Amy Blouin, Executive Director

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The State of the State Budget Economic
Conditions the Missouri Budget December2008

• Amy Blouin, Executive Director
• The Missouri Budget Project
• www.mobudget.org

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Where We Stand Economic Conditions

• Stock Market Indicators over the last Year
• S P 500 dropped 52
• Dow dropped 47
• NASDAQ dropped 54
• Major Financial Institutions Bailout
• GDP Expected to Decline by 4 in 4th Quarter
  2008
• Capital Gains Weaken Considerably
• Missouri Lost more than 46,000 Jobs in Compared
  to same time last year
• Missouri Unemployment Rate Grew by 30 between
  2006 and 2008 (151,921 to 196,901
  August-October averages)
• Unemployment Still Growing Nationally
  Unemployment Expected to Peak to 8 by 2010
• Increase in Long Term Unemployment and
  underemployed workers
• (US Bureau of Labor Statistics, and Moodys
  Economy)

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Economic Conditions How Bad Is It? Source
Moodys Economy
At Risk
Expansion
In Recession
Recovery
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Where We Stand Economic Conditions2001 vs. 2008

• The Median Income in Missouri was 45,924 in 2007
  approximately 5,000 lower than it was in
  2001when adjusted for inflation (2nd highest
  income decline in the nation)
• 742,000 Missourians live in poverty, up from
  659,000 in 2006, an increase of 12 percent in one
  year
• The need at the beginning of this economic crisis
  was much larger than at the beginning of the
  previous crisis in 2001
• (Poverty Income Information from the US Census
  Bureau)

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Where We Stand Compared to Last Crisis
Employment (BLS Data)
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Where We Stand Compared to Last Crisis Food
Stamps (Missouri DSS Data)
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• Where We Stand Economic Conditionsand the
  Impact on State Budgets

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• Center on Budget Policy Priorities

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• Center on Budget Policy Priorities

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• Whats Causing Missouris Budget Shortfall

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Fiscal Outlook Structural DeficitDoes MO Spend
too Much?

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Fiscal Outlook Structural DeficitDoes MO Spend
too Much?

• Missouris general revenue spending today is just
  slightly above what it was in FY 1999, when
  adjusted for inflation.
• Overall, the state general revenue spending
  increased on average by roughly 1 percent per
  year after inflation.
• General Revenue as a Percent of State Personal
  Income 3.7 in 1985 to 3.6 in 2006

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Comparing Missouri with Other States

• 44th Lowest for State Spending Per Capita
• 46th Lowest for State and Local Spending Per
  Capita
• 44th Lowest K-12 Spending Per Capita
• 46th Lowest Nationally for Per Capita spending on
  Higher Education
• One of the lowest eligibility levels for Health
  Care assistance for parents
• Statistics from Morgan Quitno State Rankings

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Fiscal Outlook Structural DeficitEroding
Revenue Base

• Policy changes in recent years has resulted in
  declining revenue
• State Tax Cuts 2007 2008 Sessions 260 million
  per year
• Earmarking Revenues for specific needs
• Tax Credits Redemption Doubled in the last decade
  (182 million in 1999 to 500 million in 2008)
• TOTAL revenue lost from Base 5 Percent per
  year
• Outdated Revenue Structure Lost Sales Tax Due to
  Internet Purchasing

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Fiscal Outlook Structural DeficitInflationary
Demands of Services

• Overall Inflation to maintain current services
  (including health care) 155 million
• Foundation Formula K-12 126 million
• Higher Education 50 million
• Capital Improvements 95 million
• TOTAL Inflationary Need 5 Percent per year

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Economy Creates Additional ConcernsMissouri FY
2009 Revenue (First Quarter Totals- Missouri
Office of Administration)

• Overall General Revenue Collections have dropped
  by 1 percent in the first four months of FY 2009
• Individual Income Tax Collections grew by 2.1
  percent in FY 2009 First Quarter, but declined in
  September by 2.6 percent
• Sales and Use Taxes declined the past two
  quarters in a row, and 3.3 percent in FY 2009 to
  date
• Corporate Income Franchise Tax declined by 12.6
  percent in the first quarter of FY 2009.

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Fiscal Outlook Projections

• Based on current economic trends, the MBP
  estimates that State General Revenue could be
  short by 200 million in the current year (FY
  2009)
• And face a nearly 900 million shortfall in FY
  2010

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Does the Shortfall Matter?

• Investment in Services Decrease at a time when
  need has increased
• Falling Further Behind Other States Less
  Competitive
• Less investment in our families, our communities
  and our economy

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Where We Stand Moodys Economy Bank for the
Buck
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Structural Deficit Opportunities

• Short Term Federal Fiscal Relief - 2nd Economic
  Stimulus
• Direct Grants to States, similar to 2001 crisis
• Enhance Federal Medicaid Matching Rate, similar
  to 2001 crisis. Could bring 370 million in new
  revenue to Missouri over the next year.
• Extend Unemployment Benefits, Enhance Food Stamps
  and other supports

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Structural Deficit Opportunities

• Long Term
• Work together to build a Missouri that supports
  prosperity for families, healthy communities and
  a productive economy Educate, Educate, Educate
  Investments
• Evaluate Long-Term Sustainability of Revenue
  Sources Modernize Missouris tax structure to
  fit the new economy