Slow recovery darkens budget outlook

JACKSON – State economist Phil Pepper told legislative leaders and Gov. Haley Barbour on Thursday not to expect much improvement in Mississippi’s economy until the second half of next year.
With that in mind, Barbour and members of the Legislative Budget Committee adopted “a conservative” revenue projection for the upcoming fiscal year.
The estimate of $4.56 billion, or 0.3 percent more than the current year, represents the amount of money that will be available to appropriate the 2010 legislative session.
That number is about $380 million less than the 2007 Legislature had to appropriate before the current national recession hit and Mississippi’s tax collections declined by historic proportions.
“In accepting this number we have our work cut out for us,” Barbour said during the joint meeting. “…I think it means what we all know – it can’t be business as usual. Our budget will have to be reduced.”
Growth in state tax collections of a modest 0.3 percent, or roughly $12 million, would be an improvement over what happened last year and what is happening this year.
Tax collections for the past year were 4.2 percent less than the previous year; and this year’s estimate, which legislators lowered Thursday, has tax collections dropping another 3.8 percent.
Pepper pointed out the decline would be much more if not for a 50-cent-per-pack increase in the cigarette tax approved during the 2009 session and a $40 million lawsuit settlement negotiated by Attorney General Jim Hood.
Each fall, Pepper and four other state financial experts, including Treasurer Tate Reeves, make a recommendation to Barbour and the Legislative Budget Committee on the revenue projections.
The Budget Committee and the governor are not bound by the recommendation but they normally accept it, as they did Thursday.
But both Barbour and Lt. Gov. Phil Bryant questioned whether the estimate might be too rosy.
Barbour already has had to make cuts in the current fiscal year because tax collections are coming slower than the state’s financial experts predicted. He trimmed $172 million in September, and is expected to have to make additional cuts.
On Thursday, Barbour asked legislators to consider expanding his ability to cut. Under current law, he cannot cut any agency more than 5 percent until he cuts all agencies by 5 percent.
Because tax collections could be as much as $347 million below the projection for this year, he suggested that the law be changed to allow him to cut as much as 10 percent.
But Rep. Cecil Brown, D-Jackson, a member of the Budget Committee, asked, “Why would we want to turn the state budget over to one person regardless of who that person is?”
Rep. Steve Holland, D-Plantersville, agreed. “The governor is not a member of the legislative branch,” he said. “He is a member of the executive branch. Spending is the purview of the Legislature.”
Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.

Bobby Harrison/NEMS Daily Journal