a $410 million shortfall in the current fiscal year.

Holden, noting that other areas of government already have been cut, says he would withhold $61 million from public schools and $21 million from state colleges and universities.

The new bonding plan may make more financial sense than the old one, but "this still doesn't protect education," said Holden's chief of staff, Mike Hartmann.

Republicans insist there are other ways to cover the $82 million gap. Specifically, they say Holden could spend some of the money that normally is held in reserve for the next fiscal year. The Missouri Republican Party began airing statewide radio ads Wednesday accusing Holden of insisting on education cuts and using children as political pawns.

The political posturing over who would be responsible for the education cuts has resulted in tense debates. Democratic Sen. Ken Jacob of Columbia made a show of his displeasure Wednesday by crumpling up a copy of the Republican advertisement's text and throwing it down.

Jacob criticized the revenue bonds as a way of "financing the state government on a credit card."

Under the tobacco bonding plan previously embraced by the House, the state would issue $480 million in bonds that would net the state nearly $373 million after initial interest payments and other costs. The bonds would be paid off after 37 years at a cost of $959 million.

Under the revenue bonding plan passed by the Senate, the state would issue $397 million in bonds that, after initial interest payments and costs, would net the state nearly $335 million. The bonds would be paid off over 25 years at a cost of $738 million.

The revenue bonds result in long-term savings because they carry less risk to buyers than bonds backed by tobacco settlement proceeds.

Traditionally, revenue bonds are issued only for state building projects. But the legislation expands that to include buildings at state colleges and universities in order to generate enough bond revenues to help address Missouri's budget troubles.

Instead of using bonds, several senators suggested the state should tap into its so-called Rainy Day Fund to cover this year's shortfall. That money would have to be repaid over three years -- a quicker, cheaper way of borrowing than issuing bonds.

"This whole idea of borrowing money long-term for a short-term patch just doesn't make sense," said Sen. Wayne Goode, D-St. Louis.

An attempt to use the Rainy Day Fund failed on an 18-15 vote.

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Bonding bill is HB401 (Pratt).

On the Net

Missouri Legislature: www.moga.state.mo.us