Gov. Matt Blunt and the Missouri Republican Party are filling Web World today with the governor’s reply to a Post-Dispatch editorial July 30, that took aim at his budget policy.

In the interest of fairness, and to get a good debate going, Political Fix is offering up the Blunt’s reply, followed by the editorial that got his blood boiling:

Insolvency to Surpluses: The Facts about Missouri’s Budget

By Missouri Gov. Matt Blunt

The St. Louis Post-Dispatch recently stressed the importance of understanding the state budget.  They should follow their own advice.

Missourians deserve to know the facts about the state budget.

The budget we inherited after years of liberal control in Jefferson City was an insolvent wreck, with a deficit of $1.1 billion. The budget my successor will receive is balanced, with a surplus.  This is an established fact.  Even liberal politicians acknowledge the surplus when they announce unsustainable plans to spend it on bigger government. It is regrettable that the newspaper is in denial about the dramatic improvement in Missouri’s budget.

In many states, the budget is in shambles. In Missouri the opposite is true. The National Conference of State Legislatures (NCSL) reported that 30 states face significant budget problems.  Here, we are fiscally fit, with revenue growth, ongoing savings from management and program changes, no new taxes, and large increases in funding for education.  NCSL reported that Missouri is among only 13 states with a stable or optimistic revenue outlook for 2009.

Our 2008 budget just posted the third consecutive surplus of my administration, with an ending cash balance of $833 million. As The Associated Press noted, this is Missouri’s strongest surplus in at least 20 years.  Further, the rainy day fund for emergencies has grown from $463.3 million to $557.3 million since 2005.

Other newspapers have praised the responsible stewardship that rescued Missouri’s budget from insolvency. It is against the Post-Dispatch’s editorial beliefs that it is possible to balance the budget, increase education spending, provide medical care for those in genuine need, and meet the state’s other responsibilities, all without raising taxes. It is possible to do this. It is what our Administration just did.

In January 2005, I inherited a budget that included a $1.1 billion deficit. The budget had spending of nearly $7.13 billion, against revenues of only $6.98 billion, leaving us $148 million short in our operating budget.  Additionally, the deficit included $790 million in mandatory spending that would have been necessary to sustain the old way of doing business and more than $68 million for other required payments.  The deficit was not a list of suggestions as the Post-Dispatch asserted.  For example, it included $460 million to pay for the growth of the old Medicaid system - a system attempting to provide public assistance to more than one out of every six Missourians and failing to even verify the eligibility for nearly a third of those who signed up.

On March 6, 2005, the newspaper presented its editorial remedy for the budget wreck.  They suggested I propose a tax increase.  We did not raise taxes.  Instead, we cut taxes, three times.  We made difficult decisions to control spending. We overhauled state government to produce savings and greater efficiency in the use of taxpayer dollars.

 We reduced the number of state employees to below 60,000 for the first time in years. We proved wrong those who “knew” it was impossible to achieve financial stability without job-killing new taxes.

The editorial further misled readers about education by selecting 2001 as a funding baseline. Records will show I became Governor in 2005. The assertion that my administration increased elementary and secondary education by only 4.85 percent “more than in 2001” is extremely misleading.  Working with the General Assembly we have increased K-12 funding by 17.2 percent or $440 million.

As with K-12, the editorial used 2001 data to mislead readers about higher education.  Higher education funding in 2001 was $960.4 million. The next administration then cut this by $98 million, or 10.2 percent.  My administration increased funding for colleges, universities and students by $166.5 million, or 19.3 percent, to more than $1 billion, the largest ever higher education budget and the first to exceed $1 billion.

This does not include the additional $335.3 million we provided to higher education through the Lewis and Clark Discovery Initiative. Thus, the total infusion of new funding for higher education during my term has been more than a half billion dollars.

