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Bare-knuckled budget battles expected when session convenes

It was already a given that, after a round of bare-knuckled special sessions over the summer failed to produce a solution, that the method of funding the state’s obligation to Medicaid would be an onerous issue come January when the Mississippi Legislature returns to Jackson.

That might only be partially true. The budget for every Mississippi state agency is going to be an issue.

Gov. Haley Barbour announced October 10 that he is asking department heads to trim their budgets for fiscal year 2010 by 2%. The move, Barbour said, is due to lower-than-estimated tax revenues.

“Just as Mississippi families and businesses are revising their budgets and looking for ways to save money, we in state government must tighten our belts, too,” Barbour said in a press release. “High fuel costs and lower-than-expected tax collections mean we must further control our spending.”

General fund revenues came in below $23.8 million, approximately 2.11%, short of estimates for the first quarter of FY2009, which began July 1. All told, Mississippi could experience a $100-million shortfall for FY2009.

The budget is historically the main source of conflict in the regular legislative session. More often than not, the Republican-controlled Senate the Democratic House begin budget negotiations miles apart before reaching a consensus. Approving the budget and sending it to the governor’s desk is usually one of the last orders of business before the session adjourns in late spring.

The upcoming session has a chance to take a similar shape. Barbour told a gathering of the Mississippi Council on Economic Education last week that the shortfall of the first quarter “may turn out to be the best we have,” with the possibility looming that shortfalls could increase each quarter, causing further strain on FY2008’s budget that spent 100% of earlier estimations.

“Our economy as a whole is in a place where we’ve never been before,” Barbour said, referring to the strained credit markets and collapse of several Wall Street investment banks that have led to several levels of government intervention. “Anybody who tells you that we’re at the bottom or says they know where the bottom is, I wouldn’t listen to them.”

In his run for re-election last fall, one of Barbour’s key talking points was the condition of the state’s Rainy Day Fund, which has approximately $370 million in it. Barbour was staunchly against using any of that money to pay for this year’s Medicaid tab. The state met its $90-million Medicaid obligation this year with a refund from the federal government that was a result of an accounting error discovered by the Mississippi Division of Medicaid.

“(The Rainy Day Fund) will cushion us, but it’s probably not going to mean that we’re not going to have some belt-tightening,” Barbour said.

A key component of the budget is education funding, specifically the Mississippi Adequate Education Program. MAEP is the formula that determines the amount of state money each of the state’s school districts receives. Lawmakers bucked recent history when they voted to fully fund MAEP this year, marking the first time the program has been fully funded in consecutive years. Before, the formula received full funding only in election years.

Barbour, with an audience that included state Superintendent of Education Hank Bounds and several dozen teachers, stopped short of promising MAEP would be fully funded next year.

“But I hope we can,” he said. “We all need to be prepared. We are going to have a very tough budget year. The Legislature is going to have to have an austere budget. That’s not pleasant, but it’s the truth, and people need to know the truth.

“So, before the Legislature gets back (to Jackson in January), we need all the cards to be face-up on the table.”

Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .

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