CHICAGO — The Missouri Legislature wrapped things up on Friday, adjourning after completing work in recent weeks on a $24 billion fiscal 2013 budget that relies in part on some upfront savings in two upcoming bond refundings.
The Legislature rejected a measure that would have allowed the Missouri Department of Transportation to impose tolls on Interstate 70 and enter into a public-private partnership to finance a $2 billion to $4 billion rebuilding and expansion of the aging highway.
Lawmakers floated a flurry of bills that would have influenced future local and state borrowing by requiring a public vote for appropriation bonds and overhauling tax credits, but none received final approval.
The legislation stemmed from anger over the city of Moberly’s default on $39 million of bonds behind which it put an appropriation pledge to help finance a sugar substitute manufacturing plant. The Chinese company behind the project, Mamtek US Inc., has abandoned it and defaulted on city payments. The project is the subject of a bondholder lawsuit, and various local, state and federal regulators are investigating it.
Lawmakers approved a spending plan about $50 million below Gov. Jay Nixon’s original budget proposal. The plan keeps intact funding for a health care program for the blind and veterans homes that will be supported by a dedicated funding stream in the form of casino fees.
The spending plan provides 2% employee raises for many state workers, cuts nearly 1,000 positions, and holds the line on taxes.
It relies on increased lottery revenue, includes a modest $5 million increase for kindergarten through 12th grade, and restores cuts to funding for public universities proposed by Nixon.
The budget also taps $40 million of the state’s $196 million share of the national mortgage settlement with banks. The budget does not authorize any new borrowing.
Nixon said in a statement of the budget: “I will continue to ensure that we have a balanced budget that holds the line on taxes … as I give this budget a very thorough review over the next several weeks, Missourians should know that we’ll continue to live within our means and hold the line on taxes, while doing everything possible to help businesses grow and create jobs.”
The budget relies on some upfront savings by pushing off near-term maturities in two refundings.
While rating agencies frown on such one-time maneuvers as a sign of fiscal stress, the refundings also will generate significant present-value savings, and in some cases the state will shorten the final maturity schedule.
“We still have significant present-value savings in addition to the budget relief,” said Stacy Neal, director of accounting in the state’s office of administration.
In June, the state will seek approval from the Board of Fund Commissioners to current refund in a competitive transaction up to $175 million of general obligation bonds with roughly 14% in present-value savings expected. About $23 million in upfront savings would be taken in fiscal 2013. A September sale is planned.
Officials will also ask for approval from the Board of Public Buildings for an advance refunding of up to $315 million of revenue bonds from a 2003 issue. The deal, expected to sell in early August, will generate about 11.6% in present-value savings and provide $20 million in upfront budgetary relief and another $16 million in fiscal 2014.
Ahead of a refunding last fall, the rating agencies affirmed Missouri’s triple-A ratings on $500 million of outstanding GO debt, and ratings one notch lower on $790 million of appropriation and special obligation bonds.
The ratings benefit from conservative financial operations, a broad and diverse economy, and a budget reserve equal to 7.5% of net general fund revenues that provides liquidity.
The state closed out fiscal 2011 with an ending cash balance of $379 million, up from $184 million a year earlier. Other positives are the state’s constitutional ability to withhold spending in response to revenue shortfalls and an adequately funded pension system at 80%.
Challenges include a limited ability to raise revenue without voter approval and economic exposure to a shaky manufacturing sector.