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MDA faces possibility of tight budget

When representatives from the Mississippi Development Authority (MDA) attended the Legislative Budget Committee hearings earlier this year, they were armed with a budget that reflected an expected 5% across-the-board cut.

Then House leaders asked the state agency if it could adopt a 25% budget cut, and tourism division director Craig Ray saw dark days looming.

“When you look at those numbers, the sky falls,” said Ray. “Just from tourism alone, we’d have to close three welcome centers, do away completely with the matching grant program for CVBs, and probably lose employees. That’s major.”

In the 2005 regular legislative session, state lawmakers could not agree on how to divvy up the state budget pie, and at press time, Gov. Haley Barbour had called a meeting with House and Senate leaders to discuss the matter. He is expected to call legislators back for a special session.

Taking care of the problem

“I am confident the Legislature understands the important and successful role MDA plays in creating and retaining jobs in Mississippi and helping communities become more attractive places to live so that they can compete more effectively,” said MDA executive director Leland Speed. “I’m confident the leadership will take care of the problem.”

In the last five years, MDA funding levels have fallen from $29.7 million in fiscal year 2000 to $23.6 million in FY05. The numbers could have been much worse. When MDA requested $25.4 million for the FY05 budget, the Legislative Budget Office responded with a recommendation of only $18.47 million.

The state’s economic development arm has requested a total of $22.4 million for the fiscal year beginning July 1, plus additional funding of $750,000 for a disparity study and $200,000 for BRAC (Base Realignment and Closure) consulting, bringing the FY06 budget request to $23.3 million.

“We were willing to make adjustments at the 5% level,” said Ray. “It’s the same cut we’d had the year before. Five years ago, my ad budget was $9.4 million. Last year, it was $5.7 million. We’re still learning how to do more with less, and our numbers are still effective, but the trend is going in the wrong direction.”

Despite the budget crunch, MDA reported an outstanding year.

“For the first time in years, Mississippi’s manufacturing employment has increased,” Speed pointed out. “We have launched initiatives like Momentum Communities that recognize that quality of life and economic development are inseparable in today’s environment. And, we’ve accomplished this with fewer dollars. Since January of 2004, when this administration was inaugurated, we have reduced employment at MDA by 7% through attrition with no change in service levels (while) we’re asking for 5% less money for next year.

“Having said that, the economy has momentum. Mississippi has momentum. Job growth has momentum. Now is the time to continue that momentum with well thought-out prudent investments.”

Adjusting to the $1.18-million reduction representing a 5% budget cut from FY05 would be accomplished through non-salary items and attrition, and additional cuts would come from headcount or program reductions. MDA is also lobbying to extend the repealer for CAP (Capital Improvements Revolving Loan Program) interest to administer the Community Services Division.

“With a 5% budget cut, we will be able to offer all of the services the citizens expect from MDA,” said agency spokesperson Scott Hamilton. “However, we haven’t done a detailed analysis of the impact larger cuts would have on our services or quality of delivery. Suffice it to say that we would be starting to cut muscle rather than fat.”

For example, until the Legislature agrees on a state budget, advertising commitments cannot be made.

“Our hands are tied because I can’t plan for next year, not knowing what we will or won’t have,” said Ray. “We’ve had to put off meetings for long-term buys. We’re in a holding pattern, as is everyone else at MDA and other state agencies.”

Hamilton said MDA is working with more prospects, representing a variety of industries, than ever before.

“It seems to us that as the economy is expanding and we’re gaining momentum, we need to keep the momentum going,” he said. “Cutting back on our marketing, this isn’t the time to do it.”

Of greater concern…
The status of Momentum Mississippi legislation is more troubling to agency leaders than the threat of a deep budget cut, said Hamilton.

“While we would obviously like our operating budget resolved sooner rather than later, our real risk stems from not having the Momentum Mississippi incentives that would be so valuable to many of the new prospects and existing companies that we are working with,” said Speed. “We are being beaten in the marketplace every day.”

MDA was able to seal the deal to bring 275 high-tech software development jobs to Hattiesburg by offering Bearing Point $200,000 from the agency’s ACE Fund for employee training and some relocation expenses.

“By winning this deal, another major national company that is finalizing a multi-million dollar information technology location decision in another state came to us and said, if Bearing Point is coming to Mississippi, we should look at the state, too,” said Speed. “Unfortunately, our incentive cupboard is bare. We’ll figure something out, but it will take longer and increases that risk that they’ll locate somewhere else.

“As any salesperson will tell you, it’s better to sign the deal when the buyer is in the showroom with a pen in his hand.”

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.

About Lynne W. Jeter

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