CHICAGO — Missouri Gov. Jay Nixon unveiled a $23.1 billion budget for fiscal 2012 that relies on spending and job cuts and modest debt-restructuring savings to compensate for the end of federal stimulus funds, as officials anticipate a return to revenue growth.
Nixon’s spending plan seeks no new borrowing authority but includes savings from two planned refundings. The state will refund about $75 million of outstanding certificates of participation in July and more than $100 million of Missouri Board of Public Buildings outstanding revenue bonds in September. Both transactions would be sold competitively.
Both are expected to achieve between 7% and 8% in present-value savings, but the state will push off some debt service due in fiscal 2012 and 2013 to capture up-front savings. “With both refundings we have significant economic savings and so there is room to build in a little cushion for budget relief,” said Stacy Neal, assistant director in the state’s Division of Accounting.
Missouri would capture about $20 million from the restructuring savings in fiscal 2012 and another $15 million in fiscal 2013. The state will not extend the original maturity schedule. The state took similar action last year in a $125 million general obligation restructuring and refunding that achieved 8% present-value savings with up-front savings of $30 million in fiscal 2011 and $5 million in fiscal 2012. The state, however, lopped off 10 years from the final maturity date.
The budget anticipates tax revenues will grow by 4%, but that is not enough to offset the loss of stimulus funding and the rising costs of mandatory programs. To remain in the black, Nixon proposed cutting $200 million, including $63 million from higher education and $67 million from Medicaid.
Missouri will save $38 million by eliminating 860 positions and additional savings would come from the elimination of some tax credits and the infusion of $20 million expected from a tax amnesty. The state will hold steady its funding levels for K-12 public education.
While Missouri fared better through the recession than some of its neighbors, Nixon said in his state of the state address that the latest cuts will bring to $1.8 billion the amount he has trimmed in state spending since taking office two years ago.
“We’ve kept our fiscal house in order with prudent financial controls, rigorous cost reductions, and smarter, more efficient government,” the Democratic governor said. “That’s earned Missouri a triple-A credit rating — the best you can get — from all three rating agencies. We’re one of the few states in the nation that can make that claim.”
General fund revenues are expected to rise to $7.3 billion with about 66% coming from individual income taxes and 25% from sales and use taxes, according to budget documents.
Though revenues are expected to grow by 4%, they will still remain about $980 million below 2008 levels due to a steep decline of 9.1% in fiscal 2010. The state expects to close out the current fiscal year June 30 with a 3.6% growth rate, about $206 million below original estimates.
Missouri’s economy is expected to gradually rebound over the next 18 months with job growth weak in early 2011 but gaining steam later in the year. Missouri’s housing market is expected to remain lackluster, but it is relatively stable compared to the nation as a whole, according to budget documents.
Ahead of the state’s refunding last summer, all three rating agencies affirmed Missouri’s top marks on $530 million of outstanding GOs. They also affirmed $627 million of appropriation-supported debt at one notch lower.
“The rating reflects our view of the state’s strong and diverse economic base, good financial management, and strong reserves in the form of a budget reserve fund that can only be accessed under certain circumstances,” wrote Standard & Poor’s analyst Corey Friedman.
The budget reserve is equal to 7.5% of net general revenues, totaling $527 million in fiscal 2011, and has not been tapped to offset revenue shortfalls. The government can dip into the reserve for liquidity purposes but it must repay any draws during the fiscal year by May 15.