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Voters will decide on several tax issues on the November ballot. MBP’s positions are as follows. More information on each issue is below.

MBP supports:

Amendment 1 – Parks, Soil, & Water Sales Tax

Amendment 3 – Cigarette Tax Increase for Early Education & Health

MBP Opposes:

Amendment 4 – Prohibits Expansion of Sales Tax

Proposition A – Sales Tax for Transportation

Amendment 1: Parks, Soil and Water Sales Tax

MBP Position: Support

Amendment 1 would renew Missouri’s dedicated sales tax for parks, soil and water. The sales tax of 1/10^th of 1 percent was originally established in 1984, and is subject to voter approval for renewal every 10 years under this amendment. Funding from the tax currently generates about $90 million per year in dedicated revenue, with 50 percent of the funding dedicated to state parks and historic sites, and 50 percent of the funding dedicated to soil and water conservation efforts.

This translates into funding to provide the following public benefits:

• Maintains Missouri’s 88 state parks and historic sites, keeping the parks free and open to the public;
• Prevents of soil erosion, protecting farmland and waterways; and
• Ensures clean water and water supplies.

The Amendment is supported by a number of organizations and individuals, including the Conservation Federation of Missouri, Great Rivers Greenway, Greenbelt Land Trust of Mid-Missouri, Missouri Association of Soil & Water, Conservation Districts, Missouri Bird Conservation Initiative, Missouri Coalition for the Environment, Missouri Corn Growers Association, Missouri Farm Bureau, Missouri Parks Association, Missouri Prairie Foundation, Missouri Soybean Association, Missouri State Parks Foundation, The Nature Conservancy, Ozark Regional Land Trust, The Sierra Club, Missouri Chapter

You can learn more at https://soilwaterparks.com

Amendment 3: Cigarette Tax Increase for Early Education & Health

MBP Position: Support

Amendment 3, sponsored by Raise Your Hand for Kids, will appear on the ballot this November. When fully implemented, the measure would provide $300 million annually in new, dedicated funding for investments in early childhood health and education, as well as smoking-cessation programs for pregnant mothers and youth. The funding comes through an incremental increase in Missouri’s cigarette tax of 60 cents. Missouri’s cigarette tax is currently the lowest in the nation. At 17 cents per pack, it is well below the national average of $1.65 per pack, and falls behind all of Missouri’s neighbors. In fact, even after the 60 cent increase, Missouri’s cigarette tax would still fall below most of our neighbors (with the exception of Kentucky, Nebraska and Tennessee).

Funding raised by the cigarette tax increase will be dedicated to a new fund that distributes the money for the following:

• Between 75 and 85 percent of the funds will go to improving early childhood education, from preschool to parent and family support and education.
• 10 to 15 percent will help hospitals and other health care facilities improve access to quality early childhood health and development programs such as preventative health care, obesity prevention and infant mortality prevention.
• 5 to 10 percent will support smoking cessation and prevention programs for pregnant mothers and youth.

This translates into the following public benefits:

• Increasing access to and improving the quality of preschools in Missouri;
• Home visitation programs like Parents as Teachers;
• Professional development for early childhood education providers;
• Health and developmental screenings and preventative health care for children ages birth through 5; and
• Smoking cessation and prevention programs for pregnant mothers and teens.

Research shows investments in early childhood education lower high school dropout rates, reduce crime, cut the cost of social services, and improve the health and education of children, which results in significant savings for taxpayers.

You can learn more at RaiseYourHandForKids.org, where you can sign up to receive updates on the initiative. You can also follow the campaign on Facebook at https://www.facebook.com/raiseyourhandforkids/ and on Twitter at https://twitter.com/RYH4KMO

Amendment 4: Prohibits Expansion of Sales Tax

MBP Position: Oppose

Amendment 4 would create a constitutional amendment prohibiting any new state or local sales or use tax on any service or transaction that was not subject to tax as of January 2015. The Missouri Budget Project opposes this amendment because of the many unintended consequences that would result from creating a constitutional limit on Missouri’s sales tax, including the following:

1. Missouri’s sales tax law would never be able to adjust to the changing economy. For example, Missourians used to access music by purchasing records at the local record store. Record, CDs and tapes are all subject to sales tax. But, with the development of digital music, more and more Missourians are accessing their music as downloads, and rarely purchase records anymore. These downloads are not currently subject to sales tax, and the amendment would prohibit the sales tax from ever applying to downloads simply because they aren’t currently subject to tax. The same is true for videos, computer software, and other technological advancements that we aren’t even aware of yet.

