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Non-Existent Budget Figure Used

October 3, 1996
By: Andy Kravetz
State Capital Bureau

JEFFERSON CITY - A budget item that does not officially exist was used by the GOP candidate for governor to explain how the state could afford her proposed $640 million tax cut.

Margaret Kelly told reporters in a series of news conferences across the state Thursday that the cuts would be financed by freezing a specific $4.4 billion budget line item.

"This line item funds the bureaucracy, just funds general operation of the bureaucracy. It is only one line item in our overall budget within the General Revenue Fund."

A close look at the official state budget adopted by lawmakers last spring, however, reveals that there is not one item worth $4.4 billion. Rather the state budget has literally hundreds of appropriations for the vast array of programs, agencies and divisions operated by the state.

But when questioned by reporters, Kelly persisted that there was a single "bureaucracy" funding line.

"It goes to pay for paper clips to payroll," Kelly said. But even there, Kelly was not quite accurate. Actually, for most individual appropriation sections, there are two spending lines covering the items Kelly mentioned -- one for "personal service" (the payroll) and the other for "expense and equipment" (the paper clips).

"The sooner we reduce revenue, the sooner we will get below the Hancock limit and end this ridiculous fiscal nightmare created by (Democratic Gov.) Mel Carnahan," Kelly said.

Her plan would:

* Eliminate the state's sales tax on food.

* Give taxpayers a 10 percent income tax credit.

* Exempt up to $6,000 of private pension income from the income tax.

Last month, Carnahan said he would ask the Missouri General Assembly for near elimination of the state sales tax on groceries. He says that would be enough to bring the state back under the constitutional limit.

At a series of news conferences across the state, Kelly said she would "reign in the part of the state's budget that is funding a runaway bureaucracy."

To provide the funds for the tax cut, $4.4 billion in general operating appropriations would be frozen at current levels for the next two years. That money, she said, goes to fund items such as paper clips, payroll and other administrative costs.

In the first year, Kelly said the budget freeze would save $316 million. In addition, she said, revenue growth would provide another $216 million.

But state's budget director said Kelly double counted figures to come up with the necessary budget savings.

State Budget Director Mark Ward said Thursday that Kelly's plan of freezing the operating budget for the next two years and reducing tax revenue counts the same savings twice.

"That money from the revenue growth and the budget freezing is the main thing," he said. "She is counting it twice."

It just doesn't make sense, Ward said.

To understand the problem, Ward said, look at the budget. Every year, the budget office predicts the amount of revenue the state will receive from taxes.

With that estimate, the general operating budget is increased according to how much more money the state receives. So, if $250 million more in tax revenue is expected, then the operating budget increases by roughly the same amount.

Ward, who has been in the budget office for since 1982, said the idea of $640 million tax cut isn't sound as well.

"Instead of freezing us at current levels, that would put us well below (this year's) budget," he said.

Such a cut would mean the state couldn't afford to finish building several thousand more prison spaces, Ward said. Other departments that probably would be effected would be the Mental Health, Conservation and Social Services departments as well as the area that Kelly said she wouldn't cut -- education.

Kelly said the departments of Higher Education and Elementary and Secondary Education would be exempt from the budgetary freeze. However, those two departments consume more than half the state's general revenue operating budget. As a result, Ward said, other agencies would have to suffer cuts.

In the past, Ward said, even Republican governors had to cut education when they were forced to impose budget freezes because of revenue shortfalls.

To put the total of $640 million into perspective, Ward said, laying off all 28,000 state employees who are paid out of the general operating budget would raise only $60 million more than Kelly's tax cut.

Ironically, Ward said, Kelly's plan, technically, would freeze tax refunds.

When asked about Kelly's proposal, Carnahan's campaign manager Roy Temple said the state auditor just didn't understand the budget process.

"Ludicrous" was the term Temple used to describe her plan. "If it is a specific cuts, what are they? If it is an across the board cut, then don't tell the people that they wouldn't be harmed."