JEFFERSON CITY - Gov. Jay Nixon called job growth his top legislative priority in his State of the State address Wednesday, but his budget recommendation for next year calls for a reduction of 544 state jobs.

With more than 1,000 job cuts slated for the current fiscal year, the additional reduction would mean Nixon had cut almost 1,800 positions in his first two years.

State Budget Director Linda Luebbering said the reductions do not mean Missouri's payroll was unnecessarily bloated.

"This is more about demanding more from people left behind," Luebbering said.

The Department of Social Services would be hardest hit by job cuts, but Luebbering said many of these reductions would be to positions that are already vacant -- although increases in welfare programs would give the agency one of the largest percentage increases among the state's departments.

Nixon's budget recommendation calls for $253 million in cuts, $121 million of which would come from Medicaid.

Luebbering said these cuts wouldn't result in the elimination of any Medicaid services or any eligibility reductions but would come from examining services provided, reducing provider rates and better managing higher-cost clients, among other things.

"In some cases, clients will receive less service because they need less service," she said.

The recommendation assumes $300 million in additional federal stabilization funds for Medicaid through an extension of the current enhanced federal matching rate for Medicaid, which pays an extra 10 cents for each matching dollar.

The former Senate Appropriations Chair -- Gary Nodler, R-Joplin -- warned that Congressional authorization of those funds is not guaranteed.

To help balance a budget shortfall for the current fiscal year, Nixon's plan will withhold an additional $50 million in funding for the rest of the fiscal year, including a proposed increased to Access Missouri Scholarship Funds for the spring semester and make use of $150 million in federal stabilization funds that had been put on hold. This would include the MoHELA funds -- $100 million which had been set aside for higher education capital projects, originally proposed by Gov. Matt Blunt and included more than $30 million in funds for the Ellis Fischel Cancer Center in Columbia.

Though the budget calls for an $18 million increase in funding to the K-12 Education Foundation Formula, Luebbering said the foundation would not be fully funded, $87 million short than requested.

In November, Nixon and the presidents of Missouri's public four-year higher education institutions agreed to a deal which would freeze tuition for in-state undergraduates in exchange for a maximum 5-percent reduction to the higher education appropriation, which his recommendation maintains.

House Budget Director Allen Icet, R-St. Louis County, didn't get a chance to see Nixon's budget recommendation before the 7 p.m. address, but said he was concerned about the number of new programs Nixon discussed in his speech.

"Where does the money come from?" he asked.

Icet also expressed surprise at Nixon's call for a bipartisan approach to budget problems.

"I just don't recall that happening last year," he said.

Sen. Kurt Schaefer, R-Columbia, was surprised that Nixon's speech didn't focus more on budget challenges because it's on everyone's radar, he said.

Actual revenue collection for the current year has been lower than expected. The consensus revenue estimate for 2010 was reduced by an additional $480 million in early January and tax revenue is now expected to be nearly $800 million less than the original projection, for the second consecutive year.

Schaefer, vice chair of the Appropriations Committee, acknowledged some concern about the estimate for next year.

"I think some of those budget predictions are not realistic," he said.

Other legislators said they are also concerned about the budget for two years from now.

Nixon's budget recommendation includes $1.2 billion in federal stabilization funds that will expire next year.

"It's a pit we don't know to get out of," said Rep. Chris Kelly, D-Columbia.

PHOTO CREDIT: Anjali Pinto / Columbia Missourian