House budget reject Greitens’ administration plan to expedite tax refund payments

House budget leaders are rejecting Governor Eric Greitens’ (R) plan to use a line of credit to help pay for getting tax refunds out to Missourians.

House Budget Committee Chairman Scott Fitzpatrick (left) and the committee’s ranking Democrat, Representative Kip Kendrick (photos; Tim Bommel, Missouri House Communications)

Under the administration’s plan the state would seek a line of credit of up to $250-million.  That would be used to help the state get refunds out faster and would be paid off by the time the fiscal year ends at the end of June.  The loan would have come from MoHEFA, the Missouri health and Educational Facilities Authority, which typically helps finance buildings projects for colleges and universities.

House Budget Committee Chairman Scott Fitzpatrick (R-Shell Knob) considered the idea since it was first presented to him, but has since cooled on it.

“I personally didn’t love it at first, the first time I heard it, and the more I thought about it the more it wasn’t something I thought we should do, so the House is not going to do it,” said Fitzpatrick.

Both Fitzpatrick and the top Democrat on the budget committee, Representative Kip Kendrick (D-Columbia), also question the constitutionality of that plan.

“One of my biggest concerns about the whole thing is we have a process in place already to make sure we can pay refunds.  The idea that we can pull from MoHEFA, and the explanation that taking this $250-million line of credit is the same thing as providing funding for Mizzou Arena – that’s a false equivalency.  It’s not.  The “F” in MoHEFA stands for facilities,” said Kendrick.

“The nature by which they wanted to do it was to use a quasi-governmental agency to borrow off budget and then use state appropriations to pay off through that quasi-governmental entity those loans,” Fitzpatrick said.  “It was creative but it isn’t something that I feel real comfortable with on the constitutionality issue.”

Senate leaders have also reportedly rejected the loan idea.

Asked whether the legislature needs to reevaluate how refunds are disbursed in order get them out faster, and with the state paying less interest on delayed refunds, Fitzpatrick said let’s wait and see.

“Like two years ago we had a 15-percent year-over-year increase in refund expenditures.  It went up like $200-million in one year and … we didn’t anticipate that.  When you have something like that – that kind of growth in refunds – it can create some cash flow problems, especially right at the end of the fiscal year,” said Fitzpatrick.  “If we have a good year of growth and we can get our General Revenue Fund cash balance in a better situation, and we don’t have an explosion in refunds … I think we ought to be able to get ourselves in a better situation where we’re paying refunds in a timely fashion.”

The House Budget Committee this week began going over Greitens’ budget proposal.  Over the coming months the House and Senate will craft a legislative spending plan that will be sent to Greitens before the end of the session in May.

House budget leaders discuss Greitens’ plan to cut college, university funding

After legislators began going through Governor Eric Greitens’ (R) budget proposal many began expressing concern over his proposal to cut money from Missouri’s colleges and universities.

Representatives Kip Kendrick and Scott Fitzpatrick (photo; Tim Bommel, Missouri House Communications)

The Governor proposed a 7.7-percent reduction to higher education.  Coupled with money frozen in the state budget that took effect July 1, 2017, that would be a 10-percent cut overall.

House Budget Committee Chairman Scott Fitzpatrick (R-Shell Knob) said that would amount to a reduction of about $68-million.  Higher education funding is also shifting to being based on performance, which could mean additional decreases for some institutions.

“I haven’t heard any rumblings from any institutions about, ‘If this happens, we’re closing,’ but I don’t think it’s outside the realm of possibility,” said Fitzpatrick.  “I don’t anticipate that all of those reductions will stand in the budget.  I think that we’ll probably try to recover some of that, but I think that the institutions – some more than others – are going to have a difficult time with it.”

Fitzpatrick and the budget committee are just beginning the process that over the next couple of months will see countless changes made to the governor’s budget proposal to morph it into the legislature’s own state spending plan.  He is sure efforts will be made along the way to restore at least some higher education funding.

