Wed January 4, 2012
The End Of Stimulus Funds: Missouri's Budget Takes Center Stage
As Missouri lawmakers return to session this week, they’ll face a multitude of tasks, but front and center will be the state’s budget. Missouri faces a challenging year, with a major source of revenue running out and an economy that’s still struggling to recover from the recession.
If you talk with almost anyone from Kansas City’s legislative caucus, they will tell you pretty much the same thing about the state’s budget situation this year: not good.
“It’s going to be obviously a very somber session when you’re talking about the budget numbers that we’re looking at,” says state Rep. Mike Talboy, a Democrat.
“Missouri is going to literally – well I guess not literally – but Missouri is going to fall off a cliff in 2012 as far as our budget is concerned,” says state Sen. Jolie Justus, also a Democrat.
Talboy, Justus, and others are bracing for a budget shortfall of hundreds of millions of dollars that’s no longer cushioned by federal stimulus funds. The state has used nearly $3 billion in federal stimulus money since the recession hit in 2008. But stimulus funds from Washington have dried up.
House Budget Chair Ryan Silvey, a Republican, says Missouri has been preparing for this. But even so, it’s going to be tough.
“When the economy started to turn down, the federal government started sending federal stabilization dollars, or stimulus dollars. So that money was placed in budget over last few years, so that we made smaller cuts along the way in hopes that unemployment would turn around and that people would have jobs by time the stimulus money ran out,” says Silvey. “Well, we’re at the end, and unemployment is still 9 percent. So now we have to figure out how to bring our budget into alignment with actual revenue and not propped up by federal money.”
And that means between $400 and $700 million in cuts, according to Silvey.
The situation is a little different across the state line. Kansas used up the end of its stimulus dollars last year. The state dealt with a nearly $500 million deficit, making some tough cuts to human services, raising the state’s sales tax, and using one-time state highway funds to help plug the hole. The state is now entering the coming year with a small surplus.
Back in Missouri, state budget director Linda Lueberring says this year’s lack of stimulus funds, combined with the loss of other one-time funds and reduced Medicaid payments, means the state’s now dealing with a total loss of about $750 million. But Lueberring says at least one factor is likely to ease the pain.
“We’re expecting growth of $285 million in revenue,” says Lueberring.
Revenue is up, with a projected 3.9 percent rate that's on par with years prior to the recession.
But Amy Blouin with the Missouri Budget project says even so, this growth is based off a very low revenue base. Very low.
“Following 2008, revenue dipped significantly - the steepest declines in the state since the great depression,” says Blouin.
So with less money overall, Blouin estimates it will take another four years for Missouri to return to pre-2008 funding levels. In the meantime, without other revenue sources, that leaves the state with some hard decisions to make. Blouin says even if the resulting size of the budget cuts isn’t any bigger than years before, the impact this year will be greater.
“We’ve spent so many years reducing services one year on top of the next that there are no cuts left in the state budget that will not be very painful,” says Blouin. “Whether it’s a reduction in state employees, which will in turn impact our economy, or cuts to health care services, including mental health services for low income Missourians, or reductions to child care services that bolster low income families and their ability to work and be productive members of their communities.”
State Representative Mike Talboy says the situation is unfortunate, with core programs now pitted against each other for limited funds.
“We really have to figure out where as a society and a state, that now that we’re going to hit rock bottom from this financial cliff that we’re going to see this year, how we then move on from there and how we progress forward in the next coming years and rebuild ourselves,” says Talboy.
But he says given the state’s financial situation and the absence of stimulus funds, lawmakers will first be faced with cutting past the fat and into the bone of state programs.