Budget fight of 2003 playing out again as parties clash

JEFFERSON CITY, Mo. -- Just as it did last year, the Missouri Legislature's Republican majority opened the 2004 legislative session by telling Missouri's Democratic governor he had better not suggest higher taxes and increased state spending.

Once again, Gov. Bob Holden boldly crossed the GOP's line in the sand.

As a result, the bitter budget fight of 2003 is playing out a second time. And on this go around, the election year stakes have ratcheted the levels of partisan rancor much higher.

In his State of the State address last week, Holden made no pretense of subtlety in deriding Republicans for lacking the courage even to consider tax increases that would help improve education funding. He called the cuts they made last year to appropriations for public schools "cruel."

Livid at Holden's characterizations, House Speaker Catherine Hanaway, R-Warson Woods, said she could no longer work with him. Although Senate President Pro Tem Peter Kinder, R-Cape Girardeau, found little to like in the governor's remarks, he pledged to continue to cooperate with the administration where possible.

Given that Holden's plan for boosting state revenue is basically a retread of the package lawmakers rejected last year and the heightened state of political hostility, it appears to enjoy little possibility of success.

Budget obligations

However, the governor said his proposal remains the only reasonable option to protect state services.

"The General Assembly has the obligation to give me a balanced budget," Holden said. "I have an obligation to present my priorities on how it should be funded."

Kinder repeated the Republican mantra that state government should make do with what it has.

"The state must do what every Missourian does in tough times -- cut waste, manage more efficiently and most importantly spend within our means," Kinder said.

Holden recommends an $18.8 billion operating budget for the fiscal year beginning July 1, an increase of $743 million, or 4.1 percent. General revenue, the portion of spending over which lawmakers have the greatest degree of control, accounts for $7.1 billion of the total.

The centerpiece of Holden's $520 million revenue package is an additional 55-cent tax on a pack of cigarettes plus an extra 20 percent levy on other tobacco products. That proposal would raise $222.4 million.

Only six other states have cigarette taxes lower than Missouri's current 17 cents a pack. However, Missourians narrowly voted down an increase of the same amount suggested by the governor in November 2002.

New revenue from casino gambling constitutes the second biggest portion of Holden's plan and would generate $115.7 million.

The industry has long advocated eliminating Missouri's unique loss limit of $500 per two-hour gaming session, a move that would mean higher profits for casinos and $51.1 million for the state.

However, casino operators are less fond of the accompanying increase in the gross receipts tax, which would go from 20 percent to 22 percent. Holden also called for replacing the $2-per-patron-per-gaming-session fee casinos pay with a $7-per-day flat fee.

Tax loopholes

The effort to close various corporate tax loopholes, which would raise another $121.2 million combined, also makes a return. While Republicans reversed course and endorsed addressing one particular loophole that allows out-of-state companies to dodge Missouri taxes, state budget director Linda Luebbering said the bill as currently written could actually cost the state money by allowing more businesses to qualify for the break.

Another $60.7 million would be raised through a 5 percent surcharge on income taxes paid by individuals earning more than $200,000 a year and by eliminating a break a person can use under the federal tax code to reduce state taxes.

On the spending side, Holden wants another $161.5 million for elementary and secondary education over levels approved for this year. The actual boost would be about $280 million, including the restoration of funds the governor withheld from public schools this year to keep the budget balanced.

Republicans have suggested maintaining education appropriations at existing levels.

After three years without most state workers receiving a pay raise, the governor is requesting $119.7 million more for wages and benefits. All employees would receive a 2 percent salary bump, with additional money earmarked to boost the base pay for workers in low-wage, high turnover positions.

But for those and other spending proposals to make it into the final budget requires the legislature's support, which is lacking. Republican leaders say the $100 million in spending reductions Holden identified don't go far enough, though with the process just getting underway they haven't specified where additional savings might be found.

As with last year's fight, Missouri voters are the great unknown factor. Any tax increase greater than $75 million would require their approval.

'This is not responsible'

If by some chance a tax proposal was cleared for the August ballot, voter rejection could throw state finances into further turmoil. By then, Missouri already would be one month into the new fiscal year.

"The governor has proposed balancing the budget on tax increases the voters have already rejected," Kinder said. "This is not responsible policy."

But Senate Minority Floor Leader Ken Jacob said no governor would push for higher taxes, particularly in an election year, if it wasn't critical to fulfill state obligations.

"It's never popular to promote any kind of taxing because you're always vulnerable to it being distorted," Jacob said. "This is an excellent case of that happening."

mpowers@semissourian.com

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