CHICAGO - With the federal stimulus package making its way through Congress, two Midwestern states are taking opposing positions on whether to include the anticipated funds in their budgets. Missouri is counting on more $800,000 from the deal to balance its fiscal 2010 budget, while Iowa prefers to wait.

Missouri Gov. Jay Nixon, a Democrat, late Tuesday delivered his first state of the state address and unveiled a $23.1 billion budget for the fiscal year that begins July 1. It does not include any major tax increases and relies on $809,000 from the stimulus package - a level officials are confident can be used without restrictions.

The budget also includes $1 billion in spending cuts that would result in the elimination of 1,329 positions and 20 programs to stay in the black. The triple-A rated state faced a combined $600 million deficit in the current fiscal 2009 and next fiscal 2010 budgets.

"After just two weeks in office, we are proposing the smallest state bureaucracy that Missouri has seen in a decade," Nixon said in his address. "The reduction I am proposing today represents the largest single reduction in the state's bureaucracy in modern history."

State Republicans, who control the General Assembly, criticized the reliance on federal funds not yet in hand.

"A budget based on a one-time bailout is no long-term plan. We need an enduring vision for our state's economy, not a budget propped up on debt that will have to be paid back by our children and grandchildren," Republican Lieut. Gov. Peter Kinder said in a statement.

The budget provides a 38% increase in funding for job training and development funding and additional money for Medicaid and job-training. The budget includes $79 million for a 3% pay raise for state employees.

Nixon pushed for bipartisan cooperation for his six-point Show Me JOBS proposal that would provide low-interest loans to small businesses through the Missouri Development Finance Board to spur job growth and expand an existing job training program

The budget relies on a 1% growth rate in various revenue streams, including slight increases in the sales and incomes tax collections.Officials now expect collections in the current year to fall nearly 4% below fiscal 2008 revenues. The state originally projected revenues this year would grow by 3.4%. While it ended fiscal 2008 with $545 million in hand, it expects to close out fiscal 2009 with a zero cash balance and end fiscal 2010 with a $52.7 million balance.

The budget includes no new direct state borrowing. It does include $360 million of Missouri Highways and Transportation Commission highway revenue bonds to wrap up a $2 billion borrowing program. The bonds would be repaid with state transportation-related taxes and fees.

The commission also expects to issue some federal transportation grant-backed bonds - depending on market conditions - under a $700 million program to repair and rebuild 800 state bridges although that authorization is not included in the budget.

Iowa Gov. Chet Culver, also a Democrat, unveiled a $6.23 billion budget for fiscal 2010 - down from the current $6.01 billion budget - that also does not include any major tax increases or rely on any federal stimulus cash. The budget includes a 6.5 % cut in most departmental spending that will save about $400 million. That cut comes on top of $180 million in spending reductions being made in the current budget.

"In this economic climate, it will mean that state government - like families and businesses across the state and nation - must truly do more with less," Culver said.

The state will use $56 million in the current fiscal year and $200 million in the next budget from its reserves to fund disaster relief. Iowa last spring suffered devastating tornadoes and flooding. The state enjoys reserves of $600 million, including $444 million in a cash balance from last year and $148 million in its rainy-day fund. It would end fiscal 2010 with $380 million in reserves under Culver's budget proposal.

Total revenue in the current fiscal year and next year is expected to fall below fiscal 2008 levels. The latest revenue estimates showed a $137 million decline for the current fiscal year and $26 million in the next budget. Corporate income taxes will show the steepest percentage decrease this year of 15.9% and next year of 6.8%.

The governor's top priority in the legislative session is passage of a $700 million bond-financed program to fund sweeping infrastructure investments and other economic development projects. The bonds would be secured by about $56 million in annual state gaming tax revenues, a moral obligation pledge, and a state appropriation.

Iowa does not issue stand-alone general obligation bonds, but it carries a Aa1 issuer rating from Moody's Investors Service, an implied GO rating of AA-plus from Fitch Ratings, and AAA from Standard & Poor's.

House Republican leader Kraig Paulsen issued a statement saying: "The governor has promised not to raise taxes, yet through his budget, Iowans and employers will see tax increases. He promised to fulfill his commitments to education, yet he comes up short on funding some of those priorities."

Democrats control the Legislature.

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