Miss. shrinks budgets, reflecting economic woes

Published 1:25 am Sunday, March 22, 2009

Mississippi lawmakers slashed hundreds of millions of dollars from the state budget Friday as experts predicted an economic recovery is more than a year away.

“The worst is yet to come,” state economist Phil Pepper told members of the Joint Legislative Budget Committee.

Based on a recommendation from Pepper and other experts, committee members shaved about $300 million from the budget of the current fiscal year, which ends June 30, and more than $400 million from the projections for next year’s budget.

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Legislators also say they might delay writing a budget for the coming year to give themselves more time to assess how the federal stimulus package will affect Mississippi government.

Wednesday is the deadline for legislators to file the final compromise versions of budget bills for the coming year, but House Speaker Billy McCoy and Lt. Gov. Phil Bryant said leaders are thinking of changing the deadline to May.

If the House and Senate agree to the change, lawmakers would finish working on general bills by late March or early April, as scheduled. They would go home for several weeks, then return to the Capitol to put the finishing touches on the budget.

McCoy said legislators will try not to squabble with each other or with Republican Gov. Haley Barbour as they set a spending plan.

“Tough times tend to bring a family together,” McCoy said.

Lawmakers are now projecting that the general fund — the part of the budget paid by state tax collections — will be $4.8 billion for this year but fall to $4.7 billion for the coming year.

It’s the first time since early this decade that Mississippi’s budget will shrink rather than grow.

Friday marked the second time in the past several months that officials reduced revenue estimates for the current year. The state had been slated to spend $5.1 billion this year, but the new estimate is $301 million lower. Barbour cut state spending in November and January because of sluggish tax collections.

The original revenue estimate for the coming year was set several months ago at just over $5.1 billion. The new estimate reflects a drop of nearly $403 million.

The revenue estimates are experts’ best guess of how much tax money the state might collect in a year, based on employment and spending trends.

Mississippi’s unemployment rate could hit 10 percent by December, Pepper said. The rate was 9.2 percent in January, the most recent figure available. This was the highest unemployment rate for January for the past five years, according to the state Department of Employment Security.

Mississippi is set to receive from about $2.5 billion to $2.8 billion in federal stimulus cash between October 2008 and December 2010. Barbour said some federal agencies are still setting regulations for the money.

Some lawmakers say the federal money will pad the state budget and could help head off the possibility of deep cuts in services or layoffs of workers.

“Without the stimulus, we’d be in one heck of a bind,” said Rep. Herb Frierson, R-Poplarville.

Legislators are still working on two state taxes that might pump more money into the budget. One is a hospital tax to help pay for Medicaid, the government health insurance program for the poor. The other is an increase in the cigarette excise tax, which at 18 cents is currently the third-lowest in the nation.

Senate Appropriations Committee Chairman Alan Nunnelee, R-Tupelo, said some of the federal stimulus money will be used to restore budget cuts Barbour made this year to public education.

With the infusion of federal money and the use of some — but not all — of the state’s financial reserves, Nunnelee said, “we will be able to limp through the fiscal years that we have in front of us.”