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Budget cuts cause concerns about ripple effect in Hattiesburg area economy

Direct local spending by USM could be cut $29 million

HATTIESBURG — With the University of Southern Mississippi (USM) one of the largest employers in the Pine Belt area, obviously there is anxiety about the impact of budget cuts on the area economy. And although a big impact hasn’t yet been seen from budget cuts for this year, there are big concerns about cutbacks proposed for next year.

“Budget cuts at USM will certainly have an impact on Hattiesburg and surrounding communities,” said Robert Ingram, executive director of economic development at USM. “This year’s cuts will not hurt too badly because many of the dollars cut have been absorbed through not filling vacant positions, delaying technology-related expenditures, reducing out-of-state travel and other such means. But future cuts will hit closer to home.”

According to a 1999 economic study of the impact of USM on the Hattiesburg area, the total annual impact is about $207 million, including 3,825 direct jobs. Ingram said if USM’s budget is cut next year by 14.1% as recommended by the Joint Legislative Budget Committee, local spending would be reduced by approximately $29 million and an estimated 290 jobs in the community would be lost— in addition to those jobs lost on campus.

“Hopefully our legislative leaders can find a way to reduce cuts,” Ingram said. “I know they are trying very hard to do so, as are the governor and lt. governor. There has been concern expressed in the community, especially by economic development leaders. Because of the diversity of the Hattiesburg-area economy I don’t think most local merchants would feel the effect on their business to the extent that merchants probably would in smaller, more university-dominated communities in Mississippi. But a large cut will be felt by every business here, just as if a local industry were leaving.”

Ingram predicts that retail sales would feel the greatest impact, but adds that if several hundred people lose jobs, the housing and rental property markets also will suffer, as well as the medical community. A large cut next year would also have a very negative effect on Hattiesburg’s sales tax collections.

The biggest long-term impact he sees based on this year’s cuts is the loss of quality faculty and staff. The School of Business is losing some of their best young faculty members who are getting huge raises to go elsewhere. And Ingram said other departments could lose equally qualified faculty and staff who would be increasingly difficult to replace because of the state’s financial difficulties.

“Should further cuts be required next year, the long-term impact will be even greater and eventually the cuts could affect the ability of our institutions of higher learning to recruit top students as well as faculty, and could force the elimination of small but important programs of study,” Ingram said.

Andrea Saffle, marketing director for Turtle Creek Mall, said that while there hasn’t been great concern thus far, people worry about what the future holds.

“It hasn’t so far been expressed as a major concern by our retailers, but we do recognize that it is going to impact the economy because, if nothing else, they are not replacing people who leave,” Saffle said. “It is really hard to gauge what the final impact will be. They are one of the top 10 employers in this area so obviously they are a contributing factor to retail sales, but I wouldn’t say any more so than Forrest General, Hercules and some of the other employers, as well.”

Richard L. Jones, chairperson of chamber of commerce division of the Area Development Partnership, said the cutbacks at USM could cause harm to the business community.

“It is going to cause a ripple effect because when people leave and aren’t replaced, jobs are lost and that places a strain on the economy,” Jones said. “USM is a big player in the local economy. So when they lose funds, it affects all of us. The university is a vital cog in this economy.”

Jones said retail sales, restaurants and service-oriented businesses are most likely to be hurt by the cutbacks. Faculty members he has talked to feel like they will get over the budget cuts, but that it will take time to recover.

“They feel like the budget cuts will have a devastating effect, but they’ll soon get over it and will be able to rebound,” Jones said. “It will be hard to recruit new faculty when they find out about the economy of the state the university is located it.”

Jones added that failing to replace staff puts a bigger burden on existing faculty, who will now have overlapping responsibilities. Some may choose to seek employment elsewhere with a more reasonable workload and more stable economy.

USM has seen $5.6 million in cuts since July 1, 2000, which represents 6% of their budget. USM spokesman Phil Hearn said the $11.5 million in cuts planned for next year would be very difficult to absorb.

“We didn’t have a whole lot of fat in our budget anyhow at USM,” Hearn said. “So this is cutting into the bone, and it will be really severe if the full impact of the legislative budget cuts goes into effect. There’s very little room to cut because 70% of the budget is in faculty and staff salaries.”

One of the options the college board is considering to deal with the funding shortfalls is a state of financial exigency, which is another word for emergency.

“If that has to happen, it would really be a setback for higher education in Mississippi,” Hearn said.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.

About Becky Gillette

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