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Nixon prepares to veto tax cut bill, state likely to end fiscal year with hefty surplus

This article first appeared in the St. Louis Beacon, June 4, 2013: Missouri’s state government appears on track to end this fiscal year with an unanticipated cushion of at least $300 million. The overall growth for FY2013 was about twice what had been predicted.

But state Budget Director Linda Luebbering  cautioned Tuesday that the May monthly figures also hint that the state’s spate of good financial news may be brief.

With just a few weeks left to go before ending on June 30, this fiscal year’s growth is running 10.4 percent above the growth for FY2012 – more than twice the growth estimate of 4.8 percent used to craft the current budget.

As of May 30, the state had collected $7.3 billion in general revenue for the current fiscal year, compared to $6.61 billion at the same point last year. Luebbering said in an interview that the growth was fueled largely by a growth in individual income taxes of almost 10 percent – a sign that more Missourians are working.

But the monthly general-revenue collections for May are up only 2.5 percent, compared to May 2012 – one of the smallest monthly increases for quite a while. Luebbering said that the smaller increase this May reflected, in part, the fact that May 2012 was a strong economic month.

But the latest May figures include a decline in state sales tax collections, compared to 2012 -- often an indicator of a possible economic slowdown as people spend less money.

Nixon likely to veto tax cut bill Wednesday

That projected economic slowing may be underscored on Wednesday, when Gov. Jay Nixon is expected to announce that he’s vetoing HB253, a massive tax-cut bill that his budget staff estimated would cost the state $800 million a year.  

When fully implemented, the tax cut would amount to almost 10 percent of the state’s current annual general revenue. Nixon has said the state can’t afford it without slashing education and other key spending.

(The tax-cut losses don’t take into account the $200 million in additional sales tax income that the state would collect under the bill because it also eliminates the state’s longstanding sales tax exemption for prescription drugs. Legislative leaders say that provision is an error and would be corrected next session if Nixon signs the bill – which nobody expects him to do.)

Luebbering declined to comment on the governor’s possible actions but did emphasize that her staff is sticking with its estimate of the $800 million in lost state income if the tax cuts – most aimed at corporations and businesses – were to go into effect.

Nixon’s announcement will be made during scheduled stops Wednesday in Kansas City and Springfield. He was in St. Louis on Monday to announce the veto of an unrelated bill.

Study: higher costs if no Medicaid expansion

The governor also is likely to highlight expected higher state health-care costs because the General Assembly has declined to approve an expansion of the state’s Medicaid rolls in line with the federal Affordable Care Act.

Under the expansion, the federal government would pay all of the additional costs for three years and at least 90 percent thereafter. Republican critics say the federal government and the state can’t afford it and also object to expanding the government’s role in health care.

Nixon – who supports the expansion -- is pointing to this week’s report by the independent Rand Corporation,which concludes that in 14 states opting out of Medicaid expansion, “3.6 million fewer people would have health insurance while state spending on uncompensated care could increase by $1 billion in 2016 alone. Federal payments to those states would fall by $8.4 billion.”

The 14 states examined do not include Missouri because the study was completed before it was clear what Missouri would do.

The study’s authors also assert that state officials around the country should “be aware that if they do not expand Medicaid, fewer people will have health insurance, and state and local governments will have to bear higher costs for uncompensated care.”

In a statement, Nixon said, “This independent study builds on the already overwhelming evidence that strengthening Medicaid in Missouri is the right thing to do for our citizens and the smart thing to do for our state. Turning down the federal dollars available to expand and improve Medicaid in Missouri will increase costs and send billions of Missourians’ hard-earned tax dollars to other states."

State House Speaker Tim Jones, R-Eureka, told the Beacon a few days ago that a legislative panel will be looking at the issue this summer and that some sort of health-care legislation is likely to come before the General Assembly next year. Jones remains opposed to the federal Affordable Care Act and the Medicaid expansion it recommends.

Missouri's revenue figures for current fiscal year, May

Missouri’s May 2013 general revenue tally reported that  general revenue collections for the current fiscal year, which ends June 30, had to date  “increased 10.4 percent compared to 2012, from $6.61 billion last year to $7.30 billion this year.”

Net general revenue collections for May 2013 increased by 2.5 percent compared to those for May 2012, from $618.1 million to $633.7 million.

GROSS COLLECTIONS BY TAX TYPE

Individual income tax collections

  • Increased 9.3 percent for the year, from $5.33 billion last year to $5.82 billion this year.
  • Increased 3.5 percent for the month.

Sales and use tax collections

  • Increased 1.5 percent for the year from $1.71 billion last year to $1.74 billion this year.
  • Decreased 2.5 percent for the month.

Corporate income and corporate franchise tax collections

  • Increased 3.1 percent for the year, from $414.1 million last year to $427.1 million this year.
  • Increased 15.9 percent for the month.

All other collections

  • Increased 25.9 percent for the year, from $347.4 million last year to $437.2 million this year.
  • Increased 33.6 percent for the month.

Refunds

  • Decreased 5.6 percent for the year, from $1.19 billion last year to $1.13 billion this year.
  • Increased 15.6 percent for the month.
Jo Mannies is a freelance journalist and former political reporter at St. Louis Public Radio.