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Another Round of Cuts

December 15, 2001
By: Robert Sandler
State Capital Bureau

JEFFERSON CITY - Missouri's budget was cut by $92.5 million Friday by Gov. Bob Holden as part of a $212.2 million budget-shrinking plan, but no state employees will be laid off.

In addition to the budget withholdings, the governor also announced he was using $63.5 million of tobacco settlement funds to help balance the budget.

His action drew an immediate attack from the House GOP leader, Catherine Hanaway. "Missouri's tobacco settlement funds should be used for what they were intended, not to plug holes in the state's bloated budget," she said.

But Holden said the money he was taking would not have been used for health or anti-smoking campaigns for this year anyway.

"An endowment fund, which sets aside a portion of our tobacco settlement money to be used more than 50 years from now, will be useless if we have to cut programs today that the fund would be used to support in the future," Holden said.

Under Holden's plan, A $50 million trust fund of tobacco money would be abandoned. Interest from that fund was to be used to fund future health programs. In addition, the governor took $3.5 million from an anti-smoking campaign.

The cuts come as Missouri faces economic recession as part of the lasting effects of Sept. 11, Holden said. The weakened economy and lower tax revenue have forced the state to cut spending over the last two years totalling $612 million.

State Budget Director Brian Long said the state is now anticipating that when the fiscal year ends in June, general revenue will be six-tenths of a percent lower than last year. Budget officials said they could not recall the last time yearly revenue declined.

As she has in the past, Hanaway questioned the administration's figures.

"The governor has kept up his `sky is falling' mantra on the budget despite the fact that the revenue numbers to-date indicate that Missouri is in a spending crisis rather than a revenue crisis," Hanaway said.

The Department of Revenue reports that the state's general revenue fund is up 6.7 percent through October over the same period last year, which Hanaway said means that the state has more revenue so far this year than was originally expected.

Hanaway also attacked the governor for taking money from the tobacco settlement and using it to make up for the shortfall in general revenue.

The budget cuts mostly came from withholding appropriations to various state agencies. The Department of Natural Resources was hit hardest, losing almost 24 percent of its expected appropriation. The Social Services Department lost two percent, or $24 million, of what it expected.

The budget cuts included indigent care, hospital clinics and smoking prevention programs.

Holden said he kept his promise to maintain spending on elementary and secondary education.

"The one guiding principle that I have insisted on from the beginning in making these withholding decisions is that the critical needs of our K-12 public schools are off the table," Holden said.

Protecting pubilc schoolchildren is his top priority, Holden said.

To fix the rest of the budget woes, Holden plans to transfer funds from tobacco settlement money and other state and federal funds to the general revenue fund. Some of the money he wants to transfer may be subject to approval from the General Assembly, which begins session again next month.

Holden said state employees' jobs are secure for now, but a plan currently moving through the U.S. Congress could change that.

An economic stimulus bill that passed the U.S. House and is currently being debated in the Senate would reduce some corporate taxes. If the bill passes in the Senate and President Bush signs it into law, because Missouri ties its state taxes to federal taxes, it would cost the state $70-100 million in revenue.

The additional lost revenue from the federal law would make layoffs and further budget cuts necessary, Holden said.