Senators alter view on tobacco bond idea

JEFFERSON CITY, Mo. -- Senators pumped up the state's proposed budget by as much as $150 million Wednesday, endorsing tax changes and bond sales based on the state's future tobacco settlement revenues.

The additional money would let senators prevent some cuts proposed in an $18.8 billion budget for fiscal 2003, which starts July 1.

"We're going to need a little more money to reduce some very substantial pain to some very important government services," said Sen. Ken Jacob, D-Columbia, sponsor of the tobacco legislation.

Jacob's bill had stalled Tuesday when he rejected a proposed amendment that would keep tobacco bond funds from being used for cloning or abortion-related services.

Senators have been searching for ways to raise new revenues without tapping into the state's emergency savings account -- a step supported by Gov. Bob Holden but already rejected by the House.

Debate had just begun Wednesday on the funding bill for elementary and secondary education when Sen. Ted House, D-St. Charles, proposed to tap into the so-called Rainy Day Fund to increase school funding.

That halted the budget debate. Several hours later, senators resurrected Jacob's proposal to generate a cash advance against expected tobacco settlement payments.

The legislation would allow the state to issue bonds against 30 percent of the $4.5 billion Missouri expects to receive over 25 years from a legal settlement with big tobacco companies.

Depending on market conditions, the bond sale could raise as much as $600 million in the short term, but could reduce Missouri's total receipts from the settlement by $1.3 billion in the long run.

Jacob said $75 million to $100 million from the tobacco bonds could be available for next year's budget.

An additional $50 million would be reaped through a bill by Sen. Jim Mathewson, D-Sedalia, that would repeal some business tax incentives and encourage payment of overdue taxes.

The Senate gave first-round approval Wednesday to Mathewson's bill on a 21-12 vote and to the tobacco bond bill on a 25-7 vote. Both need another vote before going to the House.

Senate Appropriations Committee Chairman John Russell said he expected some of the new revenues to go toward schools. But he hoped that senators wouldn't vote to spend the full amount, because the precise revenues from the tobacco bonds are uncertain.

"Obviously education has to have some priority," said Russell, R-Lebanon. But "we have to be conservative on where we spend it and when we spend it."

Lawmakers have a little more than two weeks to meet a constitutional deadline to pass a budget. The House previously passed a $19.4 billion spending plan that depended on approval of new revenue sources but still fell short of balancing.

Differences between the two chambers' versions of the budget must be reconciled before a spending plan can go the governor.

Among the most contentious points is how much money should be added to the roughly $2 billion base funding for the public schools.

Holden had proposed $220 million to fully fund the school formula. The House passed a bill changing the formula so that it could be fully funded with $175 million.

Senators said Wednesday that they were considering more changes to the formula, which could allow it to be fully funded with somewhere between an additional $105 million and $120 million.