Just the Facts: The Reality of SB 509 on K-12 Spending

Representative Tom Flanigan, (R-Carthage) Chair Fiscal Review

Once again, the Governor is fighting against a tax-cut for Missouri citizens and, once again, claiming it will negatively impact K-12 education spending.

Of course, the facts betray his arguments and just like the case he made against last year’s tax-cut bill (HB 253), he is incorrect.

In fact,  K-12 spending has increased regardless of whether general revenue is up or down (see chart below). Some reasons for this are:

• Since FY 2000, regardless of whether General Revenue has increased or decreased, K-12 funding has been trending up.
• The recessions of 2001 and changes in state law including tax reductions and tax credits lead to general revenue reductions from FY 2001 to FY 2003
• The recession that started in 2008 also caused a reduction in general revenue collections but not K-12 education, and still far above the constitutionally mandated 25 percent of GR (Article IX, Section 3(b))
• From FY 2000 to FY 2010 the state had to use temporary and extraordinary revenue sources including the American Recovery and Reinvestment Act from the Federal Government to fill gaps in state funding, and K-12 funding still grew

Source: Senate Appropriations, Missouri Senate

As I wrote last year, the biggest threat to education spending is Medicaid and its expansion. Expenditures on Medicaid from state funds have risen from roughly $470 million in 2003 to $2.1 billion in FY 2012, an increase of 346 percent.

Facts are facts, and the data does not support the claim that K-12 education spending will be at all impacted by a fiscally responsible tax-cut.

Understanding the Legislative Process: The Missouri Ethics Commission

By Representative Tom Flanigan

Established by the Missouri Ethics Law in 1991 and found in RSMo Chapter 105.955, the Missouri Ethics Commissions is the entity tasked with maintaining records relating to lobbyists, elected officials, and candidates. Those records include lobbyist expenditures, personal financial disclosure forms, and campaign contribution reports.

The commission enforces ethics reporting requirements through investigations when a complaint is filed.

The commission also spends a good portion of its time and effort educating public officials, candidates, and the general public on the various reporting requirements and ethics laws.

In 2013, over 1,900 campaign finance committees and 1,100 lobbyists were registered with the commission. Also, over 9,000 Personal Financial Disclosure statements and 8,900 campaign finance reports were filed.

The commission is comprised of six members appointed for four-year terms by the Governor with the advice and consent of the Missouri Senate. Commissioners act in a non-partisan fashion and no more than three can be of the same political party.

Transparency is important and the Missouri Ethics Commission is an integral part of keeping state government honest. I encourage all of you to visit their website and explore the many reports and educational tools that are available.

Understanding the Legislative Process: How a bill becomes a law

by Representative Tom Flanigan

Governing is a team effort, and well-informed citizens can serve as referees for the legislative process.

Therefore, I plan on writing a series of posts under the moniker “Understanding the Legislative Process” in the hopes to inform our readers about the ins-and-outs of the legislative process, from law making to the appropriation process to how government really works. This will be done in the hope that all Missourians gain a better grasp of the overall process in order to affect real change.

To begin with, a more in-depth and helpful summary of how a bill becomes law in both the Missouri House and Missouri Senate can be found here and here.

But for the purpose of this post, I wish to give a brief summary of each, but would encourage everyone to read both summaries when you have the time.

A bill—whether a House Bill, House Joint Resolution, House Concurrent Resolution, Senate Bill, Senate Joint Resolution, or Senate Concurrent Resolution—can be pre-filed starting December 1st with either the House Clerk’s office or the Secretary of the Senate’s office.

This starts the long and often confusing process to get a bill through a myriad of obstacles before it can become a law.

A bill that has been pre-filed before the start of session will be introduced or “First Read” on the first day of session; and legislators may introduce bills until the 60th legislative day.

Once a bill has been First Read it will be placed on either the House or Senate calendar (depending on which chamber it originates)  for a Second Reading. After the bill is read a second time, it will then go to the Speaker of the House or the President Pro Tem of the Senate to be assigned to a committee.

Typically bills get assigned to committees that deal with its particular subject matter, but there are circumstances where that may not be the case.

A bill that has made it to a committee will either get a hearing or may “die in committee”, as it is often called. If the bill receives a hearing in a committee legislators can make changes by proposing amendments to the bill. If the committee adopts the amendment and if the amended bill is reported “do pass” it will be placed on the Perfection Calendar and have what is called a House Committee Substitute attached to it.