“It’ll depend on what things we find in the budget that we think we can reduce or any other revenue source that we’re not currently considering that could become available through the process, which usually happens in some way shape or form,” said Fitzpatrick.

Legislators in both parties and in both chambers are expressing intent to propose more funding to colleges and universities than the governor proposed, so it seems likely the 10-percent reduction will not stand.  Still the leading Democrat on the House Budget Committee, Representative Kip Kendrick (Columbia), said he’s alarmed at the governor’s proposal.

“This is a time when we’re at full employment.  That’s what scares me the most is the economy’s doing well, yet we’re seeing such tremendous cuts to public higher education across the State of Missouri.  I’m very concerned about what it’s going to mean for our state,” said Kendrick.  “I think that this is a very concerning trend that we’ve been seeing … what happens in the next [economic] downturn?  What’s that going to mean for higher education at that time?”

As for other provisions in the governor’s plan, neither Fitzpatrick nor Kendrick are supportive of a plan to take out a line of credit to pay for the state to get tax refunds out to Missourians faster.  Both also want to retain or improve on the governor’s proposal to increase pay by $650 to state employees making less than $50,000 a year, but say only time will tell what form any state employee pay hike could take.

House Budget Chairman: audit ‘confirms’ legislative criticism of former governor’s use of taxpayer money

A recent report from Missouri Auditor Nicole Galloway (D) found that former governor Jay Nixon (D) overspent on his office and used taxpayer money for personal food and security.

House Budget Committee Chairman Scott Fitzpatrick (photo; Tim Bommel, Missouri House Communications)

The audit said Nixon delayed paying bills and shifted costs to other government agencies – practices legislative budget makers in both parties often criticized Nixon for.

“It wasn’t a secret that Governor Nixon had taken liberties with the Constitution and the appropriations bills that we had passed,” said Missouri House Budget Committee Chairman Scott Fitzpatrick (R-Shell Knob)“[Auditor Galloway] basically just confirmed what we’ve already been saying for the last several years.”

The audit found that, for example, flights by Nixon or his staff were paid for by the Department of Economic Development, though not all business on those flights was related to DED and Department officials often weren’t on those flights.

Fitzpatrick, who began serving as budget chairman in August, 2016, said this year’s state spending plan aims to prevent future governors from using similar tactics.

“One of the things that we did this year … was to take the places where the Nixon Administration has been skimming money off the top of appropriations to fund the operation of his office and go ahead and consolidate those into transparent appropriations,” said Fitzpatrick.

Those changes were made under a Republican-controlled legislature even though a Republican – Eric Greitens – is now governor.  Fitzpatrick said he wants to see all future governors prevented from similar uses of state dollars.

“If any governor, regardless of their party, goes beyond their constitutional authority to work within the appropriations and the appropriations language that we give them, then I think it’s incumbent on a legislative branch to bring that into check,” said Fitzpatrick.

Fitzpatrick said Governor Greitens’ staff was very “cooperative” in making those changes in the budget, and he hopes the Greitens administration will never get to the point at which the legislature must respond to inappropriate use of state dollars.

Fitzpatrick believes the state Constitution is clear regarding how the governor’s office can and cannot use tax dollars.  He thinks previous budget chairmen and legislatures were not stern enough in taking Nixon to task over the practices found in the audit.

“The executive branch has been willing to overstep their boundaries and their constitutional limitations, but the legislative branch has been not really willing to react to that and create consequences that were strong enough to discourage the behavior from continuing into the future,” said Fitzpatrick.  “If we see that again, my position is that we should create consequences that would really reduce their desire to go beyond their authority.”

The current state budget became effective July 1.

House budget committee names first target in tax credit reform: wine & grape producers tax credit

The House Budget Committee has taken the first step in what could be a longer, broader process of tax credit reform.

Representative Justin Alferman (photo; Tim Bommel, Missouri House Communications)

The committee must annually clear state agencies to authorize tax credits.  When it met this year, it recommended that issuance of the wine & grape producers tax credit not be continued.

