State drops $208 in revenues in FY 2009

JACKSON – Mississippi’s revenue collections for the fiscal year that ended June 30 are $208.5 million less than the previous year.
Despite that decline, the budget the Legislature finally adopted is $250 million more than the budget for the recently completed fiscal year.
The Legislature this month completed what was the most difficult budgeting process in recent state history, wrapping things up in a second special session more than a week into the new fiscal year, which began July 1.
At first blush, it would appear that the Legislature, which passed the budget, and Gov. Haley Barbour, who signed it into law, were fiscally irresponsible.
It appears that, at a time when the eco-nomy continues to struggle and state tax collections continue to sag, the Legislature and Barbour are growing government.
Indeed, despite the dire economic situation, many state agencies are receiving an increase in funding.
How?
The primary reason is the American Recovery and Reinvestment Act of 2009, commonly known as the federal stimulus package passed by Congress and signed into law by President Barack Obama earlier this year.
“Thank goodness,” said House Education Chairman Cecil Brown, D-Jackson, a key member of the Appropriations Committee. “The stimulus money made all the difference in the world.”
While revenue collections for the past year were $208.5 million less than the previous year, they were an even more staggering $400 million less than the official estimate used to construct last year’s budget, meaning legislators and Barbour started the budgeting process in a major fiscal hole.

Avoiding layoffs
Without the stimulus money, Brown said, there would have been massive layoffs of state employees, including teachers.
“There would have been huge cuts if not for the stimulus money,” Brown said. “There would have been layoffs. Programs would have been shut down.”
There is debate on the national level about whether the massive spending program is indeed stimulating a sagging economy, and Barbour himself has criticized the stimulus package.
But in terms of preventing massive cuts in state government programs, such as education and health care, the stimulus package achieved the desired goal in Mississippi.
Disbursed throughout the state budget for the current fiscal year are $523.1 million in stimulus funds, according to information provided by Senate Appropriations Committee Chair Alan Nunnelee, R-Tupelo.
Thanks to the stimulus money, “on the total budget we spent more money, but we had to cut some (agency) budgets,” Nunnelee explained.
For instance, the budget for the Department of Mental Health was cut $6.4 million, or 2.3 percent, while the budget for trial judges was slashed $1.5 million, or 7.1 percent.

Education fully funded
But thanks to stimulus funds, education from the kindergarten through the university level will be essentially fully funded.
In fact, the K-12 education budget will be $2.7 billion compared to $2.41 billion the previous year, according to figures compiled by the governor’s office.
But $130 million of that total, according to Barbour, is federal stimulus funds earmarked for special education and for Title I programs, typically designed to help underprivileged children.
A substantial portion of stimulus money – about $160 million – is directed toward general education purposes.
Plus, Medicaid, which perennially causes budget problems, was funded at the level requested by the agency’s leadership.
Overall, stimulus funding allowed cuts to be kept to a minimum, and the Legislature and Barbour were even able to save $60 million for the upcoming fiscal year, which many believe will be more difficult than the current one.
The Legislature and Barbour also left about $260 million in the state’s rainy day fund to deal with possible future tough economic times.
And they provided $38 million to help local governments hold down the cost of car tags.
The stimulus program was not the only reason the Legislature was able to escape possible budget collapse.

Other money
Other sources of new money included:
– An estimated $106 million per year from a 50-cent increase in the cigarette tax to 68 cents per pack. The increase took effect during May and generated $21.8 million during the past fiscal year.
– An estimated $10 million per year from an additional 25-cent-per-pack increase in the tax on smaller cigarette companies that did not participate in the settlement of the state lawsuit against the major companies during the 1990s.
– $60 million per year from an increase in the tax on hospital beds.
Plus, there were sources of one-time money used to prevent massive budget cuts. Among them:
– About $43 million in lawsuits settled by Attorney General Jim Hood.
– About $5 million from the sale of contraband cigarettes confiscated by state Auditor Stacy Pickering with the help of federal officials and other law enforcement groups.
– $30 million in fuel taxes earmarked for the Department of Transportation, but taken to plug holes in other budgets.
Without that money, and in the face of declining revenue collections, lawmakers would have faced a much more daunting task with the budget.
“You take away all those sources of revenue and combine it with a $400 million shortfall and it would have made it more of a challenge to fund the things we wanted to do,” said Senate Appropriations Vice Chair Doug Davis, R-Hernando.

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

Bobby Harrison/NEMS Daily Journal