IHL confronts fiscal reality

September 24th, 2009 No comments

“We are not here to moan and cry.”

That was College Board President Scott Ross’ opening line to the Joint Legislative Budget Committee this morning as the Institutions of Higher Learning presented its FY2011 budget request. The JLBC has spent this week telling state agencies that money is slim and could get slimmer before the next fiscal year begins next July.

IHL submitted a request that is $42.8 million more than it received in FY2010. Seventeen million dollars of that will pay for a cost of living adjustment that will allow for colleges and universities to keep the purchasing power it has as the price of goods and services rises, IHL Commissioner Dr. Hank Bounds told lawmakers.

The bulk of the rest of the additional funding is made up of $21 million for the University of Mississippi Medical Center.

“Our big need is to increase our school size,” said interim UMC Chancellor Dr. James Keeton. UMC has 120 medical students, which is all the school can handle with its current size and resources, Keeton said. “We would like to grow that to 150.” While the extra $21 million wouldn’t cover the full cost of growing the student body to 150, it would be a start, Keeton said.

In a nod to the state’s dwindling tax revenue, Bounds said he has talked with all eight university presidents about the idea of consolidating some functions like purchasing, the contract 403(b) notification requirement administration and the IRS 125 administration.

“They are all open to that,” Bounds said.

Lt. Gov. Phil Bryant said he was “stunned” at that announcement, since the consolidation of any state service has long been a subject most lawmakers and state agencies have refused to even discuss.

“We can’t afford to wake up three or four years from now and have mediocre programs,” Bounds said. “We have to think differently. We also recognize that if all (economic) prognosticators are accurate, we could see some really tough days ahead.”

Bounds did not have a cost savings estimate consolidation of some functions might provide. He did say that IHL is preparing to receive fewer state funds in future budget years, and that there is a plan in place to operate the system in such an event.

The budget Bounds and other officials presented Thursday morning, which totals $841.5 million, is about $200 million less than the budget they originally planned to present. The first budget, Bounds said, would have brought funding for Mississippi’s colleges and universities up to the Southeastern average.

Bounds spent a several minutes selling higher education as a driver of economic development in Mississippi.

“I really believe we can only educate ourselves out of the financial crisis,” he said. “It is absolutely clear that if Mississippi is going to move forward we have to produce a better-educated citizenry.”

Mississippi needs more graduates who fall into the STEM category — Science, Technology, Education and Math, Bounds said.

The funds available for the Mississippi Tuition Assistance Grant, which awards $500 per semester to entering freshman who have at least a 15 on the ACT and a 2.5 GPA, are low. The funds are at the same level they were in 2000, but the number of students who are eligible has seen “an appreciable gain,” Bounds said.

With state money in a sharp decline and enrollment up at nearly every institution, Bounds could not rule out tuition increases to make up the difference.

“We will do everything that we can (to prevent tuition increases),” Bounds said. “But I can’t guarantee they won’t go up.”

House Appropriations Committee Chairman Johnny Stringer, D-Montrose, told Bounds he would do “all I can” to get IHL’s budget funded at the level it requested.

The IHL’s presentation took up the vast majority of this morning’s hearings. Afterward, the Mississippi Development Authority presented a budget request of $22.6 million, which is the same amount it got in FY10. The MDA’s state funding has been basically level since 2003. Federal money makes up most of its budget.

“We cannot afford to lose momentum right now,” MDA Executive Director Gray Swoope told the Committee.

Swoope said that Nissan continues to fulfill the Memorandum of Understanding it signed with the state regarding direct job numbers — the company employs about 3,100 people directly — and Toyota is still “fully committed to Mississippi. They are going to build vehicles in Blue Springs.”

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More numbers and a big charge end day three of budget hearings

September 23rd, 2009 No comments

The third day of budget hearings featured three fiscal heavyweights, piles and piles of numbers and one serious allegation from Division of Medicaid executive director Dr. Robert Robinson.

Robinson and his team presented a budget request that is roughly $201.9 million more than the $451.3 million the agency received in FY10.

As big as those figures are, that wasn’t the most explosive part of Medicaid’s time before the Joint Legislative Budget Committee.

Once lawmakers and Medicaid staffers finished haggling over the numbers — most of the increase depends on the state replacing federal stimulus money — Robinson was asked by Rep. Percy Watson, D-Hattiesburg, about fraud and abuse in the Medicaid system.

Robinson said the fraud among the 609,000 beneficiaries is negligible. But on the provider side, he said, it’s rampant.

“Behavioral health centers are wearing us out,” Robinson said. Robinson, without naming the place, mentioned one behavioral health outfit that received $24 million in Medicaid reimbursements it should not have gotten.

He wasn’t done. “We can’t get anybody to prosecute them,” Robinson said, adding his agency had presented evidence of the wrongdoing but had been turned down by the U.S. attorney’s office and state Attorney General Jim Hood.

“Bob, you and I have been friends for a long time but I just don’t believe state or federal prosecutors wouldn’t have time to track down $20 million,” House Speaker Billy McCoy, D-Rienzi, said at the beginning a lengthy and incredulous rant at Robinson’s assertion. “Hell, we’ve got 40 people that can work on it. I’ll get to the bottom of it personally.”

The Medicaid presentation was the most lively part of a dry, numbers-based day of budget hearings at the Woolfolk Building.

The State Board of Community and Junior Colleges requested $64.7 million in additional funding for FY11, to bring the system into compliance with state law that requires spending on community and junior college students to be in the middle of per-pupil spending on K-12 public schools students and per-pupil spending on students at Jackson State University, Delta State University, Alcorn State University and Mississippi Valley State University. Another $13.8 million would fund a dropout recovery initiative that was given $1.5 million in FY10, bringing the total increase to $78.5 million and the total budget request to $331.4 million.

Dr. Eric Clark, former secretary of state and current executive director of the SBCJC, spent several minutes after the financial parameters had been laid out to lawmakers advocating the mid-level funding law legislators passed in 2007.

“It’s a good law,” Clark said. “It passed unanimously in the House and the Senate and (Gov. Haley Barbour) signed it. It’s a moral obligation just like MAEP. I’m asking you to make it a priority.”

Clark said community colleges provide crucial workforce development programs potential businesses and industry require before they set up shop in Mississippi. “We’re growing the pie,” he said.

Senate Appropriations Committee chairman Alan Nunnelee, R-Tupelo, told Clark it would be “difficult” to get the full $13.8 million. “But I didn’t intend for this  year’s money ($1.5 million) to be the end, either,” he said.

Mississippi Department of Public Safety Commissioner Steve Simpson asked for an 8.4 percent budget increase. The $15 million would fund a trooper school to replenish the Highway Patrol’s personnel. Simpson said 71 troopers have either left or retired from DPS since November 2007. House Appropriations chairman Johnny Stringer, D-Montrose, said it would be “real hard” to operate a trooper school in FY11 and proposed that troopers who have already retired be allowed to work part-time, similar to what a lot of Mississippi teachers do, as a cheaper alternative than a trooper school to raise staffing levels.

The budget increase would also go toward the Mississippi Crime Laboratory and the state law enforcement academy, along with upgrades to DPS’ outdated computer technology, Simpson said.

The Mississippi Public Service Commission and the Mississippi Gaming Commission each