Barbour: Rough economy calls for prudent budget

Published 11:49 pm Wednesday, November 19, 2008

Gov. Haley Barbour, who has blocked efforts to increase tobacco taxes over the past few years, now proposes paying for part of the Mississippi budget next year with a two-tiered increase in the cigarette tax — adding 24 cents a pack on name brands and 43 cents on cheaper off-brands.

The state’s current 18-cents-a-pack excise tax is one of the lowest in the nation. Barbour said the higher tobacco tax would generate about $80 million a year, a relatively small portion of the $5.1 billion budget for fiscal 2010, which begins July 1.

He said his overall spending plan would cut many agencies’ spending by 2 percent, on top of the 2 percent reductions they’re getting now. Barbour said the cuts reflect a sharp downturn in the national economy.

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“This is going to be a hard budget year and we need to be prudent, conservative, responsible,” Barbour said at a news conference Tuesday.

He said he’s proposing full funding for the complex formula that pays for elementary and secondary schools and he’s proposing paying for part of the Medicaid budget by reviving and restructuring a tax hospitals used to pay. Hospitals have lobbied hard the past several months against restarting the payments.

Barbour is also planning to take $84 million from the state’s rainy day fund, which provides a financial cushion for the budget. That’s about one-quarter of the fund’s current balance.

Mississippi legislators have a long tradition of ignoring governors’ spending plans. Lt. Gov. Phil Bryant said the Senate would use some ideas from the “realistic blueprint” Barbour provided. Barbour and Bryant are both Republicans.

The 14-member, bipartisan Joint Legislative Budget Committee will release its own spending proposals in early December. The full 122-member House and 52-member Senate is scheduled to put final touches on the budget by early April.

House Speaker Billy McCoy, D-Rienzi, said he hadn’t had a chance Tuesday to study details of Barbour’s budget.

“I know we’re facing a time where we have to be very frugal about our expenditures,” McCoy said. “He and we have to make some very tough decisions.”

Before winning the governorship in 2003, Barbour was a high-profile Washington lobbyist whose client list included tobacco companies. Health advocates have sharply criticized him for blocking efforts to increase Mississippi’s cigarette excise tax in the past few years.

Barbour appointed a group of businesspeople, professors and others to study the state tax structure earlier this year and he said he’d follow the group’s advice if it recommended increasing the cigarette tax. The group recommended an increase but was divided about how much it should be.

Barbour said his plan would put Mississippi’s cigarette tax at about the average for the surrounding states.

Barbour’s proposed 24-cents-a-pack increase would be on brand-name cigarettes made by companies that were sued by the state in the 1990s. Those companies are now paying the state about $100 million a year to settle the lawsuit.

Barbour’s 43-cents-per-pack increase would be on cheaper cigarettes made by companies that are not making the annual settlement payments.

He proposes putting the money from a cigarette tax increase into the general fund — the part of the state budget that pays for schools, prisons, mental health care and other programs. Some lawmakers, particularly House Democrats, have said they want to increase tobacco taxes to help pay for Medicaid.