Vice-chairman Justin Alferman (R-Hermann) described the decision as a “test run,” because some believe that when the legislature chooses to end a tax credit, it will likely be sued by someone who wants to get the involved credits.

“What does happen?  We’re going to eliminate this.  If a year goes by and we say, ‘Look, we eliminated this one and everyone respected the legislature and their choice here,’ then maybe we can start going after some of these bigger ones like low-income housing, like historic tax credits; some of the ones that are causing the biggest strain on our budget,” said Alferman.

The wine & grape producers tax credit offers a break on income taxes equal to part of the purchase price for equipment used in making wine or growing grapes.  In each of the past two years between $14,000 and $17,000 worth of the credits have been issued, and more than $14,700 was waiting to be redeemed at the end of Fiscal Year 2016.  More than $575-million was redeemed across all tax credits in Fiscal Year 2016.

Alferman, whose district includes numerous wineries, said it is an important credit to eliminate.

“It is a great example of a tax credit that has worked but has long outlived its usefulness in our state,” said Alferman.  “I believe all tax credits should have a sunset … regardless of if it’s doing good things for our state or if they are simply pork barrel spending, which I believe a lot of them are nothing more than pork barrel spending.”

Alferman said the credit was created to help build the state’s wine industry, and that’s been done.  He said now there are people using the credit but creating subpar wines that hurt the industry as a whole, or using imported juice or grapes that would not grow here yet labeling the products as Missouri wines.

He hopes after this the legislature can proceed with more reform of tax credits, which he said have “run rampant.”

“Representative [Don] Rone did a great job of going through and analyzing along with our budget staff.  We have over $1.5-billion – with a ‘B’ – of tax credits that have been issued but have not been redeemed.  Well what would happen if those all got redeemed in one year?  We get just under $10-billion of general revenue taxes in the State of Missouri every year.  If those all, for whatever reason, got redeemed in one year, that’s 10-percent of all of our state revenue for GR.  That would devastate the state,” said Alferman.

Meanwhile, Governor Eric Greitens (R) created a committee to look at the state’s tax system, including tax credits, and recommend changes.  Alferman is hopeful the legislature will be able to work toward tax credit reform along with that committee.


House Budget Chairman proud of proposed full funding of education

The House Budget Committee Chairman is proud of a budget proposal that would accomplish what’s been his top goal since taking that job.

House Budget Committee Chairman Scott Fitzpatrick (photo; Tim Bommel, Missouri House Communications)
House Budget Committee Chairman Scott Fitzpatrick (photo; Tim Bommel, Missouri House Communications)

Shell Knob Republican Scott Fitzpatrick said in August when he became the budget chairman that his number one priority was to fully fund Missouri’s public schools.  He recently unveiled budget bills that included fully funding the K-12 school formula.

If that part of the budget were to become law, it would be the first time the formula’s current form has had full funding since it was created by Senate Bill 287 in 2005.

“We’re making another year of record investment in K-12 public education,” said Fitzpatrick.  “To me that’s the single biggest thing of which I’m most proud, and the other thing is we did it without spending any more than the governor and the General Assembly agreed to spend.”

Some have noted that the full funding would come one year after the legislature reinstated a cap on how much the formula could grow, year-to-year.  Fitzpatrick said without those caps, the growth in the formula was unsustainable.

“When I got in to the General Assembly the formula was $400-million underfunded, and over the next three or four years we added about $300-million, I think, in funding to the formula, and it was still about $400-million underfunded,” said Fitzpatrick.

Fitzpatrick’s proposal would also reject Governor Eric Greitens (R) proposed cut of all funding to K-12 transportation.

“That’s an important part of what we’re doing with education is that we’re not taking money from transportation and just putting it into the formula to say we fully funded the formula.  We’re making the commitment that we’ve made in previous years to funding transportation as well as fully funding the formula,” said Fitzpatrick.

Fitzpatrick’s budget is based in part ON passage of a bill that would end a tax break for low-income seniors and disabled renters.  The money the state would save from that repeal would go to a program that provides in-home care for the elderly and disabled.

“We’ve invested every single dollar of that back into services for seniors – low-income seniors and a little bit as well for people with disabilities,” said Fitzpatrick.

Fitzpatrick believes a property tax credit should be for people who own their homes and are working to pay it off, “especially because people who are receiving nursing home services being completely paid for by Medicaid are eligible to receive the renter’s portion of the credit, so somebody could be in a nursing home that’s already being completely paid for by the state and then on top of that the state will write a check to them for what’s supposed to represent a credit for property taxes that they paid, and that seems to me to not make a lot of sense.”

The House has passed the legislation repealing that portion of the credit. It must next be considered by the Senate.

Fitzpatrick’s budget also restores some of the state aid to colleges and universities that the governor proposed reducing.  Fitzpatrick said he wanted to minimize the impact reductions would have on students in Missouri.

When legislators return next week from spring break, the full House Budget Committee will debate changes to Fitzpatrick’s proposal before sending it on to the full House, which could make further changes.  It then faces debate in the Senate before going to Governor Greitens, who could sign it into law, veto it in part or in whole, or make spending restrictions.

Bill seeks better oversight of state settlements, after harassment in Corrections Department

House lawmakers shocked by what some have called an environment of harassment and retaliation in the Department of Corrections are considering a bill they hope will let the legislature know when such situations are present.

Minority Leader Gail McCann Beatty presents House Bill 858 to the House Budget Committee. (photo; Tim Bommel, Missouri House Communications)
Minority Leader Gail McCann Beatty presents House Bill 858 to the House Budget Committee. (photo; Tim Bommel, Missouri House Communications)

An article on detailed numerous reports of employee-on-employee harassment in Corrections, including cases of retaliation against those who reported it.  Some cases resulted in lawsuits that have cost the state millions in settlements and more cases are pending.

House Minority Leader Gail McCann Beatty (D-Kansas City) has filed a House Bill 858, which would require the Attorney General to report to the General Assembly every month on activity concerning the state’s Legal Expense Fund.  That’s the fund from which the state pays all defense costs, including all settlements.

McCann Beatty and others say such reports would inform the legislature when there are problems in state agencies such as those coming to light in Corrections.

“We can’t possibly address the issue if we don’t know what’s happening,” McCann Beatty told the House Budget Committee, of which she was formerly a member.

As House Communications reported in December, lawmakers say they didn’t know about the repeated incidents of harassment in part because the Legal Expense Fund has for years had an open-ended dollar amount in it.  The line included an “E,” for “estimate,” which meant if expenses in that line exceeded what the legislature budgeted, more money could be spent on it.

That meant even though multiple lawsuits stemming from harassment cases in Corrections were being litigated and settled, the Department never had to come before the legislature and explain or justify the additional expense.

Budget makers plan to remove that “E” so that similar situations will have to be explained to the legislature in the future, but McCann Beatty’s proposal would require further accounting.

“It allows us to monitor what is going out of that fund so that we can see patterns, and see if there’s a problem,” said McCann Beatty.

Lawmakers say such oversight could reveal similar recurring problems in other state agencies.  McCann Beatty gave the Budget Committee information from the Attorney General’s Office showing the state had spent about $60-million on settlements in the past five years, though the legislature had only appropriated about $30-million for legal expenses.

In the fiscal year that began July 1, the Attorney General’s Office reports Missouri has expended more than $17-million in 24 settlements and 4 judgments.  Those settlements include 16 discrimination or retaliation claims among seven state agencies.

“I think if you look at that list you will see that these lawsuits – it is not simply the Department of Corrections, but in fact it is a statewide issue,” said McCann Beatty.  “As a legislature I think all of us want to see that climate changed.”

The budget committee is expected to vote on McCann Beatty’s bill tomorrow.