States may lose millions under stimulus plan

KANSAS CITY, Mo. -- Taxpayers in Kansas and Missouri will be happy to get their $600 rebate checks from the federal government as part of a stimulus package heading toward President Bush's desk.

But leaders in those two states aren't as excited about the tens of millions of dollars they stand to lose as part of the plan because of two business tax cuts, according to the Kansas City Star.

The Center on Budget and Policy Priorities, a Washington think tank, estimates that Missouri could lose $100 million and Kansas $87 million. Overall, 36 states would lose a total of $2.9 billion in tax revenue -- some of it this year but most during the fiscal year that begins July 1 in most states.

Officials at the center said the reduction in spending by the affected states would partly offset any economic boost from the business tax breaks.

"When states must cut programs to balance their budgets, they lay off workers, reduce payments to contractors, cut reimbursements to providers, or reduce benefit payments to individuals," they said in their report.

In Kansas, lawmakers say the budget for fiscal 2009, which begins July 1, already is tight and there is little money for new programs or tax cuts.

Losing $87 million would leave a large hole in the state's budget, of which two-thirds goes to public schools and higher education.

"It's another unfunded federal mandate for the states," said Sen. David Wysong, a Mission Hills Republican and member of the Senate budget committee. "The state can't afford an $87 million loss."

The $87 million exceeds the $81 million that state officials are hoping to gain from expanded gambling in the next fiscal year. It would more than pay for a 2.5 percent pay raise for state employees next year.

In Missouri, House Budget chairman Allen Icet said a $100 million hit would erase nearly 30 percent of the annual growth in state revenue.

"It becomes all about priorities," the St. Louis County Republican said. "After increased funding for K-12 education and Medicaid, you've got a few options, but they are very, very limited. So a lot of new programs you simply might not fund."

Still, Icet and Senate Majority Leader Charlie Shields, R-St. Joseph, said the federal rebate checks of $600 for individuals and $1,200 for married couples could boost sales tax collections if they are spent on taxable goods.

Shields noted that about 60 percent of state revenue comes from individual income taxes, so any boost to Missouri's economy should bring in extra revenue.

The lost revenue would come at a time when Missouri has quadrupled spending on college scholarships, approved huge new tax credit programs and boosted subsidies for ethanol and biodiesel production.

The state also is phasing out state income tax on Social Security benefits.

"The budgets in 2010 and '11 are getting a bit shaky as it is," Icet said. "Then you throw this on top of it."