2. Amendment 4 would compromise Missouri’s ability to invest in education, health, public safety, transportation and other critical public services. Because the measure is a constitutional restriction, over time, as Missouri’s economy continues to change, this amendment will likely result in a significant erosion of the sales tax base, and compromise Missouri’s ability to invest in public services, like quality schools and safe neighborhoods. The sales tax supports over 22 percent of Missouri’s state general revenue budget in the current year. The amendment would destabilize this key component of Missouri’s ability to fund public services, and is likely to result in either budget cuts or require large increases in the sales tax rate to make up for the limited base.

3. Amendment 4 would also undermine funding for State Parks, Soil and Water, and Conservation. It’s somewhat ironic that Amendment 4 is on the same ballot as Amendment 1, the renewal of Missouri’s dedicated sales taxes for the maintenance of state parks, soil and water. In the same way that Amendment 4 would undermine Missouri’s general revenue sales tax, it would also undermine the sales tax base for dedicated funding streams including funding for our parks, soil and water as provided in Amendment 1, as well as Missouri’s separate conservation sales tax of that was approved by voters in 1976.

4. Amendment 4 will likely result in local property tax increases. Municipalities throughout the state rely on the local sales tax to fund their services. If this funding source is eroded, municipalities may be forced to turn to increases in property taxes to make up the difference.

5. Amendment 4 makes a phony promise. Backers of the amendment claim they are protecting Missourians from threats to extend sales taxes to services that Missourians use every day, like child care, rent, health care and funerals. But, there are no current efforts in Missouri to tax these or other services in Missouri. In fact, real estate transactions are already prohibited from sales tax due to a 2010 ballot measure promoted by the Realtors Association. More significantly, because of existing constitutional requirements, any proposals to extend sales tax to services in Missouri would require a vote of the people.

Proposition A: Cigarette Tax for Transportation

MBP Position: Oppose

Proposition A would increase Missouri’s cigarette tax by 23 cents and dedicate the funding to transportation. Rather than a constitutional amendment, Proposition A would create a change in statute. The Missouri Budget Project opposes the proposition because it contains troublesome, deceptive language that weakens the long-term stability of this revenue source.

Proposition A contains a “poison pill” that is likely unconstitutional. The language described below means that this tax could disappear at any time if another tobacco tax measure is placed on any ballot at any time. Even if it doesn’t pass, just the action of placing a tobacco tax on a local or statewide ballot would automatically require the repeal of the tax increase created by Proposition A. This deceives voters and weakens other opportunities to secure a stable source of revenue for transportation.

The proposition would generate about $95 million per year in new revenue for transportation infrastructure. Though funding is definitely needed for transportation, the amount provided by the proposal pales in comparison to the actual need. In 2009, MODOT had a capital program budget of $1.4 billion. The amount was projected to drop to $325 million by 2016, well below the level needed to maintain Missouri’s roads and bridges. Because of this decline, early in 2016 the Missouri Highways and Transportation Commission approved a plan to spend down its road fund reserve balance, bringing the capital budget to about $800 million annually over the next five years.

The addition of $95 million in revenue annually for MODOT would be helpful. However, adequate funding for MODOT was not the intent of the proposition’s proponents. Instead, the measure is intended to serve as a decoy to drive voters away from supporting Amendment 3.

The “poison pill” language included in the Proposition follows:

“The additional taxes levied in subsections 1 and 2 of this section shall immediately, automatically and permanently be repealed and reduced to zero under any of the following events:

(1) In the event any tax or fee increase on some or all cigarettes or other tobacco products is officially certified to be placed on any local or statewide ballot by the Secretary of State or any other election official at any time; or

(2) In the event any provision of subsections 1 through 9 of this section is ruled null and void, invalid, unlawful, severable or unconstitutional for any reason by any state or federal court of law.”

