Missouri Gov. Jay Nixon continues to warn that sales tax cuts passed by the General Assembly would hurt the state budget and in particular hammer local governments.
“The fiscal impact would be profound and permanent,” Nixon told local mayors, City Council members, aldermen and others on Friday at a meeting of the Eastern Jackson County Betterment Council.
Some local legislators were on hand, too, and didn’t agree with all of the governor’s figures or his contention that they had acted recklessly.
“None of us want to hurt municipalities,” said Rep. Sheila Solon, R-Blue Springs.
For weeks, the governor has traveled the state, explaining his veto of several last-minute tax bills, detailing the impact on cities and other local jurisdictions, and urging local officials to talk with their legislators and press them to not override those vetoes in September.
“We need to let everyone know that these local, voter-approved taxes are off limits,” he said.
The governor’s office says local governments would lose $321.5 million annually.
Independence, for example, has a $75 million general fund, and the governor’s office estimates the city would lose $5.01 million.
“I don’t know where we go” if the cuts go through, said Independence Mayor Eileen Weir. Personnel is the city’s biggest expense, and she said cuts would inevitably fall there.
Other impacts, according to Nixon’s office: $12.87 million for Jackson County, $1.86 million for Blue Springs, $221,575 for Grain Valley, $455,881 for the Central Jackson County Fire Protection District and $689,404 for the Independence Events Center Community Improvement District.
The General Assembly passed a fiscal year 2015 budget in mid-May – a budget he says was already in the red. But legislators still had a week go in their session, and on the last day passed several bills to carve out specific transactions from sales taxes: 10-year-old vehicles, admission to amusement parks and professional sports, certain types of food processing, data storage, and others.
The governor has called these “Friday favors,” and his senior legal and policy adviser Chris Pieper called it “the lobbyist buffet at the end of the session.” Nixon also says the bills were passed without regard to the budget, often without hearings, and sometimes without the report of the estimated fiscal impact that usually accompanies legislation.
“I think it was a breakdown of the legislative process,” Nixon said.
Those cuts, Nixon said, add up to a $425 million annual hit to the state budget, or about 5 percent of state general revenues, in addition to the $351.2 million loss for local governments. Since legislators adjourned, the General Assembly’s own fiscal review team come up with revenue-loss estimates roughly in line with Nixon’s, said State Budget Director Linda Luebbering.
Schools also get sales tax money under Proposition C passed by the voters in 1992. The loss to school districts works out to $145 per student.
“That’s every school,” Nixon said.
Local governments rely more on sales taxes than the state does, and Nixon said the legislature’s action amounts to a double whammy. Local governments are just recovering from cuts during the recession, and now comes this blow to their revenues.
“Your jobs are already tough enough without the General Assembly coming up and pulling the rug out from under you,” he told the local officials.
One of the tax cuts illustrates how state officials differ. Economic development officials for years have pushed for state incentives for data centers. It’s been a priority in Independence, for example.
Solon and others point out the idea has been around for some time, with hearings, and legislators finally got it to a vote.
But Nixon counters that the proposal discussed for years and the bill passed on the session’s last day were two different things. The original bill set requirements for how much companies would invest and how many jobs they would create but those requirements are gone from what legislators passed.
Also, the bill has to do with “data processing” – something virtually every business does to some degree, Pieper said – so banks, financial services companies and others could claim an exemption on equipment related to that. The cost to the state is $152.1 million, with a similar lost for local governments.
Pieper said such measures were “written with ambiguous language on the fly.”
Solon disputed that, and she said there had been hearings on several of the issues.
“The methodology of these (Nixon’s) numbers needs to be looked at before we go into veto session,” she said.
She said the state needs a progressive policy of retaining and attracting jobs, and she said it was “somewhat disingenuous” for the governor to call the General Assembly into special session late last year to pass incentives for Boeing to bring a major investment to St. Louis – she voted for that – and then criticize these bills. (Boeing didn’t come after all.)
She and Rep. John Mayfield, D-Independence, also expressed concerns about parts of the state budget the governor has vetoed in response to anticipated lower revenues.
“That’s the conversation we should be having,” Solon said, and she said legislators will look at overriding those spending cuts.
One, Mayfield pointed out, was turning the Independence Police Department crime lab over to the state and turning it into a regional facility. Another was one of Solon’s bills, which would widen screening of newborns for a range of medical conditions. She called that veto short-sighted.
Asked about those two cuts, the governor said, “Quite simply, there were a lot of good things in the budget that I had to veto.”
He said the General Assembly, which also passed an income-tax cut over this veto, has made it clear that state government is going to be smaller. He said he had to make cuts and it made sense to start with new spending.
“I cut projects of mine also,” he said.