An economic summary of Missouri.

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This excerpt is from "The Missouri Budget, Fiscal Year 2009, Budget Summary." The SBBER wishes to thank Governor Blunt, the Office of Administration, Division of Budget & Planning, and Kevin Highfill for their assistance and permission in reprinting this information.

Missouri Economic Position

The Missouri economy, like that of the nation, continued to grow in Calendar Year 2007, but has come up against the strong currents of the housing and auto manufacturing slowdowns. After peaking at record levels in the spring, Missouri employment declined slightly into the autumn. According to U.S. Bureau of Labor Statistics' data, through November 2007, the state gained 12,000 jobs over the previous twelve months, growth of 0.4 percent, and 87,900 jobs since January 2005. Between November 2006 and November 2007, 6,200 jobs were lost in motor vehicle and transportation equipment manufacturing, a reduction of 9.5 percent. Conversely, the state gained 18,900 private service-producing jobs over the same period, an increase of 1.0 percent. Despite this churning in the job market, on a year-over-year basis, personal income growth during Calendar Year 2007 is projected to be 5.4 percent, which is above average.

Missouri's economic outlook over the next two years is similar to that of the nation, weighed down by the general outlook in the housing and automotive industries. However, Missouri's exporters are benefiting from the weak dollar, and continue setting new records for total exports. Growth will continue in the service sectors. Below average employment growth of 0.4 to 0.6 percent is expected annually. Personal income growth will slow to 4.0 percent in 2008, increasing to 4.3 percent in 2009. Risks to this outlook include slower consumer spending as a result of sharply reduced residential investment activity and higher energy prices, and further slowdowns in vehicle manufacturing.

Revenue Projections for Fiscal Years 2007 and 2008

Revenue forecasting is challenging under the best of circumstances. When uncertainties overshadow the economic forecast, the undertaking becomes even more difficult. Unpredictable energy prices and volatile equity markets further complicate this mission. Nonetheless, the state must move ahead with its budget based on the best available economic information. Governor Blunt is committed to working constructively with members of the General Assembly to ensure the state follows sound budget policies. As a first step, the Governor worked with legislative leaders to develop a consensus revenue estimate. General revenue growth below long-term averages is expected in the coming fiscal year. The revised Fiscal Year 2008 and initial Fiscal Year 2009 revenue estimates project net growth of 3.1 percent and 3.4 percent, respectively. The revenue base has held up well through the first half of the current fiscal year. Growth in individual income tax receipts is expected to remain strong, and may be boosted further as a result of capital gains stemming from active equity markets. However, consumer spending on taxable items is being dragged down as consumers consider reducing debt loads and dealing with high energy prices. Tax changes in the form of income tax relief for seniors and sales tax relief for manufacturers will slow revenue growth. Another year of substantial tax credit growth will reduce receipts, but the new programs championed by the Governor this past year will help to spur economic development. General revenues in Fiscal Year 2009 will be affected by the slowing in the overall economy. Finally, the continued implementation of the 2004 transportation ballot initiative, Constitutional Amendment No. 3, will impact fiscal years 2008 and 2009. This will lower general revenue collections by an estimated $30 million annually.

Revenue Limitation Amendment

Article X of the Missouri Constitution establishes a revenue and spending limit on state government. The limit is about 5.6 percent of Missouri personal income, based on the relationship between personal income and total state revenues when the limit was established and approved by voters in November 1980. Calculations made pursuant to Article X of the Missouri Constitution show that total state revenues for Fiscal Year 2007 were below the total state revenue limit by nearly $1.3 billion.

The Office of Administration projects that total state revenues will not exceed the total state revenue limit in Fiscal Years 2008 or 2009. These preliminary calculations are subject to change as actual state revenue collections become known and as the federal government revises its estimates of Missouri personal income. These projections could change if the General Assembly were to pass legislation to increase revenue without a vote of the people. Per Article X of the Missouri Constitution, revenue approved by the voters is not subject to the revenue and spending limit.

Article X, Section 18(e) of the Missouri Constitution imposes an additional revenue limit, which states the General Assembly shall not increase taxes or fees in any fiscal year, without voter approval, that in total produce new annual revenues greater than $50 million adjusted annually by the percentage change in the personal income of Missouri for the second previous year, or one percent of total state revenues for the second fiscal year prior to the General Assembly's action, whichever is less.

New annual revenues mean the net increase in annual revenues produced by the total of all tax or fee increases by the General Assembly in a fiscal year, less refunds and less all contemporaneously occurring tax or fee reductions in that same fiscal year.

For Fiscal Year 2007, these limits are calculated at $84.3 million for the personal income amount and $80.9 million for the one percent of total state revenues amount. Legislative actions in the 2007 session resulted in a reduction of $163.4 million in state revenues, which is clearly below the constitutional limit.

For Fiscal Year 2008, the limits are calculated at $88.8 million for the personal income amount and $86.0 million for the one percent of total state revenues amount.

For more information concerning Missouri's economy, visit the Missouri Office of Administration, Division of Budget & Planning's website at http://www.oa.mo.gov/bp/index.htm, and their published budget executive summaries at http://www.oa.mo.gov/bp/execbudgets.htm.

by The State of Missouri, Office of Administration, Division of Budget & Planning Missouri Economic Projections, 2007-2009

Percent Increase by Calendar Year

2007 2008 2009 Total Employment 0.8% 0.4% 0.6% Personal Income 5.4% 4.0% 4.3% Source: State of Missouri, Office of Administration, Division of Budget & Planning.