State's bleak economy analyzed at conference

Anyone hoping Friday's Economic Outlook Conference would provide predictions that Missouri's budget problems will be short-lived left disappointed. Bleak is the word economist Dr. Ed Robb used to describe the state's economic outlook.

But while acknowledging those fiscal realities -- a current $300 million shortfall and no relief seen -- State Rep. Rod Jetton, R-Marble Hill, told those at the conference that he views budget trouble as an opportunity to change the policies he says brought on the red ink. Given the defeat of the last three tax measures put on the state ballot, he doesn't think tax increases can be part of the solution.

Those perspectives were difficult for Cape Girardeau Mayor Jay Knudtson, the third speaker at the conference, to follow. Knudtson is lobbying hard for four tax increases the city wants to see passed in the April elections.

He acknowledges the difficulty of getting new taxes passed right now, but said, "I believe the people of Cape Girardeau are the exception to the rule."

About 75 people attended the conference at Dempster Hall, sponsored annually by the Center for Economic and Business Research, the Department of Economics and Finance at Southeast Missouri State University and the Donald L. Harrison College of Business. The attendees included businessmen and businesswomen from as far south as Portageville and as far north as Ste. Genevieve, along with about 25 university students.

Robb retired in December as director of the Economic and Policy Analysis Research Center at the University of Missouri at Columbia. He has been tracking the state's budget trends for 30 years. The state has both a revenue and an expenditure problem, he said, outlining a series of legislative changes in the 1990s that affected both.

They included a 1993 law that substantially increased corporate income taxes.

Other laws decreased state revenue, including an exclusion of food for home consumption from the sales tax and a pharmaceutical tax credit. The total is $500 million the state no longer is receiving.

Another provision limited the legislature from raising more than $75 million in taxes without a vote.

Robb focused on three areas where costs are exceeding the state's ability to pay: education, Medicaid, and corrections and prisons.

Expenditures for grades K-12 have increased $800 million over the past four years, he said.

"Obviously, this can't go on."

Liberalizing Medicaid eligibility rules in 1998 has increased costs dramatically. The number of Missourians now eligible for Medicaid is approaching 1 million -- almost one in every five residents of the state.

Another startling statistic: At the rate new prisoners are being incarcerated, the state will have to build a new 1,500-bed facility every year to keep up, Robb said.

He does not endorse using one-time funds to pay off budget shortfalls, likening that to paying off your Visa bill with your Mastercard.

He projects the imbalance in state revenue and expenditures will exceed $1 billion.

"The state is on what many people think is a downward death spiral," he said.

Changing policies

Jetton says policies that were in place when revenue was continuing to grow will have to be changed to put expenditures and revenue back in synch.

"This is a wonderful opportunity in our state ... to change the way we do business," he said.

He favors increasing revenue not by raising taxes but by cutting them to expand the economy, saying both Ronald Reagan and John F. Kennedy already showed it works.

He also took aim at the state workers' compensation program -- "It's killing our employers," he said -- and promotes tort reform to help control health care costs.

Republicans in the legislature have proposed making up most of the shortfall through savings. Nobody wants to talk about saving money through cutting waste, Jetton says, but he did. He told a story about a prisoner in Charleston, Mo., who was driven by corrections officers to Jefferson City to see an eye doctor because the doctor has the contract with the state to provide those services.

He blamed former Gov. Mel Carnahan, Gov. Bob Holden and the Democratic-controlled legislature for the policies that have brought the fiscal crisis. "They meant well, they were trying to do right," he said. "But those policies led into where we are today."

Knudtson acknowledged that the state's woes are shared by Cape Girardeau. "When you have flat sales tax revenues and you're projecting 3 percent growth annually, you're toast," he said.

Tom Vandenburg, human resources manager for Holcim, a cement manufacturing company in Ste. Genevieve, Mo., said the priorities and policy changes the speakers talked about were "right on."

Asked what changes he wants the state to make, Vandenburg said, "We need to create some policies that bring jobs into the state."

Dr. Rick Althaus, a political science professor at the university, lauded the information provided.

"But it still boils down to what changes do you want to make," he said.

sblackwell@semissourian.com

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