The Perfection phase of a bills life is where committee substitutes are adopted and where the debate by the full chamber occurs. Members who do not sit on the committee that a bill went through are able to add more amendments at this time. Yet once all the debate is done and all the amendments that will be added are done so, the body then votes to “Perfect and Print” the bill. If they do so, the bill will then be printed with any changes that were made by amendments and placed on the Third Reading Calendar.

However, if a bill has a financial impact on either the General Revenue fund, or any other state fund in excess of a $100,000, it will be referred to House Fiscal Review Committee. In this committee, the Joint Committee on Legislative Research Oversight division will explain a bill’s Fiscal Note—an explanation of its impact on state revenues, either positive or negative—and members of the committee will be able to ask any pertinent questions. If the a majority of the committee is in support of the Fiscal Note findings, the bill will then be voted on and reported to the full House for Third Reading.

Of course, the Senate has its own version of this committee, which is referred to as the Government Accountability & Fiscal Oversight committee. Their role is similar to that of the House Fiscal Review committee, and if a bill is passed out it will also go to Third Reading.

The Third Reading of a bill is the phase where final thoughts are expressed through more limited debate, and where the final vote is taken in order to move a bill out of one chamber onto the next.

If a bill is fortunate enough to be passed out of one chamber, it must begin the process all over again in the other chamber. And if there are changes made in the other chamber, either through substitute amendments or committee substitutes, the bill will go back to the originating chamber. But if that body does not agree with all the changes that were made, they will ask the other chamber to rescind from its position. If neither side will withdraw from its opinion, the bill will go to a joint conference committee. In this committee, differences are reconciled (hopefully) and agreed upon by both chambers, a final vote will occur to Truly Agree and Finally Pass the bills. Once a bill is TAFP’ed, it will be sent to the Governor for his signature or veto.

A bill will become law once the Governor signs it or takes no action, but if he vetoes a bill, the legislature has a chance to override that action by a 2/3rd vote in both chambers during the Veto Session, which occurs in September.

This is how an idea becomes a bill and ultimately may become a law. It is often a herculean effort to get a bill through the entire process.There can be over a thousand bills filed with only a small minority making it through the entire process. In fact, in this last session only 164 bills made it to the Governors desk out of over roughly 1400 filed.

This is just the tip of the iceberg of the legislative process. In my next post, I will go through the appropriations process in the Missouri House and explain how funds are allocated for the various departments and programs in our state, allowing citizens to throw flags when there is misuse of funds.

Bad accounting leads to question of necessity of Governor’s cuts

by Representative Tom Flanigan

Governor Nixon, it would seem, has a problem with consistency in how he budgets. As this article from the St. Louis Post Dispatch points out, the estimates for disaster relief funds after the Joplin tornado were widely inaccurate. And while it is good to budget more than less for disaster relief, when you only need a third of the funds the rest should go back to what they were intended to be spent on.

I applaud the governor for making the tough decisions when the tornado hit Joplin, but that does not mean transparency and tracking of public monies should be set aside. This revelation of mismanaged funds calls into question the validity of the current cuts in state expenditures.

If, in a time of surplus, the governor tries to justify cuts on hypotheticals this begs the question whether or not there is any rational basis for any of his budgeting methodologies.

The tornado in Joplin was a devastating event, but when all the repairs and rebuilding have been completed and there are left over funds, previous cuts should be restored; it is the logical and fiscally astute action to take.

There are many state programs and institutions that are hurting from both those previous cuts and the current ones.

In fact, the governor’s lead budget person said,

“[t]here was no dollar-for-dollar accounting of the leftover disaster money. The cuts to colleges never specifically were restored. The money simply got absorbed into the pool of general revenue spent on government operations and services during 2012 and 2013…”

The legislature, compelled by statute, appropriates money to specific programs and while unexpected events do occur that must be addressed, there must still be some rational basis for tracking taxpayer dollars.

I hope the governor learns from this failure to budget in a fiscally responsible way, and restores the cuts he has made so agencies can fully serve the people of Missouri.

The Importance of Being Fiscally Prudent

by Representative Tom Flanigan

A government should at all times be fiscally responsible and prudent with the taxes that are collected from the people. When government is able to live within its means and prioritize what services are essential than there is no reason for a surplus to exist. A surplus held by government means there is less fuel for the economic engine of our state.

Governor Nixon has withheld $400 million from the budget in critical areas, using the passage of House Bill 253 to justify his withholding of these funds.

The Missouri Legislature passed House Bill 253, which is an intelligent and pragmatic restructuring of the Missouri tax code that would put more money in the pockets of individuals and allow the state to collect what is due from past years.

Governor Nixon, in a move that seems out of step with the values and priorities of the people of Missouri vetoed this important bill claiming it would hurt those who are the most vulnerable while withholding funds for critical state programs. Political doublethink at its finest.

