Barbour says Medicaid, schools could lose money

Published 12:23 am Friday, January 9, 2009

Gov. Haley Barbour says Medicaid or public schools — and possibly both — will be among the state programs losing money next week when he makes a second round of state budget cuts.

Within hours of the governor making the announcement Thursday, lawmakers started working on a bill designed to generate more money for state services by increasing the cigarette tax by 82 cents a pack.

Some House members said the plan to take cigarette taxes from 18 cents a pack to $1 was too much. Others said it was too little.

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“I wish we had a tax on all sins, including lying,” said Rep. Willie Bailey, D-Greenville, prompting an outburst of laughter from fellow lawmakers and lobbyists at a standing-room-only committee meeting.

“Alcohol, Viagra, I think we ought to tax ’em all,” Bailey said. “We’d have no problems with revenue.”

Barbour cut about 2 percent from the $5 billion state budget in November, but he chose not to take money then from Medicaid, a government health insurance program for the needy. He also spared the Mississippi Adequate Education Program, a complex formula that provides most of the money for elementary and secondary schools.

The Republican governor said the second round of budget cuts is unavoidable because a weak economy is eroding state revenues. Tax collections in December were 9 1/2 percent short of expectations, and Barbour said economists believe the economy will continue to perform poorly for the rest of the fiscal year, which ends June 30.

“There’s not a department or agency in state government that can’t save something,” Barbour told more than 1,000 businesspeople during a meeting of the Mississippi Economic Council, a statewide chamber of commerce.

Barbour told reporters he doesn’t yet know how many millions he’ll have to trim or how large the cuts will be to individual agencies. He said officials are awaiting information about corporate tax collections. Businesses affected by Hurricane Gustav in August were given until early this month to file taxes that normally would have been due in the fall.

Because Medicaid and public schools are the two biggest items in the state budget, Barbour said they’ll have to be trimmed. Under state law, a governor may not cut any agency’s budget by more than 5 percent until he cuts every agency’s budget by that much.

Nancy Loome, president of The Parents Campaign, an advocacy group for public education, said cuts to education “will be devastating” and could hurt the state’s job-creation efforts.

“The schools are already committed to their teacher contracts,” Loome said. “The vast majority of their budgets is made up of teachers’ salaries, and they are committed to those salaries for this year.”

Legislators began their three-month session this week, and the tight state budget is expected to dominate their debates. Barbour has said repeatedly that he wants lawmakers to spend no more than one-fourth of the state’s $362 million rainy day fund, which provides a financial cushion during tough times.

However on Wednesday, the Democratic-controlled House voted to take about $17 million from the fund to restore cuts that Barbour made to universities and community colleges in November. The bill still must be considered in the Senate.

Many lawmakers expect to increase the cigarette tax this year, but it’s unclear by how much. Barbour wants to add 24 cents a pack for premium cigarettes and 43 cents a pack on cigarettes produced by companies that didn’t participate in the state’s 1997 settlement of a lawsuit against the tobacco industry. Some health advocates want to add $1 a pack.

House Ways and Means Committee Chairman Percy Watson, D-Hattiesburg, said the proposed increase of 82 cents a pack is a compromise. The bill that cleared Watson’s committee on Thursday would increase the tax March 1, but some lawmakers said it might not be possible for the House, Senate and governor to agree on a bill by then.

The bills are House Bill 326 and 290.