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The state of Missouri began the 2006 fiscal year with
the second-lowest cash balance in its General Revenue
Fund since hitting record highs in the late 1990s. On
July 1, Missouri began FY 2006 with $302 million in the
state’s General Revenue Fund. One year ago, the state
began FY 2005 with a beginning General Revenue balance
of $506 million. This included about $190 million in one-time
federal assistance to the state.
Beginning year balances are essential in meeting the state’s financial obligations in the lean revenue months of July and August.
The state’s Office of Administration on July 19 directed the transfer of $200 million from the state’s $476 million Budget Reserve Fund to the General Revenue Fund. That same day, a transfer of $23.1 million was made to the Outstanding Schools Trust Fund and $173.4 million was transferred to the State School Moneys Fund.
State revenue collections peak with the filing of individual income tax returns on April 15. Other top collections points come at the end of each fiscal quarter. To cover cash flow, the state maintains a $476 million budget reserve fund.
Last year, $200 million was transferred to General Revenue from the Budget Reserve Fund in October by the Holden administration. Another $250 million was transferred to General Revenue from the Budget Reserve Fund in March by the Blunt administration. Such transfers must be repaid by May 15, with interest, during each fiscal year in which they are made.
Estimates of net General Revenue receipts for the month of July total $430.49 million, reflecting 2.78 percent growth over the $418.8 million received in July 2004. The consensus revenue estimates on which the FY 06 budget is based will require General Revenue growth of 1.09 percent over what was actually received in FY 05 to match the estimates on which the FY 06 budget is based.
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The state of Missouri collected $ 6,711,465,175.79 in General Revenue in FY 2005. The budget for FY 2006 is based on expected GR collections of $6,784,300,000.00. Both figures are net after refunds of over-withholdings of estimated and individual taxes. The chart on the following page compares FY 2005 actual revenues to the FY 2006 Consensus Revenue Estimate agreed to in December by the House, Senate and governor’s office.
Part of the anticipated growth factor can be attributed to stronger than expected General Revenue collections in the latter half of FY 05. For the first time, fiscal year GR collections exceeded the previous high enjoyed by the state in FY 2001, prior to the economic downturn resulting from the 9-11 terrorist attacks and a slowdown in the stock market.
In planning this year’s budget, officials incorporated changes in public policy that will reduce the amount of funds deposited into the state’s General Revenue fund. This includes the completion of a phase-out of the estate tax in Missouri, as well as the redirection of a portion of the state sales tax on motor vehicles from General Revenue to MoDOT. This year’s budget shows these changes will reduce inflows to General Revenue by an estimated $61 million.
With just four weeks of General Revenue collections in place, July lacks sufficient data to accurately predict the economic health of the state. Traditionally, July and August are slow months for revenue collections. It is the beginning of a fiscal quarter, with quarterly taxes not due until September. Missouri’s tax collections peak on April 15 with the filing of individual income taxes.
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During the month of July, the effective rate of return for the State’s
portfolio was 3.05% and the month-end yield-to-maturity was 3.16%.
The return of 3.05% was the highest monthly yield for the State Treasury
since November 2001.
Shortly after 9-11, the Fed cut the target Fed Funds rate below
3.00% to provide sufficient liquidity to the markets in light of concerns
about global financial conditions and then continued to make further cuts
as the US economy fell into recession and to ward off a perceived threat
of deflation. The yield on short to intermediate-term fixed income investments, which are closely tied to the target Fed Funds rate, fell accordingly.
The increase in the yield on the State Treasury’s portfolio is closely related to the Fed’s methodical approach in raising the target Fed Funds rate since July 2004 and a restructuring of the portfolio. Structural changes to the portfolio include:
o Greater emphasis on modeling State cash flows, which helps free up funds for longer-term investments. Previously, with little or no analysis of cash
flows, a much larger portion of the portfolio was kept short (1-90 days) to match off against expected disbursements.
o Restructuring of investments in the short end of the portfolio to “ladder” more funds
in the 6-12 month area.
o Use of tri-party repurchase agreements to increase yields on overnight investments
Although the General Revenue fund balance has fallen during the first month of July, the balance of the overall State Treasury has held steady at close to $3 billion. This in large part to $370 million of Amendment 3-related bonds issued by MoDOT in July, which are invested by the State Treasurer. All of these bond monies are expected to be spent on road construction projects within the next six months.
The Unclaimed Property Division of the State Treasurer’s Office returned $1,428,873.25 to 4,218 accounts in July. This division is responsible for locating citizens who are the rightful owners of abandoned property that has been turned over to the state. During the fiscal year that ended June 30, a total of $20.7 million was returned to citizens, a new record for the amount of property returned in a single fiscal year.
Under state law, banks, private businesses such as stock or insurance companies and government agencies holding property of owners they are unable to contact for five years must turn that property over to the state.
Once the property is received, an account is created in the name of the owner and the Unclaimed Property Division actively works to locate and return the property to rightful owners. Efforts include ads with names of property owners, direct contacts, exhibits at fairs and events and a website. Anyone with Internet access can to check to see if they are listed among property owners at http://www.showmemoney.com
Unclaimed property is held by the state in perpetuity. Ownership never reverts to the state and any claim that can be verified will be paid by to the rightful owners or their heirs.