JEFFERSON CITY, Mo. — Without more cuts, Missouri is expected to end the current fiscal year about $40 million in the hole and could be on the path to a nearly $460 million shortfall next fiscal year, the Republican House budget leader said Thursday.
The governor likely needs to cut an additional $200 million in planned state spending in order to address the projected shortfall and to start next year with enough money to run government, Budget Committee Chairman Scott Fitzpatrick told reporters. Those cuts would likely remain in place, as well as additional spending restrictions going forward.
“We will balance it, but we have a pretty difficult task ahead and there’s going to be a lot of hard decisions that we’re going to have to make,” Fitzpatrick told committee members during a Thursday meeting.
His Senate counterpart, Appropriations Committee Chairman Dan Brown, described the state’s budget situation as “pretty dire.”
Former Democratic Gov. Jay Nixon already cut more than $200 million in spending this fiscal year. New Republican Gov. Eric Greitens has said he plans additional spending cuts, although he has not provided details on how much or which programs will be affected.
Legislative work to craft a budget for next fiscal year, which begins July 1, will be put on hold as Greitens, who hadn’t held public office before Monday, drafts his first budget plan. He also is breaking from tradition and won’t present a budget plan during his Tuesday State of the State address; Fitzpatrick expects it in early February.
But Greitens said Thursday that he and the Legislature are lowering expectations for revenue growth in this fiscal year to 3 percent instead of Nixon’s 4.1 percent and lawmakers’ estimated 3.4 percent. And they’ll base next year’s budget, which begins July 1, on an estimated 3.8 percent growth compared to this year’s revised figures.
Opportunities for additional spending next fiscal year will be limited, Fitzpatrick said, adding that a proposal to cut corporate income taxes is not a “realistic approach to governing this year.”
Legislative leaders are split on why the state is coming up short.
Fitzpatrick said part of the problem is the state ended its 2016 fiscal year with less money than expected, and Medicaid expenses have continued to grow. He also said the state faced unexpectedly high costs for legal settlements, including a $9 million settlement for the family of an Iowa man who drowned after he fell out of a boat handcuffed and in an improperly secured life vest while he was in custody of a state trooper. Fitzpatrick also cited multimillion-dollar settlements for alleged harassment of prison employees.
Brown attributed the lagging revenues partly to the nation’s economy, expressing hope that things will improve under President-elect Donald Trump.
Missouri’s corporate income tax revenues also are down by more than 25 percent through the first half of the budget year. Part of that may be attributable to a tax law change approved by the Legislature that allows multi-state corporations to allocate their profits differently, but Brown believes it’s more due to corporations leaving Missouri.
House Minority Leader Gail McCann Beatty said tax breaks passed by the Republican-led Legislature are to blame.
“We need to revisit that,” she said. “Otherwise, we’re going to see cuts in education. We’re going to see cuts in our social services.”
Associated Press writer David A. Lieb contributed to this report.