Analysis: Teachers back limits on Missouri tax credits

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February 7, 2010

Anonymous The Joplin Globe Sun Feb 07, 2010, 10:49 PM CST

The Associated Press

JEFFERSON CITY, Mo. — Some Republican senators seeking to rein in Missouri’s expansive tax credit system have a new ally: Teachers.

The alliance is a reflection of Missouri’s new budget reality. Scarce dollars are forcing advocacy groups to pay ever-greater attention to their self-interests. And that’s pitting one cause against another — education vs. low-income housing, for example.

The budget battles have as a backdrop some pretty bleak numbers:

— More than halfway through its fiscal year, Missouri’s revenues are down 12.5 percent compared to the previous year, and that’s on top of a 6.9 percent decline from 2008 to 2009.

— To fill the gap, Gov. Jay Nixon has cut around $725 million from this year’s budget.

— Nixon is proposing to use $1.2 billion in federal stimulus funds to balance Missouri’s 2011 budget. That federal money is due to expire after next year, meaning Missouri would have to plug a $1.2 billion hole just to keep the budget flat in 2012.

Put bluntly: Missouri’s bottom line looks bad for the near future.

In that context, Sen. Jason Crowell, R-Cape Girardeau, has been pushing for greater legislative control over Missouri’s 54 active tax credit programs.

Tax credits reduce the money a person or business owes to the state. Their intent is to encourage certain activities. There are tax credits for businesses that hire new employees, moviemakers who film in Missouri and developers who renovate historic buildings or construct low-rent homes. Other tax credits reward donors to food pantries, crisis pregnancy centers and domestic violence shelters.

Most tax credits are an entitlement. If you qualify, you get the tax break regardless of the state’s finances. In most cases, the first step is to get state authorization for a tax credit. Then when the project is complete, the state issues the tax credits, which can be redeemed later.

In the 2009 fiscal year, Missouri redeemed about $585 million of tax credits. It authorized even more. The Department of Economic Development alone authorized about $743 million of tax credits in 2009, many of which won’t be issued or redeemed until future years.

Some tax credit programs already have caps on how much can be authorized. But Crowell contends legislators need greater power to curtail tax credits, especially in tough budget times. His legislation would make tax credits subject to the budget process, meaning lawmakers would determine annually how much — if any — credits can be authorized for each program.

Crowell contends tax credit recipients should be competing with schools, hospitals and others for a share of state’s shrinking supply of money.

“I don’t buy that in Missouri’s budget, where we can’t fully fund the foundation formula (for public schools), where we can’t fund higher education, where we are looking at massive cuts to other areas, tax cuts are unaffected,” Crowell told the Senate Governmental Accountability and Fiscal Oversight Committee last week.

He drew support from fellow Republican Sens. Brad Lager of Savannah, Chuck Purgason of Caulfield, and Jim Lembke of St. Louis.

Also supporting Crowell were two prominent teachers’ groups — the Missouri National Education Association and the Missouri State Teachers Association — which are concerned about cuts at schools. They note that Nixon is not seeking to fund the full amount called for next year under the formula that distributes basic aid to K-12 schools.

Curtailing tax credits could make more money available for schools in future years.

“Some of our leadership started to see the light on state revenues and the effect it was going to have on children,” MSTA lobbyist Mike Wood said in explaining the group’s support for Crowell’s legislation.

There remains considerable resistance, however, from many tax credit recipients.

The most vocal opposition last week came from those involved in the development of affordable housing projects, which are subsidized by federal and state tax credits. A new group called the Missouri Workforce Housing Association — consisting largely of builders, managers and financiers of low-income housing projects — made its Capitol debut Thursday by opposing Crowell’s legislation.

The group’s goal is to make housing tax credits more efficient, said executive director Tim Barry. But “the first thing to do is save the credit,” he added.

Supporters cited hundreds of millions of dollars of home construction that wouldn’t have occurred but for the tax credits. They noted that good homes attract families, which fill the schools.

“There are many studies that show us that children who live in stable, good, affordable housing have much better outcomes than children who do not,” said Stephen Acree, executive director of the Regional Housing and Community Development Alliance in St. Louis.

Republican House leaders are echoing the concerns of the developers. They assert that banks would be less likely to lend money for projects if applicants are not able to say for certain that the Legislature will authorize any tax credits.

To make tax credits subject to annual budgeting “just doesn’t work in a practical world,” said House Speaker Pro Tem Bryan Pratt, R-Blue Springs.

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Analysis: Teachers back limits on Missouri tax credits

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