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AIM calls for reform of withholding authority and the entire state budget process

It appears the fight has just begun over the current broad authority governors wield in withholding funds authorized in the state budget.

Currently, the governor is allowed to manage state spending in times when the state budget is endangered due to slow revenue collections. But in recent years, governors have used this constitutional power for purposes that appear to be more political in nature.  In fact, there is often disagreement about whether a revenue stream emergency actually exists.

The issue finally came to a head when State Auditor Tom Schweich sued Governor Nixon over his management of the budget in the wake of the Joplin tornado. In June of 2011, Nixon announced he was withholding $172 million from education and other spending in the 2011 – 2012 state budget due to impending costs to the state caused by response and clean-up from the tornado and flooding later in the spring.

But the costs to the state from those natural disasters amounted to about $36 million. The governor returned about $13 million to education and the rest of the withholdings were absorbed into other programs in the budget.

Auditor Schweich sued Nixon arguing the governor had overstepped his authority by making cuts before showing that revenues were actually falling short of budgeted amounts. Tuesday, the Missouri Supreme Court ruled that Schweich didn’t have the authority to sue Nixon until after the auditor had completed an audit of the budget in question.  The Supreme Court decision did not rule against Schweich’s argument, but said the Auditor did not have legal standing to ask the question at the time the question was asked.  In its ruling, the Court said only after the end of the fiscal year could it be determined whether revenues were sufficient to fund amounts appropriated by the legislature.

Although the rejection by the Supreme Court was on technical grounds, the governor’s office issued a press release heralding the decision as a victory for Nixon.

“The Missouri Supreme Court has confirmed once again that Missouri governors have the authority and the responsibility to rein in spending and keep the budget in balance – and over the past four and a half years, that is exactly what we have done,” Nixon said.

Schweich and other elected leaders believe governors have too much latitude when deciding how to control state spending once a budget has been passed. Besides the withholding of money last year for the tornado cleanup, the issue arose again this past summer when Governor Nixon withheld more than $400 million from education and other state programs during his campaign against House Bill 253, despite the fact that state coffers showed $339 million in excess revenues.  House Bill 253, as passed by the legislature, would have been the first broad-based income tax cut in nearly 100 years, but the bill was vetoed by the governor.

The state budget starts with a recommendation by the governor, the legislature typically changes the budget, and a revised version is presented to the governor. The governor may veto specific items in the budget, and such vetoes may be overruled by the legislature.  This summer, Governor Nixon used his veto power to veto an appropriation to rebuild a technical school that was authorized by the legislature. The legislature overruled his veto and restored the funding during the recent veto session, but Governor Nixon again used his power to withhold the funding. Associated Industries of Missouri president Ray McCarty believes taxpayers had something different in mind when they adopted the constitutional provision.

“Governors may use the current authority to rearrange funding within budgets – withholding from some programs to fund others,” said McCarty. “The current law provides no guidance on how to determine when a revenue shortfall exists. We believe the legislative branch of government needs to play a role in determining how our tax dollars are spent and when appropriated funds should be withheld.”

State Rep. Todd Richardson, R-Poplar Bluff, said last month that he plans to pursue a constitutional amendment that would clarify and limit the governor’s authority to cut the budget. Richardson contends governors should be able to cut the budget only in times of emergency or funding shortages. His proposal could be considered by legislators during the 2014 session and, if approved, would be referred to voters in a statewide ballot.

McCarty said AIM will also research whether a statute clarifying a governor’s constitutional authority may be sufficient.

“This issue is not unique to the present administration and can cause political issues when the roles are reversed,” said McCarty. “Historically, some legislatures have funded budget items when most experts agreed revenues were insufficient, and they relied on the governor to play the ‘bad guy’ by withholding the funding.  We believe the people wanted checks and balances between two branches of state government in funding state programs – not the political shell game it has become.”

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