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26 March 2010

Ervin: Hope is Not a Plan

"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." –Thomas Jefferson, letter to John Taylor, May 28, 1816

The Missouri House of Representatives passed their version of the state budget for the next fiscal year beginning June 1, 2010 this week.  Unfortunately, the House passed a budget that I could not support that is at least $275,000,000 out of balance.  The challenges for the next budget year and the year beyond continue to pile on.

While the talk of large numbers and lots of zeroes can be somewhat arcane and "inside baseball", they do affect each of us - after all it is our money.  So bear with me in this update.

Governor Nixon proposed a budget totaling $23,857,795,551.  Included in that budget is $900,000,000 of one-time, federal dependency money that is being used to pay for ongoing operating expenses of state government.  Also included in his budget proposal is $300,000,000 of federal dependency money that is "promised" by the federal government, but has not yet been approved by Congress - we may or may not receive these funds.

Dependence on both of these revenue sources is problematic at best and, at worst, disastrous in future years.  The General Assembly needs to reduce the Governor's recommended budget by at least $650,000,000 to $750,000,000 to begin fixing the structural imbalance of dependence on one-time revenues from the federal government that end this year.

Since the agreement on the consensus revenue estimate in January, we have learned that revenue collections are continuing to decline with year to date revenue collections as of February being down 12.7%, or about $610,000,000 less from what was expected to meet the budget.

Governor Nixon has responded to these declining revenues by withholding more money from the existing budget and asking the legislature to revise downward his recommended budget for the next fiscal year by removing the $300,000,000 that has not been approved by Congress and reducing the general revenue estimate by $200,000,000 to correct an overly optimistic consensus revenue estimate - both prudent recommendations.   These suggested reductions to the Governor's recommended budget total $500,000,000.

Unfortunately, the House only reduced the budget by about $225,000,000.  These steps, and more, are necessary to resolve the structural imbalance that currently exists in the state budget.  The over reliance on one-time, federal dependency money has put our state budget at risk in the coming years.

This $1,200,000,000 of one-time, federal dependency money will not be available in the next budget year, meaning that the fiscal year 2012 budget will start with a $1,200,000,000 hole.  The necessary cuts that will have to be made next year will be unlike anything we have seen in recent years, even topping the cuts that were made in fiscal years 2003, 2004, and 2005.

The significance of the shortfall in revenue that we face this year, and next, cannot be underestimated.  This is the time when the Governor, the House, and the Senate must work together to fix the structural problems in our state budget.  This will require very difficult decisions, courage, and realism - it is not a time for gamesmanship and politicizing.

The recently released unemployment numbers continue to suggest a national unemployment rate of 9.7% with Missouri's unemployment rate holding at 9.4%. These rates are not expected to change in the near term.  Without more people becoming employed we cannot reasonably expect income tax and sales tax collections to turn upward to fill the hole created by the one-time revenue sources.

The Missouri Senate must now contend with an unbalanced budget and consider further cuts of at least another $275,000,000 to $500,000,000.  We can no longer hope that better times will come.  State government must live within its means just like the rest of us.

Unlike Congress, we must have a balanced budget.  The state of Missouri can't print money to satisfy unrestrained and politically motivated spending habits - even in an election year.  We can either jump off of a ten foot cliff today or choose to jump off of a hundred foot cliff tomorrow.  This is the time to make difficult decisions.  Having hope in a greater, more prosperous future is great motivator - I have that hope myself, but hope is not a plan.

As always, I appreciate hearing your comments, opinions and concerns.  LaTonya Percival, my Legislative Assistant, and I are always available to answer questions and address your concerns.  I can be reached in Jefferson City at (573)751-2238 or you can write me at doug{dot}ervin{at}house{dot}mo{dot}gov or regular mail at 201 West Capitol Avenue, Room 412A, Jefferson City, MO 65101.

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