State Officials in Missouri Spar Over ‘Friday Favors’
Missouri Gov. Jay Nixon speaks at the National Governors Association convention on July 12, 2014. Mark Humphrey / AP Photo
Connecting state and local government leaders
A veto fight between Gov. Jay Nixon and the legislature is annoying local jurisdictions.
JEFFERSON CITY, Mo. — When the Missouri Legislature returns to the State Capitol on Wednesday for its annual veto session, leaders of the state’s cities, counties and school districts will be watching closely.
This summer, Missouri Gov. Jay Nixon vetoed a package of 10 bills with sales-tax exemptions that he has claimed will hit state and local sales tax revenue by $776 million annually. If he’s right, that would amount to more than a third of Missouri’s sales- and use-tax collections last year. Nixon’s administration has said more than $400 million of that could impact the state’s bottom line, while $351.4 million could come from money that was supposed to be sent back to cities.
“It is a kick in the teeth to us,” said Richard Davidson, mayor of Neosho, a town of 12,000 people in the southwest part of the state. Speaking at a town hall meeting this summer, the mayor told supporters, “our budget is sales-tax driven and I don’t remember them ever calling us.”
For Neosho, Nixon has estimated a cut of more than $700,000 each year—a 6 percent reduction from last year.
Davidson’s frustration lies at the center of Nixon’s campaign to sustain his vetoes. Most of the bills were passed with support from more than necessary two-thirds majority required to override him on Wednesday. But they passed during the hustle and bustle of the final week of session, most of them in the final eight hours on the last day of legislative session when lawmakers were voting quickly on dozens of bills.
Because of that, Nixon has dubbed them the “Friday favors,” claiming that the bills were quietly slipped through on behalf of special interests—from electric companies to dry cleaners to data centers and fast food restaurants—all after the legislature sealed the deal on its budget a week prior with no consideration of the tax-reduction measures or their potential impact on the budget.
“In order to stay on a fiscally sustainable path, my vetoes of the ‘Friday favors’ need to be sustained,” Nixon said last week during a meeting with reporters in his Capitol office. “That’s not the way to do a budget, especially when they impact local programs.”
Sam Anselm, interim city manager in Joplin, a larger metro area half an hour from Neosho, said he took issue with the way the measures were passed, too. Nixon has projected Joplin could lose more than $1 million, which Anselm said would impact a city service or force layoffs.
“The way that those bills were passed didn’t really allow legislators or cities a lot of time to evaluate what impact they might have,” he said.
Nixon’s numbers likely depict a worst-case scenario where every possible sales-tax reduction is taken advantage of by a consumer. Republicans who hold supermajorities in both houses of the Missouri Legislature have their own numbers, and, of course, they are significantly lower than the Democratic governor’s estimates. Still, they expect as much $223 million in reduced local revenues.
The impact of the measures could go beyond municipalities. In Springfield, for example, voters passed a measure increasing sales taxes annually by $1 million to pay for the Greene County Public Safety Center, home of the county’s emergency management system and its 911 Emergency Communications Center. Greene County Presiding Commissioner Jim Viebrock said last month his opposition is not about a partisan position against the legislature.
“It’s about local control and making sure communities like ours can continue to provide the vital public services our citizens count on,” he said.
(The Missouri State Capitol's Rotunda by Nagel Photography / Shutterstock.com)
The tax-cut fight of 2014 in Missouri comes after two prior clashes between the second-term Democrat and the state’s conservative legislators over tax cuts.
In the two previous battles, Nixon has focused almost exclusively on the potential impact of the income tax cuts to schools. In this summer’s fight, Nixon has instead focused his attention on the impact on municipal governments, making dozens of stops in Missouri cities from Springfield to Farmington in an effort to build support from city leaders.
In July, when the state’s municipal finance chiefs held their annual gathering in Branson, Nixon flew down from Jefferson City to make his case about the potential impact of the tax cuts. The message came as the local officials were preparing to begin their budget meetings with hometown city council members.
Most localities finalize their budgets in September, meaning finance chiefs start work as early as July. Many cities moved forward by factoring in some sort of sales-tax reduction. For cities with budgets that rely heavily on sales-tax revenue, Nixon’s message meant reevaluation of what they would budget for the upcoming year.
“Cities have really taken this seriously,” said Richard Sheets, deputy director of the Missouri Municipal League. “Cities have taken advantage of the number of different sales taxes they can enact. They have become for the most important source of revenue for local governments and have really surpassed property taxes.”
Brian Schmidt, a former executive director of the Legislature’s Joint Committee on Tax Policy, said if sales-tax receipts for cities decline due to the tax exemptions, localities could in some cases increase their property-tax levies to make up for the reduction. In other words, Schmidt said the sales-tax cuts from Jefferson City could lead to property-tax hikes at the county courthouse.
Sheets, however, said he hopes it does not come to that. Members of the Missouri Municipal League have been putting pressure on their area lawmakers with their own numbers on how a sales-tax reduction might impact their budgets. Legislators have been coy about which bills they will actually consider during their veto session, but Sheets said the short timeline coupled the sheer number of measures legislators could consider—33 bills and more than 100 line items—gives him hope.
“I’m sure some would just like to override everything, but that’s not feasible,” he said. “I’ve heard from legislators and our city officials that our legislators do understand the impact and didn’t realize the full extent of these exemptions. I’ve been hearing some pretty positive things.”
Eli Yokley is editor of PoliticMo, a Missouri political news website. He is a regular contributor to the Joplin Globe and St. Louis Business Journal and is based in Columbia, Missouri.