The tax relief we provided to taxpayers was directed primarily to seniors, military veterans, health care and manufacturing jobs. But the editorial implied that these “lost” revenues would be reductions in future budgets. In fact, they are incorporated into our budget projections. The newspaper’s error has the effect of double-counting the impact of tax relief. I do not view a tax reduction as taking money “away from” the government, or as a “loss” to the government. Tax relief is returning taxpayer money to taxpayers. We need to do more of this, not less of it.

I hope that my successor shares my principles of good government. If Missouri follows the lead of liberals with radical proposals to dramatically increase welfare spending, the surplus might be sustainable for a few years, but this will eventually drive the state to either bankruptcy or a tax increase.  If we continue on the path of fiscal responsibility, Missouri’s budget will remain strong and we will avoid the budget collapses that other states are experiencing because they failed to rein in spending.

Post-Dispatch editorial

With less than six months remaining in office, Gov. Matt Blunt and his administration are hard at work framing and burnishing their legacy.

They’ve been boasting about how well Mr.Blunt managed the state budget. In a press release issued last week, they claim that through “fiscal restraint, spending discipline and responsible stewardship of Missouri tax dollars,” Mr. Blunt “turned a $1.1 billion deficit into three straight surpluses without raising taxes.”

All of this could be chalked up as political puffery if it weren’t so vital for Missourians to understand the realities of the state budget. And the reality, to put it kindly, is that Mr. Blunt’s claims are misleading.

The governor did not inherit a $1.1 billion deficit. He didn’t inherit any deficit at all. When Mr. Blunt took office in January 2005, the state budget was balanced. It remained so through the fiscal year that ended in June of that year.

The $1.1 billion to which Mr. Blunt refers was not a shortfall in funds that were needed to meet budgeted expenses; it was the difference between what his state agencies had requested in their budget proposals and the amounts they received at the end of the budgeting process.

That process is a negotiation involving balancing the needs and interests of the people. Agencies typically start out asking for more money than they expect to get. Would you say your family incurred a $5 deficit if your son asked for a $10 allowance and you only gave him $5?

Then there’s Mr. Blunt’s claim to have produced three straight surpluses. The Missouri Budget Project is a liberal-leaning non-profit advocacy group that closely tracks and analyzes state government funding issues. In a recent report, the group demonstrated that the state spent more than it took in for each of the years that the governor claims a “surplus.”

It’s true that the state ended each year with unspent funds. But that was mainly because of large cuts in spending for health care for the poor (nearly $200 million during Mr. Blunt’s first year), along with the “one-time availability” of a large chunk of federal money.

Mr. Blunt says his administration built up a pot of $833 million in unspent funds. He warns that “some politicians are salivating over the surplus as they announce political plans to deplete it by spending hundreds of millions of dollars on taxpayer-subsidized welfare.”

That claim, too, does not stand up to scrutiny. First of all, $502 million of the supposed $833 million surplus already is committed to meeting expenses in the current budget year. Of the $331.8 million balance of the “unspent” dollars, the governor’s own budget office estimates that most of it is committed to the next budget year, leaving only about $60.8 million by fiscal 2011. And $60.8 million is a lot less than $833 million - about 93 percent less.

The reality is this: Mr. Blunt inherited a tight state budget. He kept it in balance by cutting health care to the poor. His predecessor, Gov. Bob Holden, also inherited a tight state budget in 2001. He kept it in balance by cutting higher education funding. Mr. Blunt did very little to rectify those cuts. Today, Missouri colleges and universities receive 11 percent less state funding (adjusted for inflation) than they received in 2001.

Mr. Blunt did put more money into funding for elementary and secondary eduction - 4.85 percent more than in 2001.

On the other hand, spending on mental health services has fallen 7.57 percent in the same period.

The next governor won’t find the going any easier. By 2011, tax cuts enacted during the past two years will reduce state revenue by between $186.3 million and $263.8 million a year. Add to that a state economy that’s losing jobs, and the picture hardly is rosy.

This is more than just a matter of spin. To the extent that it prevents Missourians from grasping hard truths at a time of hard choices, Mr. Blunt’s self-congratulatory rhetoric should be considered a public liability.