October 3, 2002

School Board Reviews State Budget Study Forecasting Tough Times Ahead

The Scotland County R-I School Board got bad news and more bad news as far as the future of state education funding is concerned during the group's September 26 meeting.

Superintendent LeRoy Huff presented the board with a report of a study recently released by James A. Moody and Associates regarding the Missouri budget crisis.

Moody, a former state budget director, has spent the past 10 years as a governmental relations consultant. The report by his firm is an analysis of recent trends in Missouri State Government with respect to revenues versus spending and examines the question of whether Missouri will be able to grow out of the current budget quandary.

Huff pointed out to the board that the report offered a sobering forecast for the next three to four years for future Missouri budgets. This issue will directly effect school districts across the state as the public education industry relies on state funding for a large portion of the operating revenues.

"Mr. Moody is an extremely knowledgeable and well-respected economic authority in our state," Huff said. "His concern is that current and future state budgets for three to four years leave very little room for error and that currently there exists many chances for error."

Huff added that Moody's report went on to warn that these prospective budgetary errors would have widespread negative consequences on public entities including education.

One aspect discussed in detail by the report are projected state revenues and the double-sided sword of the Hancock Amendment and the tax cuts which followed.

Hancock caps the amount of tax revenue the state can generate. When revenues exceed that cap it triggers a tax refund process. In 1997 the state refunded more than $315 million to Missouri taxpayers. In order to prevent the waste of collecting and then returning these monies, state government devised tax cut plans to elleviate the problem.

However Moody points out that these cuts were made during a time of a thriving state economy which has since went south.

Under current economic conditions the state tax revenues are falling well short of the Hancock cap. In 2001 the state fell $547 million short of triggering the Hancock cap. Moody predicted this trend will continue until at least 2005 when the gap will expand to a predicted level of $629 million, a figure that represents just under $1 billion in declining revenue since 1997.

The board spent considerable time reviewing the study and indicated it will definitely take the issues under advisement when considering future budget issues for the district.

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