Missouri Legislative Update April 17, 2020

Missouri Legislative Update

April 17, 2020

Leadership in the Missouri General Assembly this week announced plans for a return to the Capitol on April 27, 2020.  In the everchanging world of COVID-19 and social distancing, it will be interesting to see how this plan comes together.  There are political ramifications, and also the challenge of protecting public health while getting the legislative work done.

 Governor Parson announced a new structure to coordinate the receipt of the massive federal packages for state and local governments, led by State Treasurer Scott Fitzpatrick.  Look for some further guidance from Governor Parson.  Treasurer Fitzpatrick announced on social media that the first large installment from the Coronavirus Relief Fund was received this week. 

Stay At Home Order Extended

Governor Parson announced on Thursday, April 16 that he was extending the “stay at home” order due to the coronavirus for Missouri to May 3, 2020.  He also announced that the state would begin the process of re-opening business in Missouri. Below is a link to Governor Parson’s press release: https://governor.mo.gov/press-releases/archive/governor-parson-extends-statewide-stay-home-missouri-order-through-may-3. 

FY 2020 Budget Plans and Special Session 

While legislative leaders on Monday of this week indicated that they would return on April 27, 2020 to resume the legislative session, some of the talk suggested they might opt to take up substantive bills for the remaining three weeks and possibly delay the Fiscal Year 2021 budget to a special session.  Upon further review, leadership in the two chambers indicated in a joint statement on Wednesday of this week that they will be returning April 27 and will primarily focus on the Fiscal Year 2021 budget.  There may be additional concurrent work on legislative issues by both bodies but at this time no one is quite sure what that will look like. 

There are some capitol observers who would suggest there could be at least one special session called after the completion of the regular session on May 15, 2020, but at this time this thought is just speculation. The plan and content for a special session at this point is uncertain, but the disruption of the 2020 legislative session may likely leave many important issues hanging. 

The plan to complete the FY 2021 budget by May 8, 2020 also creates uncertainty for how the State will budget any enhanced future federal COVID-19 funds, which will be needed by all states to fill the fiscal holes that will appear.  Whether before June 30, 2020, or after Fiscal Year 2021 begins on July 1, 2020, it appears that further budget work may be necessary to deal with the evolving fiscal issues precipitated by COVID-19. 

April 2020 Revenues Mid-Month

State revenue watchers know that collections will be bad for April 2020 and the ensuing months.  The cause is the economic downturn from the COVID-19 outbreak.  The question is how much will the Fiscal Year 2020 revenues suffer? 

Fluctuations in the calendar each year make comparing the daily revenue sheets from the Missouri Department of Revenue a difficult task, so it is important to be reminded that it isn’t a good idea to be making judgments on revenues based upon these daily sheets.  The other side of the coin is that people want information about how revenues are coming in. 

With those caveats in mind, here are the April 2020 general revenue collections through April 15, 2020.  Sales and use taxes are -13.75%.  Individual income tax collections are -28.07%.  Corporate income tax collections are -40.94% 

Revenue collections for the remainder of Fiscal Year 2020 will be negative for the remainder of Fiscal Year 2020 and into Fiscal Year 2021.  At this point, we do not know how deep this fiscal shortfall will ultimately be, and whether increased federal funding will be adequate to help fill that fiscal hole. There is great uncertainty at this time. 

Parson Taps Fitzpatrick To Coordinate Federal Aid

Governor Parson has announced that State Treasurer Scott Fitzpatrick will lead the administration’s efforts on the identification, coordination, and rules compliance for the federal dollars for COVID-19, and state and local revenue shortfall relief. 

Fitzpatrick is uniquely qualified for this role, as he is the former House Budget Committee Chairman, and has strong relationships with the key elected officials and staff in the revenue and budget picture. 

The federal dollars are a hodge-podge of direct payments to entities (hospitals who are facing declining revenues due to termination of elective procedures), and direct funding to states, such as the enhanced Medicaid matching funds. 

In a Senate Appropriations hearing last week, State Budget Director Dan Haug noted that the federal government was to issue guidance this week on the initial round of $2.38 billion for state and local government COVID-19 relief. 

It is likely that there will be more federal packages forthcoming, which makes the coordination role even more important. Fitzpatrick will work closely with Budget Director Haug and his Budget Office staff, as well as with Governor Parson’s immediate staff.  Governor Parson and Fitzpatrick will likely announce a seven-member steering committee for this work, but no names have been officially announced yet. 

Coronavirus Relief Federal Funding Begins To Arrive But Guidance Still Needed

This week, Missouri state officials were able to initiate a simple application to the federal government for the COVID-19 direct funding for state and local governments, and that 50% of the state allocation of $2.38 billion in the Coronavirus Relief Fund were to be received this week, in fact Treasurer Scott Fitzpatrick took to social media to announce that he had received approximately $1.1 billion of their initial payment.  At this time, it sounds like the remainder of the $2.38 billion is anticipated to be received by April 24, 2020. 

While the receipt of this funding is good news, the State is waiting for further federal guidance on the allocation of funds to local governments, and also whether the new funding can only be utilized for direct state costs related to testing and treatment for the COVID-19 related illness. 

If these funds cannot be utilized to also cover revenue shortfalls, eventually the declining state revenues will precipitate major budget shortfalls. 

At this time, the current interpretation from the Feds is that local governments receiving these funds according to the law are limited to those governments with more than 500,000 in population. The federal government this week put out a list of eligible local governments, and in Missouri there were two—St. Louis County and Jackson County.  If these facts bear out, in the short term it appears there will be no direct earmarked federal funding for local governments, which will be struggling with declining revenues. 

Hospital Revenues Also Dropping, Initial Federal Help Starts

In the daily briefing by Governor Parson on April 13, 2020, Missouri Hospital Association President Herb Kuhn indicated that Missouri hospitals have seen a decline in their revenues by $32 million a day, due to the decline in elective procedures and the cancellation of visits and tests by those seeking treatment for non COVID-19 procedures.  For a month, the impact on Missouri hospitals is a staggering $1 billion. 

While hospitals began receiving direct payments form the federal government, the federal distribution utilizes Medicare data as the basis for the initial distribution.  This distribution arguably will not adequately compensate many entities with relatively lower Medicare revenues, such as safety net hospitals, children’s hospitals, and psychiatric hospitals.  Our information is that the Missouri hospitals began receiving the federal payments within the past week.