Amy Blouin, Executive Director ablouin@mobudget.org January 2018 Amy Blouin, Executive Director ablouin@mobudget.org 1

Why the State Budget & Tax Policy Matter Why does the budget matter? • K-12: 848,000 children • Higher Education: 177,921 students • Child Care: 36,351 children • Foster Care: 20,287 children • Adoption: 22,534 children • Mental Health: 170,000 adults and children who struggle with developmental disabilities, serious mental illness, substance abuse • Health Care for Seniors: 80,920 • Health Care for Missourians Living with a Disability: 157,111 • Health Care for Kids & Pregnant Women: 648,942 2

How Services are Funded Missouri’s budget is really made up of three large categories or pools of funding: State General Revenue, Federal Funding and Earmarked State Dollars: Federal funding that comes to Missouri is largely dedicated for specific programs, for instance, Medicaid dollars must be used for Medicaid. State lawmakers have little control over federal funds. Earmarked state dollars are ones that are generally constitutionally required to be used in certain ways. For instance, the gas tax is earmarked for transportation. Lawmakers have little control over earmarked funds because of their restrictions set in the constitution, except that lawmakers can increase funding for programs that also get earmarked funds. State general revenue is made up of the individual and corporate income tax and most sales tax in the state. This is the area of the budget that lawmakers generally debate during the legislative session. For the current budget year, which began on July 1st, and is Fiscal Year 2018, each of these three large pools of the budget makes up about one-third of the total state budget of $27.8 billion The State Fiscal Year runs from July 1 – June 30th 3

How Services are Funded Missouri’s budget is really made up of three large categories or pools of funding: State General Revenue, Federal Funding and Earmarked State Dollars: Federal funding that comes to Missouri is largely dedicated for specific programs, for instance, Medicaid dollars must be used for Medicaid. State lawmakers have little control over federal funds. Earmarked state dollars are ones that are generally constitutionally required to be used in certain ways. For instance, the gas tax is earmarked for transportation. Lawmakers have little control over earmarked funds because of their restrictions set in the constitution, except that lawmakers can increase funding for programs that also get earmarked funds. State general revenue is made up of the individual and corporate income tax and most sales tax in the state. This is the area of the budget that lawmakers generally debate during the legislative session. For the current budget year, which began on July 1st, and is Fiscal Year 2018, each of these three large pools of the budget makes up about one-third of the total state budget of $27.8 billion The State Fiscal Year runs from July 1 – June 30th 4

How Services are Funded 5

Missouri has reached a point where we are unable to fund the public services that provide the foundation upon which families, communities and our economy can thrive, including as education, public health & safety and transportation. Missouri’s revenue collections have not kept pace with increasing costs of services. When adjusting for inflation, the real purchasing power of general revenue remains lower than 2008. Not only have costs risen due to inflation, but the demand for services has also increased, requiring state revenue to grow at a higher rate than inflation just to maintain existing services. Not only have services been cut over the last decade, each year they compete against each other for more limited increases. Services for our grandparents are pitted against services for our children; and health care services for our neighbors living with disabilities are pitted against other financial supports that help seniors and people with disabilities remain independent in their own homes. 6

Budget is Halfway through the Process Putting Missouri on the Road to Recovery Budget is Halfway through the Process Early Ed through 12 is fully funded for now. 2. Higher Ed restored $70 million from Governor’s cut Long Term Supports and Services providers getting back about half of their cuts restored. Consumer Directed Services still restricted to 60% cost cap. Next plug holes and modernize; beginning with fixing the corporate tax apportionment hole created in 2013/2015 7

Senate will start on their Budget Process Putting Missouri on the Road to Recovery Senate will start on their Budget Process Might not accept the House changes. Education is the most vulnerable. Next plug holes and modernize; beginning with fixing the corporate tax apportionment hole created in 2013/2015 8

Big Complicated and Scary Tax Reform Putting Missouri on the Road to Recovery Big Complicated and Scary Tax Reform Fix the corporate apportionment hole created in 2013/2015 Enact Streamlined End or modify the Timely Filing Discount Create a More Equitable Tax Structure Next plug holes and modernize; beginning with fixing the corporate tax apportionment hole created in 2013/2015 9

Keeping “Up” With Kansas Unfortunately, without intervention, it’s about to get much, much worse. In 2014 Missouri’ passed the Senate Bill 509 tax cuts as an ill-fated attempt to “keep up with Kansas”. The MO cuts include many of the same provisions that the Kansas’ tax cuts included and which wreaked havoc in Kansas. But Kansas has already proven that it’s a bad idea to go down this road. In fact, since 2012 when the Kansas tax cuts were implemented, Kansas has enacted nine rounds of state budget cuts, increased the state sales tax rate, eliminated or reduced credits that help families like the home mortgage interest deduction and child and dependent care credit. Further, the state’s bond debt increased by $2 billion in the last six years, resulting in three credit rating downgrades. (SOURCE: Kansas Center for Economic Growth and Rise Up Kansas). In fact, Kansas’s tax cuts proved so devastating that in June of 2017, with strong bipartisan support, Kansas lawmakers repealed the bulk of the cuts, placing Kansas on the road to recovery. Unfortunately, Missouri is set to begin its own version of the Kansas tax cut experiment starting in 2018. Unless we take proactive steps to prevent these cuts from being implemented, we’ll soon be walking down a similar path as Kansas. 10

SB 617 and HB 2540 Putting Missouri on the Road to Recovery Senate Bill as it is creates about an $800 million dollar hole. House Bill as it is creates a $173 million dollar hole in the GR budget but is still moving and fully implemented leaves the budget in a better place. Next plug holes and modernize; beginning with fixing the corporate tax apportionment hole created in 2013/2015 11