Upcoming budget tough, but state does have healthy reserves

By BOBBY HARRISON / Daily Journal Jackson Bureau

JACKSON – While politicians of both parties warn that work on the upcoming budget will be the most difficult yet, legislators and Gov. Haley Barbour will not be undertaking the task with a completely empty cupboard.
Barbour has told agency heads to prepare for a cut of up to 15 percent for the coming fiscal year, which begins July 1. The reductions would come on top of cuts of 10 percent or more during the past three years for many state agencies.
“It is going to be brutal,” conceded House Education Chair Cecil Brown, D-Jackson.
Still, when the Legislature begins work in January on the 2012 fiscal year, the state will have at least $500 million in reserve that could be tapped to deal with what Barbour has described as the worst budget year since the Great Depression.
Those available monies can be found in:
• The state’s Working Cash Stabilization Fund, commonly called Rainy Day Fund.
• The Health Care Trust Fund, known as Tobacco Trust Fund.
• Hurricane Disaster Reserve, which was originally set up to provide the state match to deal with Hurricane Katrina.
In addition, the state has $127 million in stimulus funds that were approved for an enhanced federal Medicaid match. According to some reports, the governor also has access to another $25 million in stimulus funds to spend as he sees fit.
The state, for the first time in recent years, will have an ending cash balance – about $60 million – from the fiscal year that ended on June 30.
“I don’t want to spend all of those funds (during the 2011 session) but I don’t want to have a huge nest egg while laying off state employees and seeing college tuition go up 20 percent, 30 percent in some cases, and seeing ad valorem taxes on our homes, cars and businesses go sky high,” said House Appropriations Chair Johnny Stringer, D-Montrose.
Lt. Gov. Phil Bryant recently said the reserve funds are available because he, Barbour and others insisted on saving some of those monies during past difficult budget years.
He said he believes about half of the $152 million Rainy Day Fund should be spent during the upcoming session.
In addition to the reserve funds, for the first time in three years, tax collections are growing, albeit modestly. That growth is expected to provide $140 million more than the state has for the current fiscal year, based on an estimate provided by the staff of the Legislative Budget Committee.
The biggest problem in the budget for the upcoming fiscal year is the loss of $383 million in federal stimulus funds. But the source of the reserves, such as the Rainy Day Fund, appear to be large enough to offset the diminished stimulus help.
But Brown pointed out that numerous agencies are reeling. For instance, local school districts were underfunded more than $250 million this past year and were forced to eliminate about 1,000 jobs, including more than 700 teaching positions.
Universities also eliminated positions and raised tuition, as did community colleges.
The state’s Mental Health system is talking about laying off between 3,000 and 4,000 employees if it does not get a sizable increase in funding.
Plus, preliminary reports indicate that the state will need to put an additional $37 million in its pension fund.
All of which makes for a stressful budget process.
“It is a problem,” Brown said. “But I don’t think we will have to cut the budget the 15 percent the governor is talking about. That is $750 million. We’re not going to cut $750 million. We won’t have to.”
Bryant said recently the only problem with using the reserve funds is that they would be one-time money – once used, it’s not available the next year to fund recurring expenses. The Rainy Day Fund does replenish itself over a period of time.
And while legislators and the governor rail about the lack of wisdom in using one-time money to fund the budget, they routinely do. Barbour criticized then-Gov. Ronnie Musgrove for using about $700 million in one-time money to fund the budget in his last year in office before being defeated by Barbour in 2003.
But that practice has continued under Barbour and peaked two years ago with the use of more than $800 million in one-time funds.
Contact Bobby Harrison at (601) 353-3119 or bobby.harrison@djournal.com.