Bonuses for state workers, a cushion for refunds, and other pieces of Greitens' budget

JEFFERSON CITY — Missouri might try to secure a $250 million line of credit to pay tax refunds during lean months, a state budget official said Monday while explaining the ins and outs of Gov. Eric Greitens' proposed budget for the 2019 fiscal year.

This move in the Republican governor's second spending plan would be a first for Missouri, said Dan Haug, the state budget director.

Essentially, the additional line of credit would help the state deal with its late-refund problem between May 16 and June 30, when the Missouri Constitution prohibits transfers from the state budget reserves to pay for operating costs. The money would be paid back by the end of June and wouldn't involve a deficit, Haug said.

"It's what any business would do if they had that kind of cash-flow issue," Haug said, adding that people who expect refunds file their taxes earlier than people who know they'll owe.

This funding tactic was among Greitens' recommendations for spending $28.75 billion to operate Missouri from July 2018 through June 2019, though it also is among the supplemental requests for the current year. Like all of Greitens' budget decisions, the $250 million cushion is subject to change or deletion as lawmakers mark up and modify Missouri's budget.

More:Higher education slashed, again, in Greitens' proposed state spending plan

However, Greitens did not delve into this issue during a rare press conference he held to outline "important investments" and "tough choices" in his proposed budget. From the governor's perspective, Missouri's budget situation is better than it was last year, but "only a bit," he wrote in his budget letter. Missouri will have about $202 million in additional spending compared to the current budget, which incorporates previous cuts made by Greitens to meet the constitutional requirement of a balanced budget.

Many questions journalists asked veered away from budget matters, as reporters oscillated between asking for more detail on the governor's cutting and spending and pressing him for information about the extramarital affair he admitted to Jan. 10. Greitens had not made a public appearance since giving his State of the State address that same evening, and he has communicated through a private attorney to admit to the affair and to deny claims the woman made to her ex-husband that Greitens took a photograph of her and threatened to release it if she went public about their relationship.

Greitens did not directly answer numerous personal questions, like whether he took any photos of the woman with whom he had an affair, and he also deferred to Haug on budget-related questions that required a nuanced explanation.

For example, there's the $40 million cut to the Department of Social Services in the form of "Medicaid cost containment initiatives." Budget officials have not yet identified these cost-cutting measures, which come on top of $30 million in "efficiencies" the department was directed to find and cut over the second half of 2017.

"We'll define that as we go along," Haug said of the $40 million reduction.

The state's revenue outlook recently took a downturn. After forecasting revenues to grow by 3.8 percent in the current fiscal year, Missouri cut its growth expectations in half. The change was due in part to the recent federal tax reforms and to state income tax cuts passed in 2014.

Missouri is required to have a balanced budget, which means accounting for the $300 million staying with taxpayers as result of the recent tax reform packages. The state and federal tax changes are expected to reduce revenue by $240 million and $58 million in the 2019 fiscal year, respectively, Haug said, adding that he expects Greitens' forthcoming tax plan to be revenue-neutral.

Another funding choice in Greitens' budget could mean bonuses for Missouri's state workers, the lowest-paid on average in the nation.

Greitens' budget calls for a $650 boost for state workers making $50,000 or less. But, Greitens noted, this $29.4 million pay plan would only materialize "if the Missouri legislature enacts critical reforms to the state civil service system — to ensure that we can move employees to where they help the most, reward the best for superior performance, and take rapid action against those who fail our citizens and their colleagues."

The governor's office expects legislation to be filed soon to reform the Missouri Merit System, which the state says is "designed to protect employees from arbitrary actions, personal favoritism and political coercion." The departments of Corrections, Health and Senior Services, Mental Health, Natural Resources and Social Services and the Office of Administration use the merit system, as well as several other divisions, like the Missouri Capitol Police and the Missouri Housing Development Commission.

Greitens' office referred the News-Leader to articles about civil service reform enacted in Indiana under former Gov. Mitch Daniels, a fellow Republican who also won election during his first foray into electoral politics.

When Daniels took office, he reduced the powers of labor organizations by ending collective bargaining between unions and Indiana state employees via an executive order, according to a Princeton University researcher. This allowed Daniels to change how Hoosier State workers had their job performance measured, including adding the possibility of higher annual pay raises to incentivize high-performing workers. (Missouri's constitution guarantees employees, including state workers, the right to collective bargaining.)

In Indiana, lawmakers created a "personnel contingency fund," according to the Princeton study. Daniels' office used the fund to fill the hole made by awarding 10 percent pay hikes to top employees. 

On the other hand, Indiana employees who didn't perform up to scratch were subject to a 60-day "work improvement program" and then could be fired if they didn't make sufficient progress, according to the Princeton study. The New York Times reported in 2011 that Daniels, who took office in 2005, had reduced the size of the state workforce by almost 20 percent, though the Princeton study noted that while there were layoffs, "employee attrition, especially retirements, was the main reason for the reduction in the total size of the state payroll."

Greitens has already made substantial changes to Missouri's state worker policies, like a totally new method of assessing employee performance. Gone is Missouri's old system of formal annual evaluations. Instead, supervisors and employees are instructed to have less formal conversations on a monthly basis. And Haug told reporters Monday that Greitens' 2019 budget includes the equivalent of 91 fewer full-time employees due to attrition. 

Broadly speaking, Greitens' civil service reform could give the state more flexibility to reward, fire and move around its employees.

He called for civil service reform in his first State of the State, saying he wanted to "focus on making a smaller government that works better for all of our people and will make Missouri a better place to do business."

Greitens' budget also includes the creation of a $25 million matching fund for investments by local governments "to ensure infrastructure is in place to attract, retain, and grow Missouri businesses and create additional jobs for hard working Missourians."

Possible projects include improvements to ports, utilities and communications systems, according to Greitens' budget overview. 

Another pro-business recommendation: Adding about $2.3 million to help the Department of Economic Development recruit businesses.

However, the state tourism commission is slated to experience a cut of about $10 million, equivalent to almost half its budget.

Greitens said he included about $11.2 million in additional spending to benefit Missouri children in foster care, a priority for him and his wife, Sheena, since they took up residence in the Governor's Mansion. That money could help reduce the state's adoption backlog and increase the amount of money foster care providers receive. 

But it's unclear whether any of that money will help the state improve its oversight for prescribing psychotropic drugs to foster children — an issue over which Missouri is being sued in federal court, and a problem allegedly exacerbated by the state's inability to maintain current and accurate medical records of children in Missouri's care.

Supporting law enforcement and veterans had been another priority for Greitens, a former Navy SEAL. His recommendations include an $11.5 million total increase for the Missouri State Highway Patrol, additional money for state veterans' homes and $30,000 to repair a Missouri war monument in northern France — but a $50,000 cut to the state's War on Terror Unemployment Compensation Fund.

Tens of millions in cuts to higher education were among the immediate headlines. The reductions for colleges like Missouri State University and Ozarks Technical Community College come on top of last year's cuts and comprise decreased core funding as well as requirements for colleges to perform well to win back more dollars.

Senators grill Greitens' budget director

Haug put on his game face and went before the Senate Appropriations Committee on Tuesday for a grilling. Senators left and right wanted answers based on an overview of the governor's new budget proposals.

The undefined civil service reforms Greitens wants to tie to raises for state workers caused some consternation, notably from Sen. Dan Brown, the Rolla Republican who chairs the appropriations committee.

"What the hell does that mean?" Brown wondered.

Haug was not able to provide Brown and the other senators with more specific information about Greitens' desired pay plan, which was among the concepts on which the appropriations committee demanded more details.

For example, Sen. Rob Schaaf, R-St. Joseph, wondered whether the $250 million loan to pay refunds wasn't just a way to get around the constitutional prohibition on using budget reserves. Haug seemed disinclined to see it that way.

"There's really no extra cost to the state, and we can get the refunds out quicker," Haug said during the hearing, adding that Greitens' administration was trying to think "outside the box" to make government more efficient. "It's new to Missouri, but it's not necessarily a new concept."

The cuts to higher education were of particular concern to Sen. Caleb Rowden, a Republican whose central district includes the University of Missouri-Columbia.

Rowden questioned whether Greitens was "hostile to higher education" in light of two consecutive years of cuts and raised the possibility that lack of an educated and trained workforce contributed to Amazon choosing not to build its new headquarters in Missouri.

Sen. Jamilah Nasheed, D-St. Louis, asked Haug to relay her concerns to Greitens that historically black universities, like Harris Stowe State University, could not withstand small cuts, let alone the 7.7 percent reduction the Republican governor proposed for next year's budget.