Missouri Legislative Update April 24, 2020

SLAA News,

The Missouri General Assembly is on the cusp of returning to Jefferson City to complete the Fiscal Year 2021 budget, and also to work on some substantive legislation.  The full extent of the plan for the remaining three weeks of the 2020 legislative session is not yet known.

Guidance on some federal funding for COVID-19 came in a limited form late this week. The question on many minds in the Capitol is how long will the current recession last, when will businesses get back to normal, when will economic activity start creating needed tax dollars for government services?

Things in Missouri seem to have turned a corner, but so many unanswered questions remain.

Governor Parson Is Hopeful

Governor Parson has indicated his intent to begin returning Missouri to normal operations when his social distancing order expires on May 3, 2020 and guidelines for reopening are forthcoming.  The details of what that means, and what activity is allowable, are not yet clear.  A few counties have opened up, but on Wednesday Governor Parson pointed out that those counties must still abide by his order. 

Rally For Re-Opening Missouri

There was a rally of several hundred people wanting to “open Missouri” on Tuesday, April 21, at the State Capitol.  When asked about the rally, Governor Parson noted that citizens have the right to demonstrate at the Capitol, so long as they abide by the laws and orders in effect.

Governor Parson Announces Additional Withholds

On Monday, April 20, 2020, Governor Parson announced an additional $47 million in Fiscal Year 2020 withholdings.  These withholding are a probable harbinger of more future budget actions by Governor Parson due to the economic downturn.

The link to the Governor’s withholdings  click here.

The withholding announcements are the start of the budget reduction process that will very likely continue as the Fiscal Year 2021 budget is passed by the Missouri General Assembly.

The House rules normally do not allow for floor substitute bills.  In normal times the only action that can occur on House bills on the floor is to offer amendments, which with the massive changes to the budget that will occur would be very cumbersome.  Thus, it is likely the House will suspend that rule for the budget process, and that House Budget Chairman Cody Smith will offer House floor substitute bills.

At this time, it sounds like the new House Substitute bills for all of the House Committee Substitutes for the 13 operating budget bills will be distributed by Friday of this week.   The distribution of the bills will then allow the Substitutes to be offered next week as the House takes up the FY 2021 budget.

The number that has most consistently been discussed with respect to FY 2021 budget reductions that will be contemplated in the floor substitute bills from the previous House Budget Committee-passed bills is $700 million.  No exact word yet if there will be some type of fund created to backfill those reductions in either chamber to account for available federal funds.

Federal Funds Steering Committee

There has been no formal announcement of the informal committee of advisors that State Treasurer Scott Fitzpatrick is leading.

In addition to Fitzpatrick, the group is said to include State Budget Director Dan Haug, Senate Appropriations Committee Vice-Chairman Lincoln Hough, House Budget Committee Vice-Chairman David Wood, Rich Germinder, the DNR Legislative Director, Missouri Public Service Commission Chairman Ryan Silvey, Dan Burgess (legislative director for Senator Roy Blunt), Democrat State Senator Karla May and Democrat Representative Kip Kendrick.

During one of his press briefings this week, Governor Parson indicated that this work group will conduct public meetings and also clarified that their task will be to receive and provide guidance to the public on the federal funds that the State will receive.

The Federal Guidance

This Fitzpatrick-led committee will now be able to do some work, as a short memo outlining the federal guidance for the Coronavirus Relief Fund was received on Thursday, April 23, 2020.  As a short summary, here are the highlights of the federal guidance:           

Cannot be utilized for a revenue shortfall due to COVID-19;

Must be utilized for direct COVID-19 expenses incurred after March 1, 2020 and through December 30, 2020;

Cannot be utilized for expenses that were appropriated by the governmental entity in their last regular budget;

May be used for payroll expenses for public safety, public health, health care, human services and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency.

If there is any significant relief for the revenue shortfall created by the COVID-19 outbreak, it would likely be by backfilling expenses out of General Revenue relating to the last bullet point, and then shifting those expenditures to the federal funds.  It is not known whether this activity will allow the bulk of the federal funds to provide state budget shortfall relief.

 The April 2020 Revenue Downturn

This downturn brings year to date revenues through April 22, 2020, to -0.34%.  This revenue picture means that year to date revenues are slightly negative through April 22, but significantly negative for April 2020.  At the end of March 2020, year to date general revenue growth was +5.8%, and thus the drop in month to date collections in April has been significant. April revenues are down 43.81% (or $399 million) through April 22, 2020.

Going back to 2018, the Missouri Department of Revenue made significant errors in the individual income tax withholding tables, which suppressed revenue growth in the first nine months of Fiscal Year 2019. Then, during April 2019, and in particular the latter days of April 2019, total general revenue collection for April 2019 grew by over half a billion dollars.  Part of the downturn in April 2020 revenues is due to correcting the erroneous 2018 withholding tables, which increased withholding payments in 2019 and reduced final payments in April 2020.