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Jeff Roberson, Associated Press
Missouri Gov. Jay Nixon delivers the annual State of the State address to a joint session of the House and Senate Tuesday, Jan. 17, 2012, at the capitol in Jefferson City, Mo.

JEFFERSON CITY, Mo. — Missouri Gov. Jay Nixon proposed a third straight year of cuts to public universities Tuesday while favoring K-12 schools in an election-year budget plan that avoids tax increases and emphasizes efforts to expand private-sector jobs.

Delivering his fourth State of the State address to a joint legislative session, the Democratic governor relished the fact that Missouri's unemployment rate has finally fallen from its recessionary peak to the same level as when he was sworn into office in January 2009.

"Because of our strong leadership, Missouri is once again moving forward," he proudly declared.

Nixon proposed a nearly $23 billion operating budget for the next fiscal year, a slight reduction from the current year's spending it. It would cut funding for higher education institutions by 12.5 percent while holding aid for student scholarships steady and would eliminate 816 state positions to help close a projected $500 million gap between expenses and revenues. Employees who remain would be recommended to receive a 2 percent pay raise beginning in January 2013.

Nixon said the employee cuts would reduce the state payroll to its smallest level in 15 years. Although he didn't tout it, funding for higher education institutions also would be at its lowest point in at least the past for gubernatorial administrations. Nixon said the institutions must change their business models.

"I am calling on all our colleges and universities to continue to look for more ways to cut overhead and administrative costs and run smarter, more efficient operations," Nixon said.

It's doubtful that the full extent of the state cuts — approaching nearly a one-quarter reduction over the past three years — could be covered by improved efficiencies, said Brian Long, a former state budget director who now is the director of the Missouri Council on Public Higher Education.

"That's going to create some tremendous fiscal challenges at every one of our campuses in our state," Long said.

The Missouri Budget Project, which analyzes financial issues with an emphasis on their effect on the poor, was critical of Nixon's refusal to consider tax increases to avoid deeper cuts.

"While the governor mentions the need for job creation, these cuts will make it harder for students to get the quality education they need to compete in the global economy and for Missouri to attract jobs to our state," said the group's executive director, Amy Blouin.

By proposing a slight $5 million increasing in basic aid to public K-12 schools, Nixon was able to boast that he is providing a record level of funding to elementary and secondary classrooms. But the $3 billion in basic aid is still $477 million less than what's called for by the state's school funding formula, a shortfall that has continued to balloon over several years of underfunding.

Nixon emphasized instances in which he has worked together with the Republican-led Legislature to keep "a laser-like focus on job creation," specifically highlighting legislation that led to recent announcements by Ford and General Motors to expand automobile manufacturing plants in Missouri. He also touted proposals Tuesday night to spur more jobs among parts suppliers to the auto factories, increase international exports, put money into incentives for science and technology-based companies and offer job-training subsidies for companies that hire military veterans.

Republican legislative leaders cast a starkly different image of the state's economy and of Nixon's efforts to improve it.

In a Republican response broadcast after Nixon's speech, House Majority Leader Tim Jones declared: "Governor Nixon talks about creating jobs, but Missouri has fallen behind on his watch."

Jones, of Eureka, cited three specific cases in which Nixon's Department of Economic Development has offered state tax incentives to businesses that failed or later had their state aid offers revoked after embarrassing revelations.

Senate Appropriations Committee Chairman Kurt Schaefer, who joined Jones for the official the Republican response, emphasized Nixon's cuts in prior years to public school busing and higher education while noting that Medicaid spending had "skyrocketed" by 24 percent during Nixon's tenure.

"The growing diversion of funding away from programs that assist all our citizens in order to fund an expanding welfare state is simply unsustainable," said Schaefer, of Columbia.

Nixon's budget director, Linda Luebbering, said the governor's proposed budget actually contains a reduction in general revenue spending for Medicaid, based largely on efficiencies his administration has implemented.

Luebbering said Nixon would have loved to recommend more funding for public colleges and universities. But "quite frankly," she said, "we don't have the money."

To balance the budget, Nixon also assumed savings from a restructuring of state debt and an increase in revenue collections through an amnesty period for people with overdue taxes — a proposal that also was part of Nixon's package in 2011 but failed to pass the Legislature. .

Nixon called for "comprehensive" changes to two areas: Missouri's tax credit programs, which he said have waived $2 billion of taxes over the past four years; and charter schools, which he said need to be held "to high standards of academic achievement and financial integrity."

Both drew only limited applause. A bipartisan group of senators and House Democrats stood to clap for Nixon's call on tax credits while House Republicans generally remained seated — a reminder of the divisions that doomed a similar proposal during an autumn special session. Republicans also remained quiet as Nixon called for greater charter school accountability; some Republicans are instead pushing a plan to expand charter schools outside of their current boundaries in St. Louis and Kansas City.

While most Republicans sat in silent disapproval, Nixon reiterated an annual call to re-impose Missouri's campaign contribution limits. Nixon has benefited from the unregulated donations to build a $5 million campaign balance heading into the 2012 elections. But Nixon said Missouri's unlimited donations have created the potential for the wealthy, lobbyists and special interests to tip the balance in elections, putting "the very foundations of our democracy at risk."

Nixon opened and closed his nearly hourlong speech by honoring survivors of the May 22 tornado that killed 161 people in Joplin and destroyed thousands of homes, businesses and schools. He drew attention in the Capitol audience to Quinton Anderson, a high school senior whose parents died in the tornado, and to school Superintendent C.J. Huff. Nixon's budget director said the administration has set aside $72 million during the current year and $31 million in 2013 to help pay for disaster recovery efforts from the tornado and last year's flooding along the Mississippi and Missouri Rivers.