The downturn in state revenue predicted last month is starting to be felt, with tallies of sales and income tax receipts showing sharp drops in the first 10 days of April.
State lawmakers last week passed a supplemental budget bill with almost $6 billion in possible spending, most of it federal aid provided through coronavirus relief bills passed by Congress. Now, the Democrats’ top lawmaker on budget matters in the Missouri House said, it is time for Gov. Mike Parson to share the data that shows what to expect in the coming year.
Lawmakers and the administration need to reach an agreement on a consensus revenue estimate so that when lawmakers write next year's budget – likely in a special session, Parson said last week – expectations are clear, state Rep. Kip Kendrick said.
"Reaching consensus will be difficult, and I am sympathetic, but it is still a necessary exercise," said Kendrick, the ranking Democrat on the House Budget Committee. "But we should also have a clear picture by May 1 of the federal guidance of how to use the federal funds from the CARES Act."
At his daily briefing, Parson said he intends to work with lawmakers to develop the budget for the upcoming year but can’t say when he will be ready.
"I am not sure there is any magic date out there how it’s all going to be done," Parson said.
Parson withheld about $175 million in state spending for this year on April 1, including $36.5 million from the University of Missouri.
In a letter to Parson about those withholdings, Kendrick wrote that the governor’s office should release its estimates of revenue for the remainder of the year and for the coming year.
"While I am sympathetic to the fact that forecasting revenue for (fiscal year 2021) is very challenging in these unprecedented times, the exercise and outcome of the CRE process are vital to our state’s current and future financial health, critical to the budgeting process, and necessary for building an adequate and fiscally responsible (fiscal year 2021) budget," Kendrick wrote.
The only response he’s received, Kendrick said, is an aide to Parson writing to say it would be extremely difficult to produce an estimate and that it would likely change after it was produced, Kendrick said Monday.
Through Friday afternoon, sales tax receipts were down 18.5 percent for the first 10 days of April and income tax receipts were down 19.7 percent.
The sales tax figures cover a variety of periods because retailers report on several schedules, with the largest paying weekly and reconciling the figures monthly, while the smallest businesses make quarterly payments. The income taxes include money withheld from paychecks currently and amounts due from filers who have not opted to wait until July 15 to send in their returns.
For the year, the state is still showing revenue growth of 5.4 percent.
"We know the economy is going to be extremely affected by that and if you look at those numbers they speak for theirselves," Parson said Monday.
To determine what the state will have to spend, Parson said, the Office of Budget and Planning will have to consider unemployment data, revenue receipts and the likelihood of lifting some restrictions on people’s activities.
"We are going to have to make a lot of adjustments for 2021," Parson said.
Those figures aren't surprising, said Senate Appropriations Committee Chairman Dan Hegeman, R-Cosby.
The state was expecting almost $10 billion in general revenue in the coming fiscal year, based on projected growth of 2.4 percent in this year's receipts and 1.9 percent in the coming year. Parson has warned the COVID-19-induced recession could reduce revenues as much as the 2008-2009 financial crash, which caused revenues to fall 16.25 percent over two years.
"I think we all hope this will be a V-shaped recession rather than a U-shaped recession," Hegeman said.
He noted that the $30 billion budget Parson proposed was not based on a consensus revenue estimate, a process that has been usually used to make sure all sides in the budget process agree on how much money is available. He's not ready to set a timeline for having talks with the House and the administration, he said, but the decline makes it more important that everyone agree.
"There will be more pressure to do that now," Hegeman said.
The supplemental bill included about $1.5 billion in federal funds for public schools and $304 million for higher education institutions that lawmakers were told would be used to replace general revenue if federal law allows. If it can be used that way, the general revenue could be saved for use in future years.
In a normal year, lawmakers would be looking at a constitutional deadline of May 8 to finish work on the budget for the year that begins July 1. Because the state must have a budget when the fiscal year begins, Parson said last week he intends to call lawmakers in for a special session to complete it.
Any increases any agency or institution expected will almost certainly be eliminated, Hegeman said. The budget will be a frugal one, he said.
The picture should become clearer soon, he said.
"My guess is at the end of this week we will have a better idea of where we are proceeding," Hegeman said.
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