Statement from Amy Blouin, Missouri Budget Project Executive Director

More than one in five Missouri kids are growing up in families that can’t afford the basics necessary for a good start to life because they make so little. Although poverty slightly declined since the previous year, more Missourians are struggling than before the recession. The still high number of people struggling economically is holding back our state’s economy and hampering our kids’ futures.

According to recently released Census data, tax credits for working families – such as the Earned Income Tax Credit (EITC) – prevented 9.2 million people, including 4.8 million children, from falling into poverty in the United States. In fact, refundable tax credits (such as the EITC) had the second largest impact on lifting families out of poverty of any of the safety net programs– second only to Social Security in its effectiveness.

Fortunately, in 2017 Missouri legislators can build on this track record of success nationally by passing a state Earned Income Tax Credit. A state EITC would open the doors of opportunity for more than 500,000 Missouri families.  In addition, a state EITC that furthers the success of the national credit would boost local economies, encourage work, and improve the lives of Missouri’s children and future workforce.

Mirroring national trends, U.S. Census Bureau Estimates released today show that median income in Missouri has increased and poverty has declined since 2014. However, more than one in ten families – over 875,000 Missourians, including more than one in five children – still struggle to meet their basic needs in our state. Despite recent gains, rates of poverty remain significantly higher than before the recession. The rate of poverty among Missourians is currently 14.8%, compared to 11.2% in 2000.

Last year, a proposal to pass a state Earned Income Tax credit overwhelming passed the Missouri House, but was never voted on in the state Senate.  With so many Missourians still struggling to make ends meet, now is the time to enact a Missouri Earned Income Tax Credit and help families get on the road to stability.

Statement from Amy Blouin, Missouri Budget Project Executive Director

New census data indicate that hundreds of thousands of Missourians still can’t get the health care they need to be healthy, productive members of their communities. About one in every ten, or 583,000 Missourians, was uninsured at the time of the American Community Survey – a number that would have been significantly reduced had Missouri expanded Medicaid as provided through the Affordable Care Act. Our state can still expand Medicaid in the next legislative session and benefit from the many ways Medicaid makes people’s lives better while saving the state money and boosting the economy.

While Missouri’s uninsured rate has declined along with the rest of the nation, the uninsured rate is significantly higher in states that have not expanded Medicaid (12.3%), as compared to states that did (7.2%). In addition, for those living in poverty or near the poverty level, the rate of decline in the number of uninsured was significantly lower in non-Expansion states as compared to Expansion states.

Notably, while Missouri historically has had an uninsured rate consistently below the national average, by failing to expand Medicaid, it is now above the national average. Missourians are struggling, and our state is losing out.

Medicaid expansion would reduce uncompensated care, save state tax dollars, and create jobs. And hundreds of thousands of Missourians could access the health care they need to work, take care of their kids, and lead healthy, happy lives.

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The Missouri Study Commission on State Tax Policy will be holding several public hearings over the next five months, including one Wednesday in Springfield.

The Commission is undertaking a comprehensive review of Missouri’s tax structure and identifying potential improvements. MBP’s Executive Director, Amy Blouin, serves on the Commission with state lawmakers and other citizens.

The public hearings offer an opportunity for individuals to share their insight regarding Missouri’s tax policies. If you are interested in testifying, please consider attending and testifying at one of the following upcoming meetings:

Wednesday, August 17, 2016 – 1:00 p.m.

Springfield Chamber of Commerce – Bill Foster Room
202 S. John Q Hammons Parkway
Springfield, MO 65806

October 19 – 1:00 p.m.

Wainwright State Office Building
111 N 7th St.
St. Louis, MO 63101
Wainwright State Office Building Gallery

** Work groups will meet from 10 a.m. to noon in the Gallery and room 116. Full commission and public testimony starts at 1:00 p.m. in the Gallery.

November 15 – Kansas City – exact location and time TBD

A stunning state revenue collapse in the final days of the last fiscal year (FY2016, which ended on June 30^th) may continue to hamper Missouri’s ability to meet the educational, health, and other needs of Missourians.

Decreased revenue in the month of June prompted the Governor to restrict state spending for critical services including for early education, schools, programs for Missourians with disabilities and more.[1]

In addition, the poor growth postponed income tax cuts that were scheduled to begin phasing in during 2017. However, those cuts still loom over the horizon for 2018 and would cost the state revenue that could be used for schools, transportation, and other investments in a strong economy.

