Budget hearings magnify challenge for legislators

JACKSON – During the past week of hearings by the 14-member Legislative Budget Committee, Lt. Gov. Phil Bryant detected a trend as agency heads asked for extra funding.
“Agencies understand the condition we are in, but that doesn’t seem to slow down their requests,” Bryant said after the committee had heard four days of budget requests from state department.
“One after another, they came in here and asked for additional revenue, though they all seemed sympathetic to the condition we are in.”
In total, agencies that receive the bulk of their state funding from the general fund are requesting a whopping $1.38 billion more than they were appropriated the previous year.

Drop in tax collections
It is not that unusual that the sum of such requests, at this time year, exceed $1 billion. The budget never grows that much, so the Legislature sets priorities and trims those requests.
But what is unusual is the unprecedented drop in state tax collections that has hit Mississippi.
“We are in the most destitute times we have had in my quarter century-plus legislative career,” said Rep. Steve Holland, D-Plantersille, who is a member of the Budget Committee.
For the past year, ending June 30, tax collections were more than $400 million below the official estimate and $208 million less than was collected the previous year.
For the first two months of the current fiscal year, tax collections are $31.7 million, or 5.3 percent, below the estimate. And at the current pace, the state will for the second consecutive year collect less in taxes than it did the previous year.
Only once before in recent memory – in the early 2000s – did the state collect less revenue than the previous year.
Nearly 40 percent of the about $5 billion in general fund revenue is generated through a 7 percent tax on retail items, and about 31 percent comes through income tax, and those areas are why collections are sluggish.
“Income tax withholdings were down 1.3 percent during the first seven months of this (calendar) year compared to the same period last year,” said state economist Phil Pepper.
“Retail sales in Mississippi have continued to weaken over the last year – down 8.2 percent in the first nine months of this year. Consumers continue to cut back on purchases.”
Those trends magnify the difficulties the Legislature and the governor will face in developing a budget. The Budget Committee and the governor will develop budget proposals later this for the full Legislature to consider when it convenes in January.
Hundreds of millions in federal stimulus funds are plugging some budget holes, but most of that help runs out at the end of calendar year 2010 – in the middle of the budget year legislative leaders are now planning for.
During last week’s hearings, legislators talked about making major changes in the funding of agencies to deal with the current economic downturn.
Bryant cited the Institutions of Higher Learning as an example that other state agencies must follow. Commissioner of Higher Education Hank Bounds and the 12-member Board of Trustees of state Institutions of Higher Learning are talking about merging administrative duties among the eight public universities.
But Bounds said the savings generated there will be minimal, and the likelihood exists that academic programs at the eight universities will be consolidated and eliminated on some campuses.
“If we can consolidate administrative duties (among agencies) we can save a lot of money,” Bryant said. “…It is time to be creative and consolidate and save.”
Holland said that despite the need for cuts, an emphasis must remain on health care and education. He said education is the key to improving the state’s economy and that children who go to school healthy are more apt to learn.
“Education and health care are part of the solution – not the problem,” Holland said.

Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.

Bobby Harrison/NEMS Daily Journal