SID SALTER: Expect state revenue problems not seen since the Great Depression

Perhaps the best way to begin a discussion of the Fiscal Year 2012 state budget is to put it this way – look at everything problematic with the current FY 2011 budget and then make it $500 million worse.
But that’s still missing the point to a degree.
Let’s try this explanation – even with federal stimulus funds, Mississippi’s FY 2010 budget was cut an average 9.5 percent. The FY 2011 budget was crafted to be at a level that averages 13.5 percent below 2010 appropriations.
As the 2009 federal stimulus funds expire, the FY 2012 budget that lawmakers are now contemplating is projected to be from 20 percent to 23 percent below the 2010 appropriations.
Mississippi is firing or furloughing state employees under the FY 2010 and FY 2011 budgets.
Imagine the impact of an FY 2012 state budget with an additional 10 percent taken off the top essentially across the board.
In other words, Mississippi is contemplating budget cuts the depths of which have not been seen in modern times. Without the federal stimulus funds, the FY 2012 budget gap would be far deeper after even more disastrous budget cuts for the two prior fiscal years.
The Joint Legislative Budget Committee is scheduled to begin an abbreviated schedule of budget hearings on Sept. 20 and conclude them on Sept. 23. That schedule reflects the fact that lawmakers are in no mood to repeat last year’s rather ridiculous hearings in which state agency heads asked for more than $1 billion in increased funding over the previous fiscal year’s budget.
Gov. Haley Barbour cut spending five times in 2010 in order to comply with the state’s constitutional mandate to balance the budget.
Mississippi endured a $363 million budget deficit for FY 2009, $480 million budget deficit for FY 2010, with an estimated revenue shortfall of $544 million for FY 2011. That pattern could be changed by State Tax Commission reports that overall tax collections in August were more than $12.4 million, or 3.9 percent, ahead of projections. For the first two months of the FY 2011 – July and August – collections were $19.1 million ahead, or 3.6 percent.
Congress adopted an additional federal stimulus package that will inject new federal dollars into Medicaid and public education as part of the recent $26.1 billion bill passed by Congress. That funding will allow lawmakers to “push forward” a portion of the $98 million in education funding and will shore up Medicaid in the short term.
But Barbour and key state legislative leaders agree on one thing – Mississippi has not faced a budget crisis like that which looms since the Great Depression.
That challenge comes at a time when the Legislature is gearing up for both legislative redistricting and the 2011 general election. No matter how bad the state’s fiscal crisis becomes or the extent to which essential services are cut, the political reality is that new tax proposals will be dead-on-arrival.
The kicker is that if legislative redistricting breaks down and becomes mired in federal litigation – which in Mississippi is predictable if not a political certainty – then lawmakers face the prospects of back-to-back elections in 2011 and 2012. The state’s rainy day fund is being spent down at an alarming rate. The state’s “inviolate” tobacco trust fund has been violated to the point of near extinction and there are really no other pots of cash left to raid beyond those sources.
The result: State services will be reduced significantly. Those seeking less government will get it in spades.
Be careful, as they say, what you wish for – you just might get it.

Sid Salter is Perspective editor at The Clarion-Ledger and a syndicated columnist. Contact him at (601) 961-7084 or ssalter@jackson.gannett.com.

Sid Salter