Moreover, additional budget shortfalls may again jeopardize services for Missourians this year, and create strains for next year. Pending tax cuts would aggravate the situation further.

• Because of the FY 2016 general revenue shortfall, revenue needs to grow about 6.5 percent in the new budget year in order to fully fund the FY 2017 state budget approved by lawmakers. The amount of needed growth is far above the budgeted projection of 4.1 percent.
• If state revenue grows at the lower, projected rate of 4.1 percent, Missouri will face a $216 million budget shortfall for the current fiscal year.
• Should the legislature choose to override the Governor’s vetoes of further tax reductions passed in the 2016 legislative session, the budget will be further strained.

Relative to the Economy, FY 2016 GR Collections Among Lowest in 35 Years

GR as % of Personal Income, Fiscal Years 1981-2016

Moreover, due to the drop in state revenue, Missouri ended the last budget year with general revenue tax collections among the lowest in 35 years, as a percent of personal income in the state – one measure of the economy.

Late FY 2016 Revenue Collapse 

Until late June of this year, Missouri’s revenue had been on track to meet the original projection of 2.8 percent growth for FY 2016. However, general revenue collections plummeted during the final ten days of June, resulting in just 0.9 percent growth compared to the previous year, well below the budgeted amount.[2]

During the last ten days of June, revenue collections were 50 percent lower than the same period in the previous year. Further, revenue for the entire month of June declined by 23 percent compared to the previous year. While revenue collections can fluctuate considerably over brief time periods, the drop was largely unexpected, and left the state about $169 million short of the amount that was projected and on which the budget was based. Governor Nixon responded to the decline in revenue by announcing $115.5 million in budget restrictions/withholding for FY 2017 on July 6^th.

Further, the late June revenue collapse also left the state with a much smaller beginning balance of about $153 million at the start of the new budget year on July 1. Relative to the size of the budget, this is an extremely low amount.

The New Budget Outlook: Shortfalls Lurking

As a result of the FY 2016 general revenue shortfall, state revenue needs to grow about 6.5 percent in the new budget year, FY 2017, in order to fully fund the state budget that was approved by lawmakers. The amount of needed growth is far above the budgeted projection of 4.1 percent.

Assuming that revenue grows at the lower, original estimate, Missouri could face a $216 million shortfall for the new fiscal year. This shortfall would be worsened should the General Assembly choose to override any of the Governor’s vetoes of several tax cut bills that were passed during the 2016 legislative session.

Moreover, as income tax cuts that were approved in 2014 take effect, Missouri’s ability to fund education and other services Missourians rely on will be further impaired in fiscal year 2018.

Missouri Will Likely Face Significant Revenue Shortfalls in FY 2017 & FY 2018

General Revenue Summary FY 2013 – FY 2018, Amounts in Millions

[1] Office of Administration, Division of Budget & Planning http://oa.mo.gov/commissioners-office/news/state-releases-june-2016-general-revenue-report

[2] Expenditure restrictions made by the Governor can be seen here: http://oa.mo.gov/sites/default/files/FY_2017_Expenditure_Restrictions_07_06_16.pdf

Missouri’s annual operating budget is more than a set of numbers. In its funding for education, health care, and other services that serve as a foundation for Missouri families and our economy to thrive, the budget reflects the priorities of our state.

Although lawmakers increased appropriations in many areas, our state continues to pass by opportunities to invest in the tools that strengthen our state.

• Missouri increased its funding for K-12 education in next year’s budget. However, in response to ongoing shortfalls in K-12 education funding, lawmakers re-instituted a cap in the state’s education funding formula. The amount of state funding required for education under the cap will be more than $1,000 per student lower than what was required per student a decade ago, when adjusted for inflation.

• Despite increased funding for higher education, the amount of state funding per full-time four year college student is lower than it was in 2007, in nominal terms (not adjusted for inflation).

• Increased child care reimbursement rates put Missouri on a path to strengthen access to quality care and make child care more affordable for 20,000 low-income families throughout the state.

