Blunt Green-Lights Budget

Missouri Gov. Matt Blunt late last week signed into law a $22.4 billion operating budget sent to him by lawmakers this past spring.

The state’s fiscal year began yesterday. The budget includes an additional $420 million for Medicaid, $120 million in education funding, and $24 million more for college scholarships. Blunt used his line-item veto powers to make five changes in funding for various items or programs. The governor originally proposed a $22.9 billion budget.

For the first six months of the current fiscal year that began last July, the state reported net general revenues collections as being up by 4.2%. Officials revised estimates last December for overall revenue growth for the current fiscal year down slightly to 3.1%. Income taxes are expected to remain strong, but although sales taxes rose by 4.9 % for the first half of the fiscal year, collections are expected to wane in the remaining six months.

Missouri’s triple-A credit benefits from a formal budget reserve of more than $500 million. It can’t be tapped unless two-thirds of the Legislature approve and it must be repaid within three years. The state also ended the last fiscal year with an unofficial cash reserve of more than $500 million from its ending cash balance.

The new budget doesn’t include any new borrowing plans by the state itself or the Board of Public Buildings. Missouri carries about $684 million of general obligation bonds on its books and another $682 million of lease-backed bonds issued by the building authority. All of the state’s debt is fixed rate and its GOs are rated triple-A by all three rating agencies.

Rating agencies factor in the $2.4 billion of fixed- and variable-rate debt issued by the Missouri Highways and Transportation Commission in its net tax-supported state debt totals. The agency last year sold $550 million of road bonds that are backed by various highway user fees and taxes.

The commission plans to issue another $350 million of bonds in fiscal 2010 to complete a $2 billion borrowing program permitted under a constitutional amendment approved by voters that ended the diversion of some transportation-related funds to the general fund. The agency is also planning to sell $150 million of grant anticipation revenue vehicle bonds in fiscal 2009 — its first issuance of Garvees, which leverage federal highway grants.

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