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Capitol Perspectives: Consensus Revenue Estimates

Phill Brooks
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UPI/Bill Greenblatt

UPI/Bill Greenblatt

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For all the squawking coming out of Missouri’s statehouse about the budget, there’s an area of remarkable bipartisan cooperation called the consensus revenue estimate.

It’s been around since the early 1990s, and it has worked remarkably well in bringing a more rational process to put together the state’s budget each year.

It’s a process by which legislative budget leaders and the administration reach an agreement on the expected state revenue before the legislature begins voting on the budget.

Rep. Chris Kelly, D-Columbia, helped formalize the process when he was House Budget Committee chairman. He calls it “the single most important accomplishment” of his long legislative career.

Earlier this month, the administration and legislative budget staff began discussions for the budget year that will begin July 1, 2012.

The consensus revenue estimate actually is a formal agreement signed by the state budget director, the House Budget Committee chair and the Senate Appropriations Committee chair.

Agreement on how much the state will have to spend limits the legislative debates to budget priorities — how to divide up the money — rather than debating economic predictions.

Before the consensus revenue estimate approach, there could be vast differences in revenue estimates by the administration, the House of Representatives and the Senate. It was not always clear whether those different estimates reflected legitimate disagreements about the state’s expected economic growth or just excuses for padding or cutting the budget.

If, for example, members of a legislative chamber wanted to cast politically popular votes to boost funding to local schools above the governor’s estimate, it easily could be justified by arguing the state would collect more taxes than the governor predicted.

And lawmakers did not have to worry about balancing the budget because the governor has broad powers to cut spending when revenues fall below estimates.

That kind of thing did happen, and on a regular basis, before the consensus revenue estimate approach came into being.

The most extreme example I saw involved what was called “the pipeline” during the administration of Warren Hearnes.

Back then, tax collection figures from the Department of Revenue were not public. Instead, the public revenue figures were based on how much money the revenue department transferred to the State Treasurer.

Critics charged that not every dollar collected by the revenue department was being promptly transferred to the state treasurer.

When the administration wanted to justify a tight budget, they could just clog this “pipeline” between the revenue department and state treasurer by transferring to the state treasurer only some of the taxes that had been collected. The rest would be kept in the revenue department’s low-interest bank accounts — to the delight, of course, of the favored banks.

In other years, say an election year, the pipeline could be opened and those clogged funds transferred to the state treasurer. That would make it look like the state’s economy was on the upswing and justify a higher revenue estimate for the next year’s budget.

That kind of scheme no longer is possible. Government records and revenue collections now are public. And the consensus revenue estimate process helps assure legislators’ attention is focused on what they actually can control — spending — rather than arguments about predictions.

For the legislative session that will begin in January, the consensus revenue estimate is going play a huge role. Legislative leaders repeatedly have been warning that the state will face some major budget cuts of hundreds of millions of dollars.

Part of the problem is a sluggish economy. State tax collections have grown only about 2 percent so far this budget year. Further, special federal economic recovery aid to states comes to an end. It’s a problem nationwide. And Missouri actually is in better shape than many other states.

Compounding the problem is that, as part of the agreement in taking that federal assistance, Missouri is restricted in cutting Medicaid. Medicaid is one of the state’s most expensive and growing programs, and it provides health care coverage for the lower income. Even worse, the level of federal matching funds for the state’s Medicaid expenses will be reduced next fall.

As the Senate Appropriations chairman noted earlier this month, that leaves education as a potential target for cuts. The appropriations for education are huge single lines in the budget. That makes it easier to make a large cut there rather than identifying hundreds or thousands of smaller cuts in smaller budget lines to reach the same amount of reduction.

Further, both local schools and higher education have other ways to get money that are not available to other government programs such as prisons, law enforcement and welfare. Local schools can seek voter approval to raise school taxes. Colleges and universities can raise student fees and tuition charges.

As always, let me know (at column@mdn.org) if you have any comments. If you would like your comments, or a portion of them, included in a future column, let me know and be sure to include your full name in your email. Past columns are available at www.mdn.org/mpacol or here.

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