CHICAGO — Missouri Gov. Jay Nixon unveiled a proposed $25.9 billion budget for fiscal 2014 that bolsters education spending and provides a conditional endorsement of new borrowing if funds are carved out to repay it.

Nixon said his priorities in the new budget centered on increased education spending, job creation, transitional healthcare for low-income residents, and ongoing fiscal discipline. The proposed spending plan is up from a $24.4 billion budget for the current fiscal year which ends June 30.

Nixon portrayed the time as being right for increased education spending and new borrowing after years of belt-tightening that resulted in steep spending cuts of $1.8 billion. Nixon has eliminated 4,500 state positions to weather the recession since 2009, including 200 in the proposed budget.

"Together, we balanced the budget while holding the line on taxes. We dramatically reduced the size of state government, while making it more efficient," Nixon said in his state of the state address Monday night. "With our perfect triple-A credit rating intact and interest rates at all-time lows, we now have a unique opportunity to move forward with a bond issuance."

Nixon put conditions on his support for a bonding package saying he would support a plan only if revenue streams are identified to pay for any new borrowing and the package focuses on the state's "most pressing needs."

Nixon - who did not put a dollar amount of how much he would support -- said he wants to upgrade schools, provide funds for cutting-edge university research facilities, finance a new state mental hospital, and pay for upgrades to state parks.

He would carve out savings in the general fund to repay the borrowing by reforming a tax credit program that provided $629 million in credits last year and by ending a property tax credit for renters.

The budget provides an extra $150 million for early childhood, elementary and secondary and higher education and relies on a tax amnesty to generate about $61.4 million.

It earmarks $900 million in federal funds to support an expansion of the Medicaid system as outlined in federal healthcare reform. Republicans who control the Legislature have voiced skepticism over the expansion. Although the federal government initially picks up the added costs, the state begins in 2017 covering some of the expenses. Nixon, a Democrat, said he would include a provision that allows the state to halt the expansion if the federal government doesn't make good on its funding commitment.

Missouri has exhausted all of its GO bonding authorization for state building projects and has just about $100 million of remaining GO authorization remaining on its books for storm water and water pollution control.

Any new general obligation bonding would require a voter referendum and legislative momentum has been building for new spending on both state buildings and transportation projects.

A special bipartisan House committee will hold meetings in an attempt to craft a package that could go to voters and provide funding for both transportation and state and school buildings. A senator has proposed a $950 million general obligation state building program and the Missouri Highways and Transportation Commission chairman last week floated a one-cent sales tax increase to raise $7.9 billion over 10 years for transportation projects.

Missouri's top ratings were affirmed last year when it refunded $164 million of GO debt and the state has not issued new-money debt since 2007.

State reserves which equal 7.5% of net general revenues also provide a strong liquidity cushion. The state closed out the last fiscal year with a cash balance of $205 million.

The state has $4.4 billion of tax-supported debt but only 10% is backed by its full-faith-and-credit pledge. About 70% of state-related debt was issued through the highway commission and is repaid with transportation revenue.

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