JEFFERSON CITY – Gov. Jay Nixon today announced that, due to the recent court ruling relieving tobacco companies of their obligation to pay the State of Missouri $50 million under the Master Settlement Agreement, spending will need to be restricted in order to maintain a balanced budget.
“Based on the St. Louis Circuit Court’s decision, both my administration and members of the General Assembly counted on these funds being available when the Fiscal Year 2016 budget was passed,” Gov. Nixon said. “Now that this ruling has been overturned, this unexpected loss of funds must be accounted for through spending restrictions to keep the budget in balance and our AAA credit rating intact. In taking these necessary actions, we have made every effort to minimize the impact on vital services by reducing spending from new programs yet to get underway and funding increases that would grow the size of government.”
The St. Louis City Circuit Court ruled in 2014 that Missouri was owed $50 million in its annual payment under the Master Settlement Agreement, partially vacating an arbitration panel’s decision. On September 22, 2015, the Missouri Court of Appeals, Eastern District, overturned the trial court’s ruling. The Attorney General’s office is planning to appeal the ruling but no decision is expected before the end of the fiscal year.
In order to minimize the impact of these restrictions, the actions taken today focus on new programs that have not begun and new spending increases. Even after the restrictions announced today, with anticipated revenues from the tax amnesty fund, health care providers are expected to receive a net one percent rate increase over the prior fiscal year.
Under the Missouri Constitution, governors are responsible for keeping the budget in balance throughout the year and ensuring that the state does not spend more than it takes in.
Missouri is one of only a few states with a AAA credit rating from all three ratings agencies, which allows the state to benefit from low interest rates and makes long-term capital investments more affordable. In reaffirming Missouri’s AAA rating in August, Standard & Poor’s Rating Services noted that “Missouri’s record of taking mid-year corrective budget measures has helped make its credit quality resilient to episodes of weaker than forecasted economic and revenue performance.”
An itemized list of the $46.1 million in spending restrictions announced today is available here.