Wed June 4, 2014
Missouri's May Income Decline Foreshadows Likely Nixon Cuts
After a second straight month of declining state income, Missouri Gov. Jay Nixon is considering sizable budget cuts or withholdings for the coming fiscal year that begins July 1.
State Budget Director Linda Luebbering chose her words carefully, but acknowledged in an interview Tuesday that May’s poor financial showing is “one piece of information that affect these decisions’’ that the governor soon must make as he reviews the budget crafted by the General Assembly and now awaiting his action.
“We’re going to go into FY2015 with less than a cushion than what we anticipated,’’ Luebbering said. Last year, by contrast, the state ended the FY2013 with an unexpected surplus of roughly $500 million.
Income during the current fiscal year, which ends June 30, is up only $20 million over FY2013.
The income slowdown "is certainly something we're talking through,'' she said.
Nixon has indicated that some planned state capital-improvement projects may take a hit, since state income hasn’t been as strong during this current fiscal year.
Nixon already has vented extensively about the $400 million-plus in last-minute tax breaks that legislators approved during the final days and hours of the session that ended May 16. He has hinted that he expects to veto some or all of them. (Luebbering declined to speculate.)
Nixon also cited the apparent fiscal slowdown in his objections to the state income-tax cut that the General Assembly put in place, beginning in 2017, over his veto.
Cash-flow crunch slowing state tax refunds
May’s revenue collections may add to his angst. May’s tally of $614.4 million is down about three percent – or almost $20 million -- from May 2013. And that follows an even worse showing in April, when state income was down about $50 million compared to April 2013.
That slowdown is a factor in the state’s delay in issuing tax refunds, since cash is needed to back up those state checks. Luebbering estimated that about $100 million in state income-tax refunds will have to be issued this month. The refunds need to be out by the time the fiscal year ends on June 30.
“They will all be paid out over the next couple weeks,’’ Luebbering said.
Part of the fiscal problem facing Missouri and other states, she said, is the flood in state capital-gains taxes that taxpayers paid in FY2013 (the year of the hefty surplus) because the federal capital-gains tax rate was going up.
As a result, she said, the current tax collections may look worse than they are, in comparison.
At any rate, she emphasized – as has the governor – that Missouri must end its fiscal year with a balanced budget. And it’s up to the governor to make the trims needed to guarantee that balance.
For May, the biggest percentage drops in income dealt with corporate taxes, because of various business tax cuts in recent years.
Here’s the general-revenue breakdown for the month:
GROSS COLLECTIONS BY TAX TYPE
Individual income tax collections
- Decreased 0.7 percent for the year, from $5.82 billion last year to $5.78 billion this year.
- Increased 0.6 percent for the month.
Sales and use tax collections
- Increased 2.0 percent for the year from $1.74 billion last year to $1.77 billion this year.
- Decreased 12.0 percent for the month.
Corporate income and corporate franchise tax collections
- Increased 5.3 percent for the year, from $427.1 million last year to $449.7 million this year.
- Decreased 28.5 percent for the month.
All other collections
- Decreased 12.9 percent for the year, from $437.2 million last year to $381.0 million this year.
- Decreased 3.0 percent for the month.
- Decreased 5.0 percent for the year, from $1.13 billion last year to $1.07 billion this year.
- Decreased 7.7 percent for the month.