CHICAGO — Missouri Gov. Jay Nixon on Friday signed into law a $23 billion fiscal 2012 budget after cutting $172 million from the plan approved by lawmakers in order to keep spending in line with expected revenue and to set aside $50 million for recent weather-related disasters.
“These actions aren’t easy, but they are necessary,” Nixon said.
The state has pledged $25 million in initial assistance for recovery efforts in Joplin following a tornado last month that destroyed several thousand buildings and homes — including St. John’s Regional Medical Center — and claimed the lives of more than 150 people. Another $25 million has been promised to the recovery efforts in southeast Missouri following devastating flooding along the Mississippi River.
The Federal Emergency Management Agency has declared the Joplin region a disaster area, making it eligible for assistance covering 75% of recovery costs. The state traditionally has picked up 10% of the 25% of public costs not covered by federal aid.
Nixon trimmed nearly $100 million allocated in the new budget on college construction projects which have already been on hold. He cut nearly $15 million from higher education funding, $14 million from Medicaid, and $8 million from public school transportation. The governor used his authority to withhold allocated funding. If revenues over the next fiscal year that begins July 1 are greater than now anticipated, most of the funds can be restored.
The budget approved by lawmakers closely mirrors the plan Nixon presented earlier this year, which is based on a 4% increase in revenues and holds general fund spending at $7.9 billion. K-12 spending is also held steady while higher education is cut by 5.5%. The plan eliminates 863 positions and makes permanent $217 million in spending that was withheld this year.
The budget doesn’t authorize any new borrowing but it does rely on about $20 million in one-time savings by pushing off debt service coming due over the next two years. Two restructurings — a $75 million refunding that recently sold and a $100 million refunding planned for September — are expected to save $20 million in fiscal 2012 and another $15 million in fiscal 2013.
Ahead of the recent refunding, all three major rating agencies affirmed the state’s triple-A ratings on $487 million of outstanding general obligation debt and ratings of one notch lower on $609 million of appropriation-backed bonds.
The rating is supported by a “history of excellent financial performance, strong fiscal management controls, and the state’s moderate debt burden,” Moody’s Investors Service wrote. The state also benefits from a budget reserve that provides liquidity. The account is equal to 7.5% of net general revenues, totaling $527 million in fiscal 2011.
Credit challenges include a limited ability to raise revenues without voter approval because of the Hancock Amendment and economic exposure to the health of the manufacturing sector.
Even though Missouri’s economic recovery is expected to lag the nation’s, it remains on pace to close out the current fiscal year with 3.6% growth in revenues after two years of declines.
Missouri is ahead of several of its neighbors in the budget process that, like it, must manage with divided political governance. Nixon is a Democrat and the Legislature is controlled by Republicans. Iowa and Minnesota face a potential government shutdown July 1 as their leaders have been unable to reach agreement on new budgets.
In Minnesota, new Gov. Mark Dayton is a Democrat and the Legislature is controlled by Republicans. In Iowa, new Gov. Terry Branstad is a Republican. The party controls the state House but Democrats hold a majority in the Senate.
Dayton and lawmakers are deadlocked over how to deal with a $5 billion budget deficit. The governor wants to eliminate the red ink through a mix of cuts and a $1.8 billion tax increase that is opposed by Republicans. In Iowa, Democrats and Republicans differ over how much to spend in the next fiscal year.