Lawmakers, lobby groups question budget withholds

Two Jefferson City Republican lawmakers — Sen. Mike Kehoe and Rep. Jay Barnes — joined other lawmakers and some lobbying groups in questioning Missouri Gov. Jay Nixon’s decision last week, to withhold $400.7 million in spending from the 2013-14 state budget that goes into effect Monday.

Nixon cited several reasons for the withholds, but focused on one.

“This budget does not account for the cost of House Bill 253 (the tax-cuts bill), which I vetoed earlier this month,” the governor told reporters Friday, after signing the bills creating the state’s operating budget for the new business year.

Although Nixon rejected the proposed law, which phases in some tax cuts over a five-year period, and others over a decade, lawmakers during the Sept. 11 veto session will have the opportunity to override Nixon’s veto.

Nixon and Budget Director Linda Luebbering said Friday that’s why the governor announced the spending withholds now.

“They passed the bill,” Nixon explained. “They’re out there saying they want to move forward with that policy. That’s very real.”

Luebbering told reporters: “(The bill) clearly has a provision that could take $1.2 billion out of our revenue stream — that is a significant portion of our $8 billion general revenue budget. We, obviously, have to plan for that.”

And, Nixon said: “The clear constitutional power of not only me as governor, but any governor, is to control the rate of spending.”

But, Barnes said: “Gov. Nixon’s withholds are of dubious constitutionality.

“The Missouri Constitution only allows the governor to withhold based on real-world, actual tax receipts — not on ifs, ands, or buts.”

The Constitution says: “The governor may control the rate at which any appropriation is expended during the period of the appropriation by allotment or other means, and may reduce the expenditures of the state or any of its agencies below their appropriations whenever the actual revenues are less than the revenue estimates upon which the appropriations were based.”

State Auditor Tom Schweich sued Nixon last year over the same issue, and Cole County Circuit Judge Jon Beetem upheld Nixon’s authority to make budget cuts.

The state Supreme Court last March heard oral arguments on the appeal of Beetem’s ruling, but the high court has not issued its final decision.

Meanwhile, Nixon and his administration argue that a withhold is a “spending freeze” rather than a veto — if the state’s revenue picture gets better, the governor can release the money for spending.

Kehoe added: “Various budget people within the Nixon administration, the House and the Senate all agree on where the revenue is for this year that we’re about to end (at midnight tonight) — we should be $353 million ahead, and that’s a conservative number.”

Nixon and Luebbering acknowledged that extra money at the end of the 2012-13 business year today — but said it’s not enough to overcome the possible budget hole that the tax-cuts bill will cause if lawmakers override Nixon’s veto.

Kehoe said the governor is ignoring the controversial bill’s benefits.

“House Bill 253 gives money back to Missourians. It’s theirs. It’s not ours,” Kehoe argued. “It’s not the government’s. And it only does it if certain revenue enhancements or revenue growths take place.

“So, it will not trigger any shortfalls in the budget unless certain revenue growth occurs.”

Nixon agreed that parts of the bill has language blocking the next phase of a tax cut if the state’s revenues don’t grow enough.

“That trigger language is very, very uncertain,” the governor said. “And, if you go through the analysis of it, it’s not really a ‘trigger.’

“It’s more of an effort to talk about it. (And) there’s a whole bunch of stuff in that bill that doesn’t have anything to do with the trigger.”

And, Nixon and Luebbering said, that includes the language that creates a $1.2 billion hole if the U.S. Congress passes the “Marketplace Fairness Act,” which would impose taxes on Internet sales similar to the state sales taxes people pay for buying the same or similar item at a local store.

“The way that House Bill 253 is written, that reduction would apply to the current tax year, plus all previous tax years,” Luebbering said Friday. “(Under current state law), Missourians can ask for refunds for up to three years, so we would see a four-year reduction in a single year to our individual income tax.

“$300 million a year, times four, equals $1.2 billion.”

Barnes challenged that.

“(It) is entirely unlikely Congress will take action on Internet sales taxes,” he said. “Gov. Nixon should release these duly-passed appropriations immediately.”

But that’s not good budgeting, Luebbering said.

“The governor is responsible for keeping the budget in balance throughout the year,” she explained. “It is the responsible thing to make sure the budget is in balance.

“We can’t simply wait to see what Congress does, or doesn’t, do.”

Again, she noted — if lawmakers sustain Nixon’s veto, the $1.2 billion issue goes away because that language was passed only in House Bill 253.

And, since the money was withheld and not vetoed, it could be released in a controlled manner — following an updated budget review — if there are no fears it would be needed to protect the state from other revenue issues.

As he’s done for the past several years, Nixon also pointed to the state’s AAA bond-rating from the nation’s three rating companies, as proof that his administration has been handling the budget correctly — especially since the Moody’s agency last week downgraded a portion of Kansas’ bond ratings, because of budget shortfalls that state is having after cutting income taxes a year ago.

“Today, Missouri’s perfect Triple-A credit rating is intact,” Nixon said.

A Triple-A rating is the best available, letting the state borrow money at the lowest rates possible and signaling to businesses that the government generally is stable, financially.

And ased on records in the state’s Budget and Planning division, Standard and Poors has rated Missouri as AAA since 1962.

Moody’s has made the same rating since at least 1973.

And Missouri has been rated AAA by the Fitch service since 1989 — the first year the state government applied for a Fitch rating.

That means Missouri has been rated AAA since Democrat John Dalton was governor, and has been maintained by six other Democrats (Warren Hearnes, Joseph Teasdale, Mel Carnahan, Roger Wilson, Bob Holden and Nixon) and three Republicans (Christopher Bond, John Ashcroft and Matt Blunt).

“One of the key elements of that AAA rating is that power that we have in our constitution for the governor to control the rate of spending,” Nixon said.

“And that has been used by many governors before me and, I will submit, will be used by governors in the future.”