Missouri Governor Eyes Cuts

Missouri Gov. Eric Greitens

CHICAGO – Missouri needs to cut $700 million in spending through the next 18 months to keep its books balanced, new Gov. Eric Greitens warned this week.

Greitens attributed the red ink to weak revenue growth and a drain on state coffers from tax credits and higher-than-expected healthcare costs. Greitens announced $146.4 million in spending restrictions in the current fiscal 2017 budget that runs through June 30.

The new Republican governor, who assumed the state's reins from Democrat Jay Nixon, won't unveil his fiscal 2018 budget plan until next month. Previous governors have traditionally released their annual budgets after delivering their State of the State address, which Greitens delivered Tuesday night.

"These restrictions are an initial step towards fiscal responsibility. Over the next 18 months, over $700 million in budget cuts will be necessary just to make the budget balance and retain Missouri's AAA credit rating," Greitens said in announcing the cuts that hit higher education allocations the hardest with about $82 million in reductions. K-12 education, pension and healthcare funding were spared.

Nixon had previously trimmed $200 million from the current $27 billion budget as revenues faltered.

Greitens favors cuts over revenue hikes to deal with the red ink.

"The answer is simple: government must become more efficient, and we must build a thriving economy with more jobs and higher pay," he said.

In his speech, Greitens laid out his agenda which he said is aimed at growing the state's economy by improving the business climate. They include tort reforms that limit liability lawsuits, overhauling tax credits and regulations, and placing limits on union powers. Some are initiatives similar to what Republican governors in neighboring states have pursued. Greitens enjoys a Republican majority in the legislature which had butted heads with Nixon on some spending and tax issues.

Greitens backs a so-called right-to-work law barring mandatory union fees. Debate will begin in the legislature on that subject this week. He also endorsed curbing pre-bid union labor agreements for publicly funded projects.

"Right-to-work simply means forcing folks to work for less. Less money. Less health coverage. And less opportunity for workers and their families," Senate Minority Leader Gina Walsh, D-Bellefontaine Neighbors, said in response to Greitens' speech.

The not-for-profit Missouri Budget Project warned last week that it believes $200 million to $250 million in cuts are needed to keep the current budget balanced due to corporate income tax collections that have fallen short of projections.

"Unfortunately, the impact of budget shortfalls in fiscal year 2016, coupled with additional tax reductions, will have a ripple effect on next year's funding for schools, health care and social services, and infrastructure," the group warned, adding that unless revenues pick up "Missouri will be unable to fully fund its schools next year or make other needed investments that would build our state's economy."

Ahead of a sale last year, all three rating agencies affirmed the state's top credit marks on its general obligation bonds and the AA-plus on most of the state's other appropriation-backed special obligation bonds.

Moody's Investors Service said the state's top rating is supported by its history of above-average reserve levels, solid fiscal management controls, and a moderate debt and pension burden.

State lawmakers have approved the phasing in of a $620 million income tax cut, but revenue must meet a growth target for the cuts to take effect and they've so far fallen short.

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