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Government, Politics & Issues

Missouri officials begin annual state budget battles

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Although Missouri’s state revenue collections dropped slightly in December, the state’s budget chief says plans are still on track for Gov. Jay Nixon to base his budget proposal on a hoped-for 4.1 percent income hike during the coming fiscal year.

Missouri Budget Director Dan Haug says Nixon and the General Assembly’s budget chairmen have tentatively agreed on that income growth estimate to use in crafting budgets. Based on the 4.1 percent hike,  $360 million in additional revenue should be available for the fiscal year that begins July 1.

Their haggling over the budget, and how the state should spend its money, takes up much of the 4-1/2 month legislative session that began Wednesday. Their general agreement on how much money to expect is the first step in that annual fiscal dance.

Nixon will present his plan for spending during his State of the State address, set for Jan. 20. The General Assembly will then craft its own budget plan, which may -- or may not -- include the governor's proposals.

The current fiscal year (FY2016) has seen a lower overall income increase – so far, 2.6 percent – than state officials had seen in recent fiscal years.

Still, Haug said his office is sticking with its projections that this fiscal year should see a slight revenue boost in the coming months, and end up with an overall income increase of 2.8 percent when this fiscal year ends June 30.

That’s far below the last fiscal year, FY2015, which ended with a surprising revenue jump of almost 9 percent.

But FY2015’s hefty increase appears to have been the exception, Haug said in an interview, as  Missouri state government has slowly seen its fiscal fortunes improve from the lean years of 2009 and 2010, when state revenues plummeted.

He and his staff are confident – based on projections from economic experts – that the state government’s income should continue to increase, but likely at a slow rate.

Missouri state finances hinge on its income tax collections

Any revenue improvement will largely depend on stronger performance in two categories: the state’s income tax and sales tax. Combined, the two taxes provide about 90 percent of the state’s annual revenue.

That’s where the revenue numbers for December offer some hope and caution.

Although Missouri’s income tax collections have increased 5.8 percent so far this fiscal year, December 2015 saw a striking drop of 2.4 percent in individual income-tax collections compared to December 2014.

Haug noted that two-thirds of the state’s money comes from its income tax, so “it is slightly concerning that area would be down.”

But he added, “We’re going to wait and see what January brings. Sometimes we see a one-month blip.”

On the sales-tax side, Missouri did well in December. The state’s sales-tax collections rose 4.4 percent compared to December 2014.  That increase is higher than the fiscal year’s overall sales-tax increase so far this year of 3.1 percent.

In the next fiscal year, FY2017, the state’s estimates bank on an increase of 4.9 percent in its income-tax collections, and 3.4 percent in revenue from its sales taxes.

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