• A healthy Missouri is a fundamental building block of a prosperous economy and a good quality of life. While lawmakers made strides to improve access to behavioral health services, the legislature failed to close the health care coverage gap, bypassing an opportunity to build a stronger, healthier, and more fiscally responsible Missouri.

Click here to access the full report

Click here for the Appendix comparing FY 2016 and FY 2017 funding

With your help, we’ve made big strides this year on two of our top legislative priorities to help Missourians makes ends meet and build a stronger Missouri.

Alleviating Poverty & Providing a Pathway to the Middle Class: The Earned Income Tax Credit (EITC)

A state level EITC would give hundreds of thousands of hardworking Missouri families a much-needed boost to their income, helping them to make ends meet and build toward the middle class, while also stimulating local economies.

House Bill 1605 (sponsored by Representative Kelley) and Senate Bill 1018 (sponsored by Senator Schmitt) would have created a Missouri EITC, building on the benefits of the federal credit by providing a modest state tax credit to families with modest incomes. EITCs help families meet basic needs in the short-term, and increase educational attainment and health outcomes for families in the long run.

Support for a Missouri EITC grew considerably this year, with your help. An array of business and civic leaders joined with us in moving the issue, raising lawmaker awareness of the many benefits of a state EITC. As a result, the issue has attained strong, bipartisan support, and the bills advanced farther than ever before. The House approved House Bill 1605 by a vote of 115-35, a huge margin! Though the bills did not cross the finish line this year, the significant advancement of the issue coupled with diverse and growing public support, gives us lots of momentum for the next legislative session.

Investing in Missouri with Streamlined:

A proposal that would allow Missouri to begin to automatically collect sales tax that is due for retail purchases made through online stores was approved by the Senate Ways & Means Committee this year. This marks the first time that the issue has received a nod from a Senate Committee.

Senate Bill 795 (sponsored by Senator Wallingford) would close an existing loophole in Missouri’s tax code. Upon the passage of both the state and companion federal measure, Missouri would realize as much as $358 million per year in currently uncollected state and local sales tax. As a result, not only would the bill level the playing field for Missouri’s bricks and mortar retailers and their online competitors, it would allow the state to capture revenue that can be used to strengthen local schools, increase access to child care assistance, and invest in the health and mental health services that help families succeed.

The growing, bipartisan support for this measure also sets the stage nicely for the next legislative session.

Help us Keep the Momentum Going!

We’re not stopping here. To build on the support gained this year, we’ll be conducting outreach to generate even more supporters over the summer and fall. And we need your help to be successful!

Do you know a community organization, business or coalition that would add their support for these issues? Please share the following links with them so that they can join our efforts:

Streamlined Endorsement: www.mobudget.org/sst-endorsement/

EITC Endorsement: www.mobudget.org/eitc-endorsement/

MBP is always happy to provide presentations at community groups or meetings on these (and other) issues. Click here to request a presentation.

Finally, please consider a financial contribution to the Missouri Budget Project. Your support will help us to keep sustain our outreach on these and other critical policy issues this summer and fall. Click here to make a donation, or mail a contribution to:

One Campbell Plaza

Suite 101, Building A, Center Entrance

St. Louis, MO 63139

As of April 27th, General Revenue (GR) collections, (net of refunds) for the month of April had declined by about $219 million or by 18.3 percent, compared to April 27^th of last year. This results in a net GR growth rate of 0.4 percent for FY 2016 overall. This growth rate is well below the 2.8 percent growth called for the latest Executive Budget.

While this may be a cause for concern, several factors may explain the decline:

1. The decline is concentrated in the Individual Income as well as the Corporate Income tax. Sales and Use tax has grown a respectable 4.6 percent for the month thus far.
2. The tax filing deadline was April 18^th as opposed to April 15^th in 2015.
3. April of 2016 has 21 working days versus 22 working days in April of last year.

In a “normal” month, the above factors would have a substantial impact on intra-month revenue comparisons. The second half of April, however, is characterized by high volume revenue collections dates as final Individual and Corporate Income tax returns are delivered to and processed by the Department of Revenue. It is likely that over the next week or so, the administrative factors mentioned above will diminish in importance and that net GR collections will improve markedly. Nonetheless, the overall revenue situation should continue the subject of close scrutiny.

Check out MBP’s newsletter to see what we’re working on.

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