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State expects another $1 billion deficit, more layoffs

December 16, 2002
By: Robert Sandler
State Capital Bureau

sugg. hed-- State expects another $1 billion deficit, layoffs likely

JEFFERSON CITY - The state budget picture just keeps getting worse, as officials are now saying they expect a near-$1 billion deficit and state employee layoffs for the second year in a row.

State revenue declined so much in the past year that Gov. Bob Holden has already slashed the budget by more than $900 million and eliminated almost 1,000 jobs.

The governor's budget director, Linda Luebbering, said Monday that next year's budget could very well be short by another $1 billion.

"The main problem for us is the revenue," she said. "We're really not looking for too much growth next year."

Luebbering said revenue for the current fiscal year was down by more than $150 million through November, and numbers since then have continued to go downward. The shortfall could total $400 million by June 30, the end of the state's fiscal year.

Holden's spokeswoman Mary Still said decisions on where the new cuts would hit would probably be announced later this week or early next week. Most of the state budget is earmarked for specific spending including Medicaid, elementary and secondary education and transportation. Of the discretionary spending, higher education is the biggest recipient and could face major cuts again, said Sen. Wayne Goode, D-St. Louis County.

Goode is one of many lawmakers who have said they were upset with the disproportionate cuts to higher education in this year's budget.

To help fix the budget crunch, layoffs are now virtually guaranteed across state government, Still said, but did not know where specifically.

The biggest cause of the budget crises seems to be the continuing bad economy. With no end in sight to the economic downturn, Luebbering said the revenue shortfalls could be another $400 million for next year. The state is also facing a loss of about $435 million that won't be available next year. That money was not a problem in the current year thanks to some quick fixes that were designed to save money in the short term.

Fixing revenue shortfalls is not easy because the state constitution prohibits raising taxes beyond a certain point without voter approval.

Recently, voters have shown their dislike for tax hikes. In November, voters rejected an increase in taxes on tobacco, and in August, voters overwhelmingly defeated a $500 million tax hike for transportation.

To fix the shortfalls, Holden has been pushing to end what he calls business tax loopholes. Still said the governor wants to see corporations pay a "fair share" of taxes and for individuals' tax burdens to stop rising. But closing the so-called loopholes would not come close to fixing the entire budget.

Earlier this year, the legislature approved a mortgage of the state's 1998 tobacco settlement. The plan was intended to sacrifice bigger long-term payouts in order to raise $600 million in the short term, but it is now on hold as potential investors are unsure about the plan.

Not all lawmakers are sure the economic outlook is quite so bad.

Rod Jetton, nominated to assume the No. 2 position in the House when Republicans take over next month, said he'll believe the numbers when he sees them.

"I'm from Missouri, and you've got to show me," said Jetton, R-Marble Hill. "[The governor's office] cried wolf several times last year, and revenues weren't off near as bad as they said."

Jetton said he knew the revenue outlook would not be good and was concerned for the state.

"After seeing last year, I have my doubts that it's really going to be $1 billion. But I'd much rather be careful than reckless about it."