The funds he is withholding include $13 million for developmentally disabled rate providers, the increase in education spending, and a myriad of other vital investments in state programs.

As a consequence of this misguided policy choice, the issues the Governor are most concerned about are the ones that will be most affected. Tax revenues decline when economic growth is stalled because business and individuals do not have the necessary capitol to invest. A downward spiral of declining revenues as a result of slow growth only means important programs may be cut. And he calls a tax cut irresponsible.

Taxes are “what we pay for a civilized society” and therefore those who have shirked from their responsibility in paying their taxes must be given another chance to do so in a manner that is understanding and reasonable. House bill 253 included a tax amnesty provision that would allow those who owe back taxes to make good their past due bills without repercussions. Of course, this is not an open ended amnesty but falls within a specific timeline and has explicit rules and procedures.

As part of HB 253, this too was the target of the Governor’s veto pen and will not become a reality.

Governor Nixon justifies his veto of House Bill 253 as being the fiscally prudent course of action, yet it is more an act of an irresponsible ideologue than a concerned executive safeguarding the coffers of the people from the waste of good intentions.

Fiscal Review: A Look at the House of Representatives’ Fiscal Considerations

by Representative Tom Flanigan

Budgetary Matters: A Brief Explanation

Crafting a budget for any entity and level of government is difficult, requiring input from many parties and interests in order to come to some agreement on a wide range of issues. The work on Missouri’s budget requires that it begin months in advance of the first vote on any appropriation bill.

The first big step in the budget process is determining how much revenue the state takes in through taxes, fees, and federal dollars in order to allow the state to prioritize which programs to fund and at what levels. In fact, the following chart illustrates a year-by-year comparison of predicted revenue versus actual revenue from FY 1996 to FY 2013.

Source: Missouri House of Representatives, 2012 Budget Fast Facts: Fiscal Year 2013, pg.31

*Figures in Millions

As one can clearly see, the estimates are sometimes better than actual revenue and sometimes worse. This is of course due to a myriad of economic factors. In years when the economy both at the state level and at the federal level are robust, revenues will increase but when there is a slump or downturn there can be mild to drastic reductions in revenue collections. Also the previous chart clearly demonstrates that the recessions in 2001 and 2008 caused a downturn in revenue collections. Of course, the data does not take into account inflation, but that too plays a role in the value of dollars spent on state programs.  For example, if a product cost $100 in 1996 it would be $148.86 today. The rate of inflation can have drastic effects on the overall cost of programs and can force a reduction in expenditures.

In fiscal year 2013, however, the state of Missouri had a surplus of funds that has gone toward investments in education, mental health, and state facilities among many other projects.

Of course, as in determining what programs will get funding in the regular budget process, when there is a surplus the same sort of decisions on where the money will be appropriated must be considered. This can lead to further debate beyond the normal process that can, in fact, slow the process down.

With seven house appropriations committees and the house budget committee, there is quite a bit of opportunity for the process to be slowed or halted. That is why it is critical that the entire budget process be transparent and started in a timely fashion so that if any problems do arise they can be corrected quickly and accurately.

One such mechanism used for ensuring a smooth budget process is the Consensus Revenue Estimate (CRE). The CRE is the figure that all branches of Missouri’s government use in order to set funding priorities and keep within projected revenues. Adopted in FY 1994, the CRE aims to ensure that no one branch of government can play overt and dangerous political games with the budget and forces responsible stewardship of the public’s money.

In fact, since the implementation of the CRE there has been only one year where it was not agreed on by one of the parties involved. The year was 2003 and the Chairmen of the House Budget Committee refused to sign off on the estimate citing the arbitrary manner in which it was conceived. And while he did budget to the CRE number, he did not sign off on its legitimacy.

Despite that incident, the CRE has been the benchmark by which the Missouri Budget is measured and will continue to be so in the future. This does not mean, however, that changes should not be made. In any system, there is room for improvement and with such a complex process as budget crafting; changes will take time.

Future Budgets

With rising inflation and the slow economic recovery, the determination of outlying revenue estimates will be no easy task and could have unforeseeable impacts on the Missouri Budget. Yet as in the past, all economic factors will be taken into consideration. And the priorities of the state will be safeguarded. But the reality of any budget is that choices must be made and sometimes they are difficult.

It is increasingly important the public be made aware of the complexity of the budget process so that they and their elected officials are better informed.

If all information is not considered than the process can become bogged down in ways that will neither be good for the people of Missouri or the financial future of our state.

Edited by Jarad Perry