Tax Revenue Shortfalls Could Mean More Cuts for MU

Jun 29, 2017

It appears the bleeding hasn't stopped.

Credit KBIA

Just as the UM System Board of Curators passed its budget for fiscal 2018, tax revenue shortfalls could set the stage for more cuts in higher education funding across Missouri.

Rep. Scott Fitzpatrick, R-Shell Knob, said on Wednesday that state revenue growth was below 2 percent instead of the projected 3 percent for fiscal year 2017. That means Missouri is facing a $150 million shortfall heading into fiscal year 2018, which begins Saturday.

"Part of it is probably related to some people holding off on realizing income with the hope that the Congress will lower taxes given the new administration," Fitzpatrick said.

Rep. Kip Kendrick, D-Columbia, said the shortfalls have more to do with special interest tax cuts. Corporate tax collections have fallen in Missouri, which Kendrick attributed to Senate Bill 19, according to previous Missourian reporting.

Gov. Eric Greitens also said in his fiscal year 2018 budget summary that "revenue is being drained by special interest tax credits," but he also blamed the Affordable Care Act for creating "faster-than-projected growth in health care expenditures" for the state's budget crunch.

"(The tax cuts) significantly impacted our ability to fund our priorities and to balance the budget," Kendrick said.

The shortfalls could mean more withholdings than initially expected.

Fitzpatrick said overall Missouri legislature withholdings could range from $250 million to $300 million. Those withholdings would come on top of the $450 million withheld from the overall fiscal year 2017 budget.

The reason why the withholdings are greater than the shortfall, Kendrick said, "is mostly in preparation for slower revenue growth." 

Greitens faces a Friday deadline for signing the spending bills that formulate the fiscal year 2018 budget.

Current withholdings in higher education funding are over $200 million. Former Gov. Jay Nixon withheld $200 million before leaving office, and Greitens pulled another $80 million in January.

In his original budget proposal, Greitens suggested cutting higher education funding by 10 percent. Legislators reduced the cuts to 6.5 percent, but Kendrick said Greitens could be getting closer to what he wanted with the shortfalls.

"At this point," Kendrick said, "we're cutting priorities."

The UM System and the MU campus could very well face even more cuts for fiscal year 2018.

"It's not great news for the University of Missouri," Fitzpatrick said. "The revenue shortfall is not great news for any entity who relies on state appropriations. The university is one of those institutions."

The news couldn't come at a worse time for MU, which has been forced to cut more than 400 positions and eliminate various programs in the midst of state cuts from fiscal year 2017. The UM System recently passed its budget for fiscal year 2018, which included 12 percent cuts, mostly across the board. 

"Those cuts that we have already done have put us in a very difficult position," Christian Basi of the MU News Bureau said, adding that he couldn't speculate on what further cuts would mean for MU.

"We made some very difficult and hard choices this past fiscal year, and we are really working very hard to make some strategic investments for the future of the university."

Change, Kendrick said, will be necessary to get revenue growth back on track. In Greitens' budget for fiscal year 2018, revenue was projected to grow by 3.8 percent. Kendrick said he doesn't see that happening.

"The General Assembly needs to take a long hard look at repealing some of the special interest tax cuts that have been given out over the last several years," Kendrick said. He said he also wants to explore how the state can create equity in sales tax collections from physical and online retailers. As it stands, online merchants collect no state sales tax unless they have brick-and-mortar operations in Missouri.

Missouri's budget problems won't just go away: Cuts have been made over and over again throughout the past decade, Kendrick said, and the state has yet to find a solution to its budget woes.

"I don't think the budget's going to be any easier to fix in the coming year," Kendrick said.