EDITORIAL: Falling revenue

Any hopes for a quick state budget recovery were dashed last week with the news that September revenues were 10 percent below projections.
That came on the heels of August’s 2 percent shortfall, which was less than the recent norm and suggested the trend might be turning around.
It’s clear now that’s not the case.
And even when the economy does turn around, history suggests that it will take a long time – even a few years – for revenues to return to previous levels, as Daily Journal Capitol correspondent Bobby Harrison reported last week.
Gov. Haley Barbour, who was in Asia on an economic development trip when the September results were announced, indicated more deep budget cuts are to come.
Mississippi is suffering all around economically. Our statewide unemployment rate is 10 percent, and it’s even higher in Northeast Mississippi. Sales tax collections are down across the board in the region, indicating that people don’t have the money to spend that they once did or are being a lot more careful about it. This in turn affects struggling businesses, further exacerbating the cycle.
Overall, state revenue collections are nearly 8 percent – $77.4 million – below estimates for the first three months of the 2010 fiscal year. Last month, Barbour cut state budgets, mostly education, by $171 million.
If he does another round of mid-year budget cutting soon, he’ll have to start elsewhere. State law says every agency must be cut 5 percent before any agency can be reduced more than that. Education has already reached the 5 percent threshold.
Clearly there will be a need for further cuts at some point. But K-12, community colleges and universities have already taken big hits, and more would be a significant setback to the state’s efforts to get education funding at all levels where it needs to be. Education, we need to continually remind ourselves, is the foundation for long-term economic success in the state.
What are the alternatives? Mississippi has $300 million in its rainy day fund. Those reserves must be used judiciously, as the governor has repeatedly stressed, given the likelihood of a prolonged revenue slump last two or three fiscal years and the eventual elimination of federal stimulus funding. But judicious use may mean tapping the reserves to avoid another hard blow to schools, community colleges and universities while giving them time to prepare for leaner times ahead.
None of these decisions will be easy for the governor or, when it comes to the next budget, for legislators. Keeping the long-term impact of today’s cuts in view is essential.

NEMS Daily Journal