After months of roller-coaster finances, the state of Missouri is ending up its fiscal year with an overall decline compared to a year ago.
And Gov. Jay Nixon’s administration fears that the slowdown may continue – especially if the General Assembly overturns his vetoes of various tax cuts.
Monday’s final day of the state’s 2014 fiscal year found the state’s final general-revenue tally to be three percent below what had been projected – about $240 million short. That shortfall had prompted Nixon’s last-minute round of budget cuts about a week ago.
The state’s FY2014 general-revenue total of $8 billion was $80 million below that of fiscal year 2013, which had been a booming year that ended with a $500 million surplus.
Until a few months ago, neither Nixon nor Republican legislative leaders had entertained any sort of state income drop. Rather, the Democratic governor and his GOP adversaries had sparred over how big of an income increase was realistic for FY2015. It turns out, neither side may be on target.
The legislators’ estimated increase of 4.2 percent, and Nixon’s more general 5 percent, may both be too optimistic.
State Budget Director Linda Luebbering acknowledged as much in an interview Wednesday. For FY2014’s drop, she blamed an unexpected slight decline in individual income tax collections for the overall fiscal year – a sobering sign that job growth may have stalled.
She also pointed to a federal tax-law change that had prompted wealthier taxpayers to liquidate some holdings and pay their capital-gains taxes in 2013 instead of 2014. That’s what prompted some of the state’s unexpectedly large FY2013 income increase,
The fact that FY2014 brought in less income than FY2013 already is prompting warnings about what may be store for the new fiscal year, FY2015, which began on Tuesday.
Luebbering said that the new budget year is starting out about $400 million in the hole, because its base had been higher income for FY2014.
That problem contributed to Nixon’s early “budget withholdings’’ for FY2015, in which allocated spending is postponed until it’s clear that the state’s income will be able to cover the costs.
Nixon also has blamed the 10 tax cuts, most of them involving sales taxes, that were approved by the GOP-led General Assembly during the final days of the legislative session. Republican leaders contend that the cuts will attract more economic growth. They also have objected to some of Nixon’s withholdings, because they involved education spending, an important issue for many Missourians.
On the upside, Luebbering noted that June, the last month of the FY2014 fiscal year, did see an increase in individual income tax collections. That could signal a slight turnaround for FY2015, or just a one-month blip. She said it will take several months to sort things out.