State of Missouri delays tax refunds, borrows cash

JEFFERSON CITY | Missouri has borrowed $325 million from its budget reserves to eke out the lean weeks before tax revenues roll in later this month.

Meanwhile, tax refunds have gone unpaid, as a smaller staff of return processors and less available cash has limited how much the state can pay out in a given month.

But a spike in revenues this month should allow the state to pay back the loan and uphold its commitment to taxpayers, budget and revenue officials said.

The state borrowed $175 million in February and $150 million in March from its budget reserves. Prior to the February loan, the balance in the state’s general fund — which pays for everything from state salaries to education to social services — was down to a perilously low $13 million. Without the loans, the state would’ve faced a $100 million deficit in March and even more red ink this month.

State accountants prefer to keep the fund above $100 million at all times, said Linda Luebbering, the state’s director of budget and planning.

Borrowing funds in the weeks leading up to April 15 is not uncommon, Luebbering said — it’s been done eight of the last nine years.

Most years, it’s necessary to tide the state over before the surge in revenue that comes around the deadline for income tax filing. That’s true this year as well, she said, but is compounded by a nationwide recession that has seriously eroded state revenues.

“If you go back enough years to another downturn, you’ll see lower balances then as well,” Luebbering said. “And we always have lower balances as we’re waiting for tax revenues to come in.”

State law requires the $325 million loan to be paid back by May 15.

The recession has also slowed the state’s ability to issue tax refunds.

With state revenues down, the money for refunds just hasn’t been there when the returns have come in, said Ted Farnen, a department spokesman.

“We have a certain amount each month that can go out for refunds, and that amount this year is less than what we had to work with last year,” he said.

In February and March, the state paid out $445 million in tax refunds — compared to nearly $512 million last year. In April, planners expect to pay out nearly $64 million more in refunds than in the same month last year.

The Department of Revenue also cut costs this year by hiring just 127 temporary return processors, down from the 300 it usually employs, Farnen said. Fewer processors mean slower processing.

But despite the cash-flow hiccup that has necessitated the loans and the slow refund checks, the state is still on track to finish the fiscal year with a balanced budget, Luebbering said.

The state has implemented cuts that will save about $240 million by June 30, when the fiscal year ends. That should bring spending in line with the revenue estimate reached earlier this year.

“We’re looking at a (revenue) reduction of about 4 percent, and we’re right on target to hit that number,” Luebbering said. “It’s still a gloomy number, but the good news is the spending cuts will get us to where we need to be.”