The STATE BOND ISSUE 2003
MISSOURIANS FOR TAX JUSTICE OPPOSES
USE OF STATE BONDS FOR A QUICK FIX
TO MISSOURI'S CURRENT REVENUE NEEDS
UPDATE:
On Thursday, Feb. 20, the House
passed SS #2 SCS HB 401 by a vote of 12726. The bill passed
by the Legislature allows the state to issue nearly $400 million
in revenue bonds, and use up to $150 million of the money
in the present (FY03) fiscal year. A story in the St. Louis Post-Dispatch
on 2/21/03 explains the plan this way:
". . . the state will issue revenue bonds to finance a handful of new buildings and to fund routine repairs, such as window, roof and plumbing improvements at facilities across the state. Using bonds for these already-planned projects frees up general revenue for operating expenses." The Legislature still must pass bills earmarking the bond money for certain projects and reimbursing the treasury for money already spent on those projects.
Representatives and Senators who voted
NO on HB 401 deserve your thanks.
House members voting NO: Abel, Barnitz,
Bland, Brooks, Burnett, Curls, Dempsey, El-Amin, George, Haywood,
Hoskins, Hubbard, Johnson (#61), Johnson (#90), Jones, Lowe,
McKenna, Merideth, Roark, Sager, Selby, Townley, Wagner, Walsh,
Walton, Whorton, Wilson (#25), Wilson (42)
These House members were marked "absent with leave"
for this vote: Adams, Boykins, Reinhart, Thompson, Ward. All
others voted for the bill.
Senators who voted "No" on SS # 2 for SCS for HB 401: Bland, Dougherty, Goode, Quick, Stoll, Wheeler. Sen. DePasco was absent with leave. All other senators voted for the bill.
Note: These
bonds don't solve Missouri's revenue problems. With a one billion
shortfall in revenue that's needed for Fiscal Year 2004, we must
continue to work for a tax increase that will make our state
tax system more fair.
BACKGROUND of State Bonds Issue
Missouri is short of revenue to fulfill the amounts budgeted for Fiscal Year 2003 (July 1, 2002 to June 30, 2003). Missouri is required to have a "balanced budget." Deficit spending is not allowed under our constitution.
It is reported that there is a $350 million hole in the budget, and that amount seems to be growing. Our depressed economy is blamed for the shortfall in revenue. (Consumers aren't buying, thus there is less sales tax money for the state. Employees are being laid off, therefore the amount paid in income taxes is less.)
Missouri's Governor proposed selling bonds backed by the state's future income from the national tobacco settlement. He has said if his plan isn't approved in mid-February, he will cut funding for public schools and higher education.
The Governor's proposal was to issue $480 to $490 million in bonds. Almost $100 million of the bond money would be set aside to pay interest and principal for the first 3-4 years, leaving $380 to $390 million.
It is much publicized that the bond money would be used for schools and higher education. Not as well known is that the Governor's plan is to use some of the bond money for three capital projects -- THREE BUILDINGS:
1) a life-sciences building at the University in Columbia. Construction is already underway.
2) a new Pharmacy School building at the University in Kansas City. Construction is not yet started.
3) replacement of a state health lab in Jefferson City. This has been on the list of "needs" for a long time, and it is needed, but according to knowledgeable legislators, it could wait.
Thus, the only use planned for this bond money is for buildings and education funding. No money for other needs --not even those that can be considered "life or death" human needs -- is planned.
The Governor's plan is that the bond money would be used only for filling the Fiscal Year 2003 budget gaps.
The Republican leadership in the General Assembly put forth a plan to balance the current year's budget. One plan would use the bond money for FY2003 AND for FY2004.
On February 12, the Missouri House gave initial approval (88-71) to a bill that would limit the Governor to using no more than $100 million in bonds backed by future tobacco payments to balance the current budget. (HB401)
The Senate bill would limit the Governor
to using $100 million in bonds this year and $100 million next
year. (SB 436) It was expected to be taken up for debate on February
13.
MTJ'S POSITION
Missourians for Tax Justice opposes any use of bonds to pay for current, on-going expenses.
While there is insufficient revenue to meet the FY2003 budget needs, issuing bonds secured by future tobacco settlement money is ill-advised and unsound.
These are the main reasons for this position:
1) Using bonds to plug budget holes creates long term obligations for short term gain. (It would take 37 years to pay off the $480 to $490 million in bonds proposed by Gov. Holden.)
2) Gov. Holden's bond plan includes using a big chunk of the bond money on three capital projects (3 buildings), but his budget people insist there is no way that even the $3.5 million needed to maintain the $80 month General Relief payments can be found.
The General Relief Program provides cash assistance to "the poorest of the poor" -- those in need and medically unemployable adults who do not qualify for any other assistance program. The 9,600 people receiving General Relief assistance had their check cut from $80 per month to $9.00 on February 1. The Governor has recommended the total elimination of this program beginning July 1, for FY 2004. That was also recommended by the Governor for FY 2003, but the Legislature did not allow it. The current reduction to $9.00 per month is because that is all that is left in the funding for the current fiscal year.
The General Relief Program is funded only by the state. People receiving GR are unemployed, usually disabled and have no income to meet their basic needs. Many are waiting to qualify for other disability programs.
If this cash assistance is eliminated thousands more will face increased hunger, have their utilities turned off, and become homeless.
What is happening with the General Relief Program is a conspicuous symbol of how Missouri cares for the poor.
3) To meet the general revenue shortfall,
the bond plan diverts the anticipated revenue from the tobacco
settlement from its intended purposes to reduce addiction to
tobacco and reimburse the state for the cost of medical care
resulting from tobacco use. Bonding against future tobacco revenue
turns an asset into a debt.
It should be noted that by using future tobacco settlement money
to secure the bonds, the state is getting a maximum of 40-cents
on the dollar and potentially as low as 20.3 cents on the dollar,
depending on size and term of the bond and other circumstances.
In addition, if the tobacco settlement money is not received, the state will have to pay off the bonds with general revenue funds (revenue from state taxes, fees, etc.)
4) The bond plan shifts the tax burden for today's needs to future tax payers to pay off the bonds over the next 37 years.
5) Education is an essential need and a primary responsibility of state government, but there are other absolutely essential needs that are a matter of life and death for the people who are affected. (The General Relief program, housing, health care, etc.)
6) Efforts to make Missouri's tax system more fair (and produce more revenue) will be hindered by a "borrow and spend" mentality WHICH ALLOWS ELECTED OFFICIALS TO AVOID FISCAL REALITY.
your state senator, state representative, and Governor Holden.
Last update: 3/1/03
See Missourians
for Tax Justice News Release 2/14/03