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With time running short, Governor, Republicans, closer to budget deal

February 10, 2003
By: Jason McLure
State Capital Bureau
Links: HB 401 & HB 14

JEFFERSON CITY - Gov. Bob Holden and legislative Republicans have come halfway to solving the state's current budget shortfall, but the governor warned that the state's schools and universities could still face $162 million in cuts before the end of the year.

Holden, a Democrat, said he plans to withhold education funds unless Republicans agree to allow him to spend more of the money raised by securitizing the tobacco settlement during this fiscal year. Holden had previously given the legislature a deadline of this Saturday to approve his plan to stave off education cuts by tapping future tobacco revenues.

"They need to act," said Holden. "Now is not the time to shortchange education."

But House Speaker Catherine Hannaway said Holden was wrong to frame the debate as an either/or proposition between spending tobacco revenues or cutting education. She said the governor chose to ignore proposed Republican cuts in state government that would not have affected education.

"[Holden] has come to the table without any other ideas but education," said Hannaway. "Either he thinks education is overfunded or he's using it as a bargaining tool."

Earlier this month Holden asked the legislature to approve a bond plan backed by tobacco settlement revenues that would raise $373 million to close the state's revenue shortfall for the remaining four and a half months of this fiscal year.

Republicans have agreed to issue the bonds, but only if $100 million of the tobacco money is spent for this year, with the remainder set aside to close next year's projected $1 billion deficit.

That would still leave the state with a quarter billion dollar shortfall for the remainder of this year, but offered a list of cuts that did not include education. Their proposal called for the governor to close the remaining hole by cutting state travel and equipment budgets, delaying payment of a legal settlement with Southwestern Bell, withholding money for UMKC's new pharmacy building, and utilizing several accounting maneuvers that reduce the state's cash on hand.

Holden agreed to the first two parts of the Republican proposal, but called the rest unfeasible.

"Their proposal does not securitize enough money to fill the shortfall," the governor said. "And unfortunately their plan for covering the remainder of the shortfall does not work. There have to be viable recommendations and suggestions that are fiscally responsible."

It seems both sides are waiting for the other to compromise again before restarting negotiations.

Hannaway said budget negotiations could have proceeded more quickly if the governor hadn't chosen to go public with his objections.

"It would be better in my opinion if he hadn't had a press conference today and I wasn't responding with a press conference now," she said. "I think negotiations are better done face to face. I think we may have made a little tiny bit of movement. I wish that the movement were greater. But we're going to move towards the middle."

For the remainder of this year, the governor has the sole discretion of where to withhold money. However, to avoid cuts, he needs the legislature to approve the tobacco securitization plan to raise extra funds.

House Budget Chairman Carl Bearden, R-St. Charles, said the Republican controlled legislature won't do that unless they have some assurances about how and when that money will be spent

"The governor holds the check book, but we hold the deposit slips," said Bearden.

That leaves them both with responsibility for where the budget cutting ax will fall.