Senate panel moves Rainy Day bill

JEFFERSON CITY, Mo. -- Moving swiftly toward solving the state's latest budget crisis, a Senate panel on Wednesday endorsed using $120 million in state savings to help balance the budget for the fiscal year ending June 30.

The 13-0 vote by the majority-Republican Senate Appropriations Committee came less than a week after Democratic Gov. Bob Holden announced that the fiscal year 2002 budget would be $230 million in the red without immediate corrective action. The Missouri Constitution mandates a balanced budget.

However, despite the quick and bipartisan effort in the Senate, House Republicans remain skeptical of taking money from the state's Rainy Day Fund.

House Minority Floor Leader Catherine Hanaway, R-Warson Woods, said she isn't yet convinced the situation is as bleak as state budget officials claim.

"We're continuing to look at the numbers and continuing to look at other ways to meet the needs of the state," Hanaway said. "If in the end we need to take another look at the Rainy Day Fund, we will. Right now, we're not convinced we should."

Senate Republicans and Democrats alike apparently are convinced.

In addition to tapping the state's reserves, the bill the committee passed would use another $50.7 million in revenue from Missouri's settlement with the tobacco industry to help plug the budget. Most of that money had been earmarked for life science programs and anti-smoking initiatives.

The full Senate could take up the bill as early as today. Passage would require two-thirds support in each legislative chamber.

More cuts needed

To cover the remaining shortfall, Holden is taking action to withhold another $29.3 million in state agency spending and canceling $30 million earmarked for repair and upkeep of state buildings in the final two months of the fiscal year.

Using the Rainy Day Fund this year would force the legislative negotiators that will hammer out the differences between versions of the FY 2003 budget passed by the House and Senate to come up with another $40 million in cuts.

If the reserves are used, the money must be repaid over three years starting with the next budget year.

That was one of the reasons House Republicans last month blocked a Holden-endorsed plan to use $53 million in reserves for the FY 2003 budget. If the latest FY 2002 estimates hold true, Hanaway said it vindicates the GOP's earlier stance of keeping lawmakers out of the Rainy Day Fund.

"We would have a real crisis with no reserves from which to draw if we had not done what we thought was right," Hanaway said.

State budget director Brian Long told the committee that the latest financial problem is a result of lower-than-expected income tax revenue and higher-than-expected refunds.

$180 million less than 2001

With nearly 100 percent of individual 2001 tax returns involving payments to the state processed, Long said the state collected $420 million -- $105 million less than expected in January and $180 million less than last year.

"Unless there is a missing mail truck out there, there is no more money coming in from returns that were filed on time," Long said, adding that payments the state received after the April 15 deadline are expected to add no more than $5 million.

With 90 percent of returns involving refunds processed, Long said Missouri owed taxpayers $734.2 million -- $100 million more than expected in January.

Declining stock values last year contributed to a massive drop -- better than 50 percent -- in capital gains by Missouri taxpayers, meaning higher refunds and lower payments.

Including sources aside from income taxes, the state expects to refund in excess of $1 billion to taxpayers for FY 2002.

State Sen. Chuck Gross, R-St. Charles, questioned how the state's budget forecasters so badly missed the mark on state revenue.

"This perhaps shows us a weakness in our budget process," Gross said. "We rely on their numbers, and they can't give us accurate numbers."

Long said revenue predictions are a tricky business, even during stable economic times, and can change drastically as conditions change.

"There have been tremendous economic changes that occurred in a short period of time that made our forecasts inaccurate," Long said.

mpowers@semissourian.com

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