State capital preparing for economic slap from budget cuts

JEFFERSON CITY, Mo. -- Missouri's capital city is the quintessential company town. The company, of course, is Missouri government.

More than 16,000 people work for the state in and around Jefferson City, which with a population of 39,600 is roughly 4,000 people larger than Cape Girardeau.

Those city residents who aren't state employees have relatives and neighbors who in some way rely on the local commerce generated by the state and its workers for their livelihoods.

So with massive cuts in state spending looming, city business and community leaders are nervous.

"To be very frank, it scares the heck out of me what we potentially face," said Don Shinkle, president of the Jefferson City Area Chamber of Commerce.

With a $1 billion reduction in state spending possible for the upcoming fiscal year, every Missouri community will feel the pain of lost state jobs, elimination of programs and reduction in services.

But with state government the driving force of its economy, Jefferson City will be hit the hardest.

$519 million payroll

As things stand today, state government provides the Jefferson City area with $519 million in annual payroll, according to the chamber of commerce. The state also purchases $115 million worth of goods and services from local businesses and pays $9.5 million in rent to area landlords each year.

By one estimate, more than 3,000 state workers could lose their jobs because of budget cuts with as many as half of those layoffs occurring in the capital.

"Retailers and businesses in this town obviously would be impacted by job losses," said Mike Kehoe, who owns several local automobile dealerships.

Ongoing problems

While worried about the immediate local impact of the state's financial problems, Mayor Tom Racker said the problems will be ongoing.

"I think next year probably will be worse than this year," Racker said.

In the past, conventional wisdom held that the capital was recession-proof because of its economic reliance on Missouri government, said state Sen. Carl Vogel, R-Jefferson City. For the first time in his life, that isn't proving true.

"I never remember a time when there has been a significant possibility of laying off state employees," Vogel said. "Right now, I don't know how to prevent layoffs from happening."

Long a detractor of bloated state budgets, Missouri Chamber of Commerce president Dan Mehan praised House Republicans for "submitting a plan that will force state government to operate within its means."

Duane Schreimann, a lawyer and chairman of the Jefferson City chamber, said the local group obviously disagrees with the state organization on the subject.

However, Schreimann said the city must lessen its reliance on the state by diversifying its economy. A key step toward that is bringing in new industries, which is why the local chamber is supporting a controversial effort to annex several outlying areas adjacent to the city. Area voters will decide on annexation next month.

But economic development takes time, and Schreimann said city leaders will do their best in the short term to protect local state jobs.

"We will suggest that if there are going to be cuts they not take place in Jefferson City," Schreimann said. "That sounds selfish and it is, but that is reality."

mpowers@semissourian.com

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