The annual estimate for general revenue collections announced Friday for the state was for small growth of 2 percent, despite a strong economy and the lowest unemployment rate ever recorded for Missouri.
The projection, which pegs revenue at $9.82 billion, applies to the next fiscal year which begins in July. The figure, known as the Consensus Revenue Estimate (CRE), is used by lawmakers and the governor to construct an operating budget for the year.
State budget professionals and hired consultants, including a University of Missouri economist, join budget leaders in the state legislature and the governor to determine the CRE. If the new estimate is accurate it would represent growth of $193 million over the estimated revenue for the current fiscal year of 2019 that ends June 30th.
Former Republican Governor Eric Greitens announced the 2019 CRE in January, which was $9.42 billion. That figure represented growth of $229.3 million, translating to a growth rate of 2.5%. A revised estimate for the remainder if 2019, which was also announced Friday, has been increased by more than $200 is $9.63 billion.
The upward projection comes as state revenue is down roughly $180 million from the previous year. Lawmakers have linked the current shortfall to an error in figuring income tax tables, a problem that’s since been corrected by the state Revenue Department. There’s an expectation that revenues will make up for the shortage in the coming months because of the correction.
Republican Governor Mike Parson announced the new forecast with GOP House Budget Committee Chairman Scott Fitzpatrick of Shell Knob and Republican Senate Appropriations Chairman Dan Brown of Rolla.
Representative Fitzpatrick indicated that the calculations were made cautiously. “Budgets are based on projections,” said Fitzpatrick. “The best way to ensure a balanced budget is to use a conservative but realistic revenue estimate, which I feel is represented in this agreement.”
Senator Brown suggested the number was carefully figured to avoid an overestimation. “With a low 3% unemployment rate in Missouri and jobs available, I think 2% growth is realistic and can be attained in Fiscal Year 2020,” said Brown.
The estimates for 2020 and the current fiscal year of 2019 are much more conservative compared to previous years, which resulted in large chunks of money having to be cut from state services.
Revenues were projected to increase by $345 million at a growth rate of 3.8 percent in the 2018 fiscal year. With collections failing to meet estimates heading into the July first start date that year, former Governor Greitens slashed $251 Million in spending. Previous Governor Jay Nixon made even deeper cuts a year earlier when revenues fell far short a projected 5% growth rate.
The new estimates were released days before states income cuts take hold January 1st. The rate most Missourians pay will decrease from 5.9 percent to 5.4 percent. The rate can drop further to 5.1% if the state meets revenue targets calling for increased collections of $150 million. The rate will decrease by 0.1% for each year that the state meets those targets. Individuals claiming business income on their personal taxes could see a reduction of 25 percent once all the targets are met.
State Representative Kip Kendrick of Columbia, the ranking Democratic member of the House Budget Committee, issued a statement Friday critical of the tax cuts. “While the estimate reflects an expected $193 million in revenue growth, it is silent on the $320 million in revenue Missouri won’t collect next year due to the next phase of implementing an ill-advised 2014 tax cut,” said Kendrick. “As House Democrats warned then, this tax giveaway for rich is resulting in serious consequences for everyone else.”
Kendrick predicted that the state would have “another rough budget year ahead.”
Meanwhile, Representative Fitzpatrick is leaving the legislature to take over as state treasurer. He was appointed by Governor Parson to serve in the position after Parson selected departing Treasurer Eric Schmitt to replace outgoing Attorney General Josh Hawley. Hawley will be sworn into the U.S. Senate January 3rd after defeating incumbent Democratic Senator Claire McCaskill in November’s election.
As State Treasurer, Fitzpatrick will become the state’s chief financial officer. He’ll manage annual state revenues as well as direct the state’s banking services and oversee a $3.5 billion investment portfolio.
Republican State Representative Cody Smith of Carthage will become the next House Budget Committee chairman. Senator Brown, who’s retiring due to term limits, will be replaced by Republican Senator Dan Hegeman of Cosby as the chamber’s chair of its Appropriations Committee which handles budget matters.
The Missouri Department of Economic Development announced November’s 3.0 percent unemployment rate as the lowest in the state’s “historical data series” dating back to 1976.