Cut taxes and fund transportation? Missouri GOP lawmakers revving up plans

March 30--Years of falling revenue for Missouri's roads have pushed lawmakers to consider tax and fee hikes that could prove a sticking point as they work to pass "the largest tax cut" in state history.

The Missouri Department of Transportation reports it's short $825 million for high-priority needs alone, and though 90 percent of its major highways and interstates are in good condition, it has no money to start expansion projects or improve public safety. In a citizen's guide, the department says it must use all of its resources on maintaining the current system.

"To do that, some MoDOT districts must devote every available dollar to maintaining the condition of their roads and bridges, and they are still going to lose ground over time," the department says.

Concerned lawmakers are clamoring to find a solution as it's become next to impossible to rebuild unsafe roads or make improvements to Interstate 70, the state's main artery. Raising taxes may be tough in the Republican-dominated General Assembly, but both the House and Senate are expected to move forward next week with competing income tax cut packages and infrastructure proposals.

Those bills, however, give even Republican leaders some pause.

House Speaker Pro Tem Elijah Haahr, a Springfield Republican, said lawmakers are the "closest (they've) ever gotten to getting something done" on transportation funds.

"We've been drastically underfunding our roads for decades," he said.

Haahr is sponsoring a package of individual and corporate tax cuts, coupled with increases in motor vehicle fees and the closing of some deductions.

House Speaker Todd Richardson, a Poplar Bluff Republican, expects the House will work on Haahr's bill next week.

Debate over Haahr's bill comes after the Senate took a surprising step this week, giving first-round approval to a set of deeper tax cuts coupled with a hike in gas taxes and closing deductions. The bill, sponsored by Sen. Bill Eigel, a Weldon Spring Republican, stirs trepidation among some Republican leaders and has opposition from a left-leaning budget advocacy group. Eigel billed it the largest tax cut in state history.

Eigel's bill would gradually reduce income tax rates only if state revenue continues to grow. He argued that would protect Missouri from a Kansas-like budget crisis.

Senate Majority Leader Mike Kehoe, a Jefferson City Republican and former member of the Missouri Highway and Transportation Commission, said he voted for Eigel's bill on the first-round vote, which came after less than an hour of debate. Kehoe said the gas tax wouldn't fill the entire transportation gap but it would help.

The tax should be indexed to increase along with the price of gas, he said.

"If we would have done that 20 years ago, I'm not sure that we would be in the shape we are today," Kehoe said.

Haahr argued the effectiveness of a gas tax would diminish as cars become more fuel efficient and consumers switch to electric models. Missouri's current 17 cents-per-gallon gas tax is only half as effective as it was 20 years ago, the department reports.

"In my opinion, it's kind of a relic of a bygone era," Haahr said. "It's not just a good way to fund our system, and I think if we go with a gas tax, in 10, 20 years we'll be right back here again needing that money because we'll just have lost it."

Eigel says a hike to gas taxes would be more fair because it would capture revenue from non-Missourians who drive through the state on Missouri roads.

Both lawmakers' plans face tough roads. Critics warn the income tax cuts could knock a dent in the general revenue the state collects for other services, like education and its growing Medicaid expenses.

Eigel claims his bill will be revenue-neutral and only step down income tax rates if the state's revenue continues to grow, but the left-leaning Missouri Budget Project estimates it would cost the state between $500 million and $800 million every year once the bill is fully implemented.

The state is expected to release a cost estimate, or fiscal note, on the latest version of Eigel's bill next week.

"I'm sure the fiscal note's going to be a choker," said Senate President Pro Tem Ron Richard, a Joplin Republican.

The Missouri Chamber of Commerce and Industry has yet to endorse a proposal, though it applauded the federal tax cut passed by Congress. President and CEO Dan Mehan said in a statement the organization has concerns about portions of the Missouri tax bill that raise taxes on employers.

"We are evaluating the fiscal impact and will not endorse a final product that adds to the tax burden of our businesses," Mehan said.

Swift approval in the Senate caught several senators, including Richard, by surprise.

"I was actually upstairs meeting with the Department of Health and Senior Services and came downstairs and it was already done," said Sen. Dan Brown, a Rolla Republican and chair of the Senate Appropriations Committee.

Brown cautioned the General Assembly had to be careful with a bill that could put hundreds of millions of dollars on the line while the state grapples with offering services. He said he won't be in the Senate down the road and "somebody's going to have to make the numbers work."

Eigel said the bill and quick debate were a culmination of months of work behind the scenes, but Rep. Kip Kendrick, a Columbia Democrat, criticized senators.

"I don't know how you perfect a 450-page bill that has so many moving parts that could have an impact of $500-plus million in lost revenue in a matter of 20 minutes and think that's responsible," Kendrick said.

The state already cut taxes in 2014, a package expected to reduce state revenue by $250 million over the next decade, and Rep. Gina Mitten, a St. Louis Democrat, said Missouri services were already in trouble.

Last year, Missouri cut Medicaid reimbursement rates for in-home services for disabled people and for nursing homes. The House moved this week to partially restore those. Rep. Deb Lavender, a Kirkwood Democrat, said Missouri nursing homes spend more than they make to care for Medicaid patients.

Democrats also take issue with the level of funding for the state's public schools. The House plans to fully fund the state's K-12 formula, but the General Assembly lowered the bar to do so in 2016.

"What more trouble do we need to put Missourians in just to win elections?" Mitten said.

Jason Hancock contributed to this story.

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