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Special Focus: Missouri Budget Q & A

1. Where does the state get its money?

The state receives revenues from three primary sources: Missouri unrestricted taxes or general revenue, federal funds from the U.S. government, and Missouri taxes and user fees legally dedicated for specific purposes.  General revenue is especially important since it can be used for any purpose authorized by the governor and the general assembly.  This flexibility is vital to the operation of state government because it permits lawmakers to direct funds where they are needed most.  General revenue is primarily composed of individual income taxes (66%), sales taxes, (24%) and business taxes (6%).

Dedicated funds are usually restricted by a constitutional provision that permanently establishes what the money is to be used for. The biggest examples of dedicated funds are the gas taxes going to the highway fund, a 1% sales tax dedicated to funding schools, lottery and gambling proceeds for education and a 1/8 cent sales tax for the Conservation Department.

The fiscal year 2009 state budget (July to June) is composed of 38% general revenue, 29% federal funds, and 33% percent dedicated funds.

 

2. Who decides how to spend the state’s revenues?

By law, the governor delivers his or her budget recommendations to the state Legislature in January of each year.  This budget is based on a “consensus revenue estimate” for the coming fiscal year developed jointly by the Governor, the House, and the Senate.

The state House of Representatives and Senate consider the governor’s recommendations and thereafter write and pass numerous budget bills that detail spending plans for the coming fiscal year.  After any vetoes (Mo. has a line item veto), the governor signs the bills into law. These “appropriation laws” authorize the Governor to spend the funds in the next fiscal year.

 

3. How does the state spend its revenues?

Like a household budget, the Missouri budget is a spending plan for the coming fiscal year.  The many priorities and obligations of the state are reflected in the way the budget allocates funds.  The major spending categories and revenue sources for the fiscal year 2009 budget are shown in the table you can view by clicking on the link below.

 

Missouri FY 2009 Budget Detail

 

The budget totals approximately $22.4 billion.  Spending is heavily concentrated in just a few areas.  Two-thirds of planned spending goes to the Departments of Elementary and Secondary Education, Social Services, and Transportation.  Within these departments, the key programs are state aid to local public schools, support for low-income health care (primarily children and the elderly) and highway maintenance and construction.

The picture changes somewhat when only general revenue spending is considered.  In this instance, two-thirds of planned spending goes to the Departments of Elementary and Secondary Education, Social Services, and Higher Education.  The main expenditures in higher education are for state aid to pubic colleges and student financial assistance.  This distinction is important because general revenue typically grows slower, is more affected by economic downturns and is harder to predict than federal and dedicated funds.  Therefore, expenditures that are more dependent on general revenue are under greater pressure when the overall economy falters.

4. What happens when there is not enough money to fund the budget?

The state of Missouri is required by law to have a balanced budget.  Therefore, expenditures and revenues plus any surplus funds must be equal.  The state cannot engage in deficit spending like the federal government.  Neither can the state borrow money (except for a very limited ability to sell bonds).  Therefore, when revenue collections are not sufficient to meet budgeted expenditures, the state must either raise additional funds through increased taxes and/or fees or cut spending.  Spending is cut during a fiscal year through the process of “withholds” directed by the governor.

 

5. What happens when the state has extra money?

Revenue collections in excess of budget spending can be spent in the same fiscal year as authorized in the annual supplemental budget.  Alternatively, “surplus” revenues can be left unspent for use in future budgets.

 

6. How much is the State spending on Health Care this year?

 

Most often when we speak of State Health care we are talking about the Medicaid program which is included in the Department of Social Services budget. In the current fiscal year, Medicaid has been authorized a $910.8 m general revenue, $2,642.2m federal funds and $561 m in dedicated funds for a Total of $4,114 million. The Stat also provides medical care through the Department of Mental Health and the Department of Health and Senior Services.