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Substitute House Budget Bills Filed

The House Budget Committee Chair introduced substitute budget bills that will be the starting point for budget debate when the legislature returns from its spring break. Detailed tracking sheets can be viewed here. Some notable changes from the Governors recommendations include:

Elementary & Secondary Education (HB 2):

  • Fully funds the foundation formula for the first time in recent history by adding nearly $45 million. Full funding would trigger a provision that would allow DESE funding for pre-K programs.
  • Restores $36 million for school transportation that had been cut in the Governor’s recommendation

Higher Education (HB 3):

  • Reduced the cut to four year universities from the 9% recommended by the Governor to 6.58% except for the University of Missouri system.
  • The University of Missouri system did see an addition of $8.5 million for various health care education initiatives that were not recommended by the Governor.

Mental Health (HB 10):

  • $6.9 million was added to pay for growth in enrollees in mental health services anticipated as a result of increased asset limits.
  • Restores $500,000 for children’s trauma treatment and $500,000 for case management.
  • Restores 1.5 percent of the Governor’s recommended 3 percent decrease in provider rates

Health & Senior Services (HB 10):

  • Adds $6.5 million for the Safe-Care program called for in last year’s HB 1877
  • Reversed the Governor’s recommended eligibility change for Home & Community-Based Services. The current 21-point eligibility level was maintained by eliminating the circuit breaker property tax credit for low-income seniors and Missourians with disabilities who rent their homes, as described previously.
  • The substitute did not change te 60% Consumer Directed Services cost limit recommended by the Governor for skilled nursing services.

Social Services (HB 11):

  • Restores the current 21 point eligibility level for skilled nursing services using funding from the circuit breaker elimination via the newly created senior services protection fund, and reverses the Governor’s recommended use of tobacco settlement fund proceeds to maintain the eligibility level
  • Restores 1.5 percent of the Governor’s recommended 3 percent decrease in provider rates
  • The substitute pays for many of these increases through reductions in the Missouri Rx program and circuit breaker property tax credit, as well as decreased projected pharmacy costs and pushing new Medicaid decision items off until next session when a supplemental budget could pay for any costs not funded in the regular budget bills.
  • Uses tobacco settlement funds to pay for the transition to managed care statewide.

The budget committee will meet on Tuesday, March 28th to amend the substitute budget bills. Any proposed amendments must be submitted to the Chair by 6 p.m. on Monday, March 27th.

 

 

Throwing a Lifeline to a Lifeline: How Other Tax Credit Reforms Can Save the Circuit Breaker

circuit breaker property taxThe circuit breaker is a popular tax credit that helps Missouri seniors and people with disabilities with fixed incomes to stay in their homes by offsetting costs related to property taxes. Lawmakers have been discussing several proposals to eliminate renters from the credit. While low-income seniors who rent their homes may not pay property taxes directly, property owners pass property taxes to their tenants through rental rates. Missouri can make other changes to tax credits that would both preserve the original policy intent, and save taxpayer money.

Eligibility for the Circuit Breaker Property Tax Credit

In 2016, Missouri’s circuit breaker property tax credit helped 193,561 seniors & people with disabilities with fixed incomes stay in their homes. 100,706 of those were renters.

For renters to qualify for the credit, income must be $27,500 or below if single, and $29,500 or below if married. For home owners, income must be $30,000 or less if single and $34,000 or less if married. The maximum credit is $750 for renters and $1,100 for owners. The actual credit is based on amount paid and total household income, taxable and nontaxable. In 2016, the average credit was $535.  (SOURCE: Missouri DOR)

Renters are Eligible for the Credit in 17 of 18 States with a Circuit Breaker

Eighteen states provide a Circuit Breaker. In 16 of those, circuit breakers are available to both homeowners and renters. Renters qualify based on their rental payments, as it is assumed that property owners pass through a portion of their property taxes to tenants. In one state, only homeowners qualify, while in another state only renters qualify for the circuit breaker.

A large body of evidence shows that lower-income families are much more likely to face high housing costs — usually defined as costs that exceed 30 percent of income — than are high-income families. Families below the poverty line typically spend 42 percent of their income on housing compared to the national median of 22 percent.  Families with high housing costs typically pay high property taxes relative to their incomes since property taxes within a given community tend to be roughly proportionate to housing costs.

Renters — who are disproportionately represented among low-income families— also can face high property taxes relative to their incomes. This is because landlords generally pass along a substantial portion of property taxes to them in the form of higher rents. (Source: Center on Budget & Policy Priorities “THE PROPERTY TAX CIRCUIT BREAKER: An Introduction and Survey of Current Programs”, 2007)

Reforming the Low Income Housing Tax Credit

Instead of making changes to the Circuit Breaker, Missouri has opportunities to reform other tax credits and tax statutes that would enhance the fiscal responsibility and stability of the state while supporting investments in critical services, including education, health care and public safety.

For example, because state taxes are deductible on federal taxes, about 30% of the value that developers receive from the Low Income Housing Tax Credit is eaten up in higher federal taxes. In response to this dynamic, several other states have transitioned their low income housing or other tax credits to forgivable loan or grants programs. In order to avoid federal tax consequences, Minnesota transitioned their program to a direct appropriation or grant program, which combines federal Low Income Housing credits with state funds to support the development of low income housing. North Carolina operates a “refundable credit” model, which allows state funds to avoid federal tax consequences. Converting to either model would allow Missouri to save at least 30% of the cost of the program, while maintaining the same impact. In 2016, $170 million in Low Income Housing Tax Credits were redeemed. Converting our model to a refundable credit, direct appropriation or forgivable loan program could have saved Missouri $51 million that year alone.

House Budget Committee Organizes for 2017 Session

New Budget Chairman Scott Fitzpatrick welcomed 17 new members to the 35-member budget committee. Rep. Justin Alferman serves as vice-chairman and Rep. Michael Butler as the ranking minority member.

This year, members of the budget committee will also be members of at least one of the five appropriations committee that report to the main budget committee. Fitzpatrick said this change is intended for the members to become experts in various parts of the state budget.

 

Appropriations subcommittee Chairs include:

Rep. RedmanAgriculture and Natural Resources (HBs 6 & 7)

Rep. RolandEducation (HBs 2 &3)

Rep. BahrGeneral Administration and elected officials (HBs 1, 5, 12, & 13)

Rep. WoodHealth Mental Health and Social Services (HBs 10 & 11)

Rep. ConwayPublic Safety, Corrections and Transportation (HBs 8, 9, & 4)

 

Appropriations committees will begin hearing public testimony next week, with testimony likely concluded by the end of January.

Traditionally, the Governor releases budget recommendations in mid-January. While Chairman Fitzpatrick indicated that Governor Greitens hopes to release his budget recommendations on February 1, the later release of the executive budget may create challenges for the budget committee.

While it may wait to meet with departments until after the Governor releases his recommendations (which must be released by February 4th), it may begin meeting with some departments prior to the release.

The state constitution requires that the budget be completed by May 5th this year.

The Budget Committee tentatively plans to finish its work by March 13, with the House sending a budget to the Senate at the beginning of April. That would leave only four weeks for the Senate to do its work and reconcile differences in conference to meet the constitutional deadline.

In addition to budget bills, the Committee will conduct a thorough review of tax credits.

Federal Health Update, January 13, 2017

Senate Republicans took their first major step toward repealing the Affordable Care Act on Thursday, approving a budget blueprint that would allow them to gut the health care law without the threat of a Democratic filibuster.

After a marathon session, the Senate voted 51 to 48 to approve a budget measure that would clear the way for the health care law to be repealed with a simple Senate majority.

The timeline below is provided by Community Catalyst:

Budget Resolution

  • The Senate introduced a shell budget bill on January 3rdthat kicked off the process in both chambers of Congress.
  • Senate rules require 50 hours of debate which will began yesterday, January 4th.
  • This first debate period is expected to end on January 11thwith the start of “vote-a-rama”.
  • Vote-a-rama is a rapid series of votes in the Senate on budget related amendments to the resolution. This could go on for an extended period of time, likely many long hours.
  • The Senate will vote on the final resolution following the vote-a-rama and will send the resolution to the House which will move it quickly to the floor for a vote. The House vote could happen on January 13that the earliest.

Budget Reconciliation

  • The budget resolution gives Congress instructions to create the actual language in the budget reconciliation package.
  • The House will draft the actual language in two committees—Ways & Means and Energy & Commerce. We expect this part of the process to happen the week of January 23rd.
  • Once the language is final, the bill will move to the House floor for a vote and will then be sent to the Senate.
  • We expect the bill to skip the Senate committee process and go directly to the floor.  However, Senate rules require 20 hours of debate and there will likely be some votes on amendments.  Only 51 votes are required to pass budget reconciliation in the Senate.
  • Republicans hope to send the final legislation to President Trump by February 20th

 

 

Senate Committee Hears Bill to Dramatically Alter Medicaid

The Senate Committee on Seniors, Families and Children heard testimony on a bill that would allow dramatic changes to the way Missouri operates its Medicaid program.

Sometimes referred to as the Global Waiver bill or the Block Grant bill, Senate Bill 28 (Sater) would:

  • Authorize the Department of Social Services to apply for a waiver that would suspend rules and regulations that govern Missouri’s Medicaid program.  In its place, the state would provide rules for governing the Medicaid program.
  • Ask the federal government to cap payments to the state to cover all the costs of care for the entire Medicaid population based on a preset formula, and not actual state health care costs. The preset formula “may include provisions, to the fullest extent possible, that propose or accept a federally-capped block grant, adjusted for inflation, state gross domestic product, state population growth, state Medicaid population growth, and other economic and demographic factors, for the duration of the waiver.”
  • Would require the joint commission on public assistance to review and hear testimony regarding the waiver seeking to govern Missouri’s Medicaid program that would be “patient-centered, sustainable and cost-effective approach to a market-based health care system that emphasizes competitive and value-based purchasing,”

Bill language also opens the door for the state to request work requirements, higher copays and health savings accounts as part of a revamped Medicaid program.

The Missouri Hospital Association testified in favor with all other testimony in opposition.  The bulk of the opposing testimony related to concerns that block granting Medicaid would shift costs to the state and result in cuts in services, disenrollment or waiting lists for potential enrollees.  No vote was taken on the bill but may be taken up by the committee as soon as next week.

A companion bill has been filed in the House by Budget Chair Scott Fitzpatrick.

Tax Issues on the November Ballot

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 1/10th 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.
  1. 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.
  1. 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.
  1. 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.
  1. 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.”

New Census Data Underscores Need for Missouri Earned Income Tax Credit

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.

Percent of Missourians Living in Poverty: 2009-2015

2009 2010 2011 2012 2013 2014 2015
United States 14.3% 15.3% 15.9% 15.9% 15.8% 15.5% 14.7%
Missouri 14.6% 15.3% 15.8% 16.2% 15.9% 15.5% 14.8%

 

Percent of Children Living in Poverty: 2009-2015

2009 2010 2011 2012 2013 2014 2015
United States 20.0% 21.6% 22.5% 22.6% 22.2% 21.7% 20.7%
Missouri 20.7% 20.9% 22.1% 22.6% 22.2% 21.1% 20.2%

 

Percent of Families Living in Poverty: 2009-2015

2009 2010 2011 2012 2013 2014 2015
United States 10.5% 11.3% 11.7% 11.8% 11.6% 11.3% 10.6%
Missouri 10.7% 10.6% 11.5% 11.7% 11.5% 10.7% 10.2%

MBP Statement: Missouri Uninsured Rate High Compared with Other States – Medicaid Expansion Would Help

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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Study Commission on State Tax Policy Meetings

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