The Mississippi Legislature spent six months arguing, posturing and ultimately preparing the state’s budget for fiscal year 2010.
In 60 days, much like a new BlackBerry, the budget became outdated.
Gov. Haley Barbour announced Thursday afternoon that he is cutting $171.9 million from the nearly $5 billion spending plan because of a shortage in tax revenue for the first two months of the fiscal year.
July’s revenue was $26 million, or about 11 percent, below estimates. That number was 21 percent, or about $56 million, less than July 2008.
August’s revenue numbers, released last week, came in $5.5 million short, or about 1.7 percent, of the latest projection. That’s 5.65 percent ($31 million) under August 2008.
The combined figures from July and August, when compared with the same period last year, put the state nearly 14 percent below last year, marking an $85 million deficit for the budget two months into the fiscal year. If that two-month trend continues, the FY10 budget would fall more than $800 below estimates.
“Mississippi has collected less money in revenue every month for the last year than had been anticipated or predicted,” Barbour said.
Barbour said it was “unlikely but not impossible” that the FY10 budget could end up $800 million in the hole. He set a target between $175 million and a $350 million deficit as more realistic, based on his conversations with members of the revenue estimating group.
If revenues continue to fall at the August rate, which was the smallest decline in months, Mississippi’s budget would still fall at least $100 million short.
“Personally, I think the August numbers were pumped up by the Cash for Clunkers program, which meant a whole lot of cars got sold in Mississippi in August that, I suspect, will be a far higher number than will be sold in September and the coming months” Barbour said.
The cuts include education, which was spared during the FY09 budget year. State law prohibits any agency’s budget being reduced by more than 5 percent until every agency has been cut at least 5 percent. Thursday’s cuts brought almost every educational entity up to the 5 percent mark. The National Board Certification, which awards a bonus to teachers who complete the certification process, remains intact, as does student financial aid programs.
“Last year when I had to do this, we tried to exempt education for as long as possible,” Barbour said. “This year it’s not possible. Our FY10 budget already imposed substantial spending cuts on many agencies, while at the same time this year’s budget provided for record spending on education.”
The majority of the education budget was funded using money from the American Recovery and Reinvestment Act, which will pump about $196 million each of the next two years into Mississippi’s educational system. That money is not subject to reductions.
The Mississippi Department of Corrections and Medicaid were exempt from the first round of cuts. Court-ordered expenditures were also held harmless. Approximately $60 million of the state’s annual payment from tobacco companies was carried over from FY09 to FY10 to plug some of the roughly $140 million deficit Medicaid will run beginning in January 2011, when the ARRA money allocated for Medicaid runs out and the federal matching rules require more money from states.
“If we order cuts now, then the departments and agencies, including schools, have 10 months over which to make those savings,” Barbour said. “The longer you wait, the shorter the period of time, the harder it is on the departments and agencies. That’s one of the issues here.”
Every other agency whose budget was cut less than 5 percent during FY09 were brought up to that mark Thursday.
The cuts come a little less than three weeks before the Joint Legislative Budget Committee begins holding preliminary meetings to determine the spending plan for the next fiscal year.
“We know what it’s like when there’s a storm on the horizon,” Barbour said, referring to the recent passing of the fourth anniversary of Hurricane Katrina. “Well, financially for the state, we’ve got a budget storm on the horizon. We’ve already been through a year of it.”
Department of Public Safety Commissioner Steve Simpson did not know exactly how the cuts would affect his agency.
“I don’t know what our cut is going to be,” he said. “We’re only two months into a 12-month fiscal year so it will be easier for us to absorb cuts today than it would be down the road.”
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