State senators detail budget struggle

JEFFERSON CITY — The disappearance of $400 million in federal budget stabilization dollars and a $100 million increase in state Medicaid costs will leave state lawmakers with a sizable revenue hole to plug as they craft this year’s budget.

That was the word from state Sen. Kurt Schafer, Missouri Senate Appropriations Committee chairman, and committee member state Sen. Tim Green. The two men spoke to Missouri reporters Thursday during the annual press gathering in the Capitol.

Schafer told reporters the state budget was still far from recovery from pre-recession revenue levels, further complicating the budget outlook going into Fiscal Year 2013.

He called the $8.6 billion in revenues in 2008 the “high water mark,” noting that revenues fell by $2 billion from 2008 to 2010.  

“From 2008 standards we are still down about $1 billion from general revenue,” Schafer said.

The Columbia Republican said the state’s $7.3 billion budget can be divided into thirds: One third being nondiscretionary federal money that state lawmakers have little control over; one third from state license fees and similar revenue; and one third from income and sales tax revenue.

That final third, he said, “is what we are fighting about — where that money goes.”

Schafer said $6 billion of the state’s total budget is claimed by two items — education and Medicaid — which account for about $3 billion a piece. With the Missouri Department of Corrections accounting for an additional $600 million, little is left over for lawmakers to fight over.

This is why, he said, funding for education is so often tapped to make up shortfalls in other areas.

“That is the dynamic we are having to deal with right now in the appropriation process,” Schafer said.

The $400 million in budget stabilization dollars sent to the state through federal stimulus spending runs out this year, he said. “That is the very last of it.”

Of that $400 million, $200 million is directed toward education spending, meaning lawmakers will have to find the expired funds somewhere else in the budget in order to “keep K through 12 steady.”

Despite tight revenues, both men indicated that tax increases as a means of raising additional revenues were not a likely solution given the political and economic climate.

Green, a St. Louis Democrat, said: “Any type of increase in revenues or taxes should go to a vote of the people. The public has shown continuously a strong reluctance to tax increases at this time. With the way economy is and people struggling and unemployment, people just feel they don’t have the revenues right now for increased taxes.”

Schafer agreed, noting tax increases are “hard to explain to people.”

“You have the middle class ... paying most of the freight, yet more and more of what they are paying for every year is going to a different segment and less to them, less money to public education and things that generally benefit the middle class,” Schafer said.

With Medicaid costs rising $1.6 billion in three years, he said, “at some point you have to say, do we just need more revenue, or do we need to balance out what the money is going towards?”

Two possible areas of more tax revenues pitched during their remarks involved increases to the state’s tobacco tax — now at 17 cents per pack, well below the national average — and the possibility of instituting a sales tax on Internet sales.

Green said he doubted the Internet sales tax would make it out of the legislature this year; Schafer called state attempts to tax the Internet a form of “balkanization” and suggested that a uniform policy set by the federal government was the only way to make such a plan feasible.

While about 20 percent of Missourians smoke, that number is more than doubled by those covered by Medicaid.

“I don’t think the fix for higher education is ‘Let’s tax low-income Missourians on cigarettes.’ I think we need to change some people’s behavior to cause some healthier lifestyles so we aren’t paying so much, and if we generate some revenue in the meantime then so be it,” Schafer said, but expressed doubts that such revenues are a reliable, long-term source of state revenues.

With transportation issues — including proposals to make Interstate 70 a toll road in order to raise funds to rebuild the aging highway — and skyrocketing Medicaid costs, Schafer said Missourians would have to set priorities for what issues the legislature can address.

“At some point the public is going to have to get more involved in this discussion and start prioritizing and saying, ‘No, there has to be a balance.’ You can’t keep taking from one pot of money to put into the other,” Schafer said.