The Missouri Capitol Rotunda (Jason Hancock/Missouri Independent).
Missouri general revenue, which has enjoyed double-digit growth for more than two years, will slow dramatically in early 2023, a new estimate of state government finances indicates.
The annual consensus revenue estimate – used as the benchmark for budgeting by both the state executive and legislature – issued Tuesday projects net general revenue tax receipts of $13.1 billion in the current fiscal year.
That is the most ever in general revenue and represents growth of 1.4% over fiscal 2022. But it represents a dramatic slowdown from the growth rate through Monday of 15% so far this fiscal year.
Only minor growth, to $13.2 billion in general revenue, is expected in fiscal 2024, which starts July 1.
Lawmakers will begin writing a budget in late January, after Gov. Mike Parson makes his recommendations. The next legislative session begins Jan. 4.
To turn 15% growth into 1.4% growth, revenues from Monday through June 30 would have to decline by 6%, or by about $500 million.
A news release issued by Parson’s office didn’t highlight the projected decline but did state that the overall growth shows state revenues are stable despite recent tax cuts.
“This shows that we can continue historic investments in education, infrastructure, mental health services, and public safety just as we have done,” Parson said in the release.
The estimate promises stability in budgeting for the coming year, said House Budget Committee Chairman Cody Smith, R-Carthage.
“I am pleased to once again put forward a conservative revenue estimate to which the House, Senate, and Governor have agreed,” Smith said in the release.
The state is sitting on a massive surplus thanks to federal COVID policies and the rapid growth in state revenues. The balance in the general revenue fund grew to $4.9 billion at the end of November, up about $150 million from the October balance, with another $1.5 billion in funds that have few restrictions.
Lawmakers are already lining up with ideas to use the money. Sen. Bill Eigel, R-Weldon Spring, wants to set aside up to $9 billion over the next 10 years to widen Interstate 70 to four lanes in each direction from St. Louis to Kansas City.
The tax cuts enacted this year will cut the top income tax rate to 4.95% on Jan. 1, with additional cuts to come on Jan. 1 of subsequent years.
The possibility of recession is growing, many observers think, because lower-income Americans are spending their savings due to inflation and will not be able to sustain their purchasing power in the new year.
State revenue has benefited from inflation, with 13% growth in sales tax receipts in fiscal 2022 and 9.1% growth in the current year. Higher pay, from an increasing minimum wage and from wages hiked to cover inflation, is pushing income tax receipts higher at a brisk pace as well, up 13.6% so far this year.
Inflation-fighting interest rate hikes are also contributing to Missouri revenue growth. So far this fiscal year, interest income for the general revenue fund is $58.8 million, compared to $22.5 million over the full 12 months of the previous fiscal year.
How much the decline in growth will be due to tax cuts, and how much is expected to result from economic conditions, is uncertain, said Sen. Lincoln Hough, R-Springfield. Hough is expected to be Senate Appropriations Committee chairman starting in January.
“What the (consensus revenue estimate) is really describing,” Hough said, “is that we anticipate things slowing down.”
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