Before closing the book on 2013, Missouri Business Alert is taking a look back at the year’s most important stories in Missouri business, focusing on the top 10 stories overall and the top five in several key industries:
The Republican Party came into the 2013 session with a supermajority in both the House and Senate, which gave the Grand Old Party enough votes to pass landmark legislation and override any vetoes by the Democratic governor. If they stuck together, that is. They didn’t.
But there was a second act: Gov. Jay Nixon called the legislators back to Jefferson City for a special session near the end of the year. This time, the Republicans and Democratic governor quickly and decisively agreed on incentives intended to persuade Boeing to build its new 777X airliner, or at least the wings, in Missouri. The tax proposals and Medicaid expansion will be debated again when the General Assembly returns in January, the same month Boeing is likely to determine Missouri’s fate.
Here are Missouri’s top stories of 2013:
1. Proposed income tax cuts fall short
The General Assembly passed legislation that would have significantly reduced the tax rate for corporate and individual income over a 10-year period. The tax on corporate income would have dropped to 3.25 percent from 6.25 percent. Another provision created a 50 percent deduction for any business income reported by individuals, gradually introduced over five years. But the initiative began losing support as details emerged about unexpected consequences of the bill: increases in sales taxes on prescription drugs and textbooks. The House failed to muster enough votes to override Nixon’s veto.
2. General Assembly passes business-prioritized bills
There were some bills identified as business priorities that did get signed into law. The legislature changed the way the prevailing wage is calculated for public construction projects in rural counties. Lawmakers also took the cap off of a surcharge that businesses pay on their workers’ compensation insurance. That action will bolster the Second Injury Fund, a benefit that covers disabled workers who suffer additional job-related injuries. The Legislature overturned vetoes on bills that will: allow payday loan companies to raise fees on consumer loans; limit awards against insured drivers in certain accidents; and change regulations on foreign ownership of Missouri farms.
3. Border War over economic development intensifies
The poaching of companies in the Kansas City metro area by economic developers in Missouri and Kansas continued in 2013, but at the end of the year Nixon offered a truce in the so-called Border War. Nixon called for a moratorium on using tax incentives to shuffle companies across the state line. Then, during prefiling for the General Assembly’s upcoming session, Sen. Ryan Silvey, R-Kansas City, filed a bill aimed at ending the practice. The pilfering has shifted more than 5,000 jobs across the state border within the metro area, draining an estimated $200 million in income tax revenues from the states and resulting in no net gain to the local economy. Whether Nixon’s proposal for a moratorium gains traction in the Missouri General Assembly during the coming year is uncertain.
4. Federal budget fights wound Missouri’s economy
The federal government’s partial shutdown for 16 days in October directly hurt thousands of federal employees in Missouri, but also had ripple effects. The shutdown began to bite private sector workers whose companies depend on federal contracts. The Federal Reserve Bank of Kansas City reported that the partial federal government shutdown caused some production delays and other problems. Several factory managers reported delays in the government inspection and approval process, a lack of federal data availability and overall customer uncertainty.
5. Governments struggle with student transfer issue
A Missouri Supreme Court judge ruled in December that students should be allowed to transfer out of unaccredited school districts. Taxpayers in five school districts sued Kansas City Public Schools and the state, claiming that they should not be required to accept transfer students from the unaccredited Kansas City school district. A trial court found that for the transfers to violate Missouri law, they would have had to result in increased costs to the schools accepting the transferring students. But the Supreme Court characterized Missouri’s transfer law as shifting costs rather than generating new ones. The decision put pressure on state legislators and the governor to come up with a new school transfer law that requires struggling districts to pay for children to enroll in nearby, higher-performing school systems.