Budget gap is good reason to get to work

There were some lessons in this year's sessions of the Missouri Legislature. How well they were learned and how much attention will be paid to them remain to be seen.

One of those lessons was the need for legislators and the governor's staff to agree on revenue estimates as they go about creating spending plans.

When John Ashcroft was governor, he persuaded leaders of the Missouri House and Senate to agree to numbers that became known as the consensus estimate. Relying on the expertise of economists and some old-fashioned political bargaining, the consensus figure leveled the playing field for the state budget director and budget committee members in both legislative chambers.

This system worked fairly well until a couple of years ago, when a sour economy made these projections unreliable and subject to frequent changes as conditions warranted. But the premise that everyone should approach the state budget with the same revenue figures in mind still served the budget-making process well.

This year, the governor's staff and Senate budget leaders agreed on a consensus figure, but House leaders developed their own projections. The result was a good deal of bickering and confusion over balancing the budget, which is required by the Missouri Constitution.

The prospects for the next round of state budgeting -- for fiscal year 2004, which begins July 1, 2004 -- are even more grim than those faced by the governor and legislators this year.

Already there are forecasts of a staggering gap between current appropriations and anticipated revenue -- as high as $1 billion by some estimates.

Jim Moody, who was the state budget director under Ashcroft, has been providing in-depth analyses of the state's financial situation for a couple of years. He has prudently avoided taking sides in partisan debates. His answer to questions about the need to cut spending or raise taxes is a Solomon-like "It's two sides of the same coin."

Moody's warnings deserve to be heeded. Because of several factors, Missouri simply isn't going to have enough revenue to meet all of the spending demands in the next fiscal year. Those factors include a low state tax base, changes in federal tax laws that automatically reduce state tax revenue, the loss of 67,000 jobs over the last two years, the demand for more education funding (see the editorial below) and the increasing number of Missourians who are eligible for Medicaid.

What is needed, Moody says, is an overhaul in state budgeting, particularly in how one-time funds are used. Meanwhile, the State & Regional Fiscal Studies Unit at the University of Missouri-Columbia has issued a report on the state's tax policy and education funding that would, if its recommendations were adopted, mean even more sweeping tax reforms.

Legislators and the governor's policy-makers would serve the state's best interests by making an earnest effort to find ways now to work on a consensus estimate and the realities of the looming budget gap. The sooner this effort begins, the better, even if adjustments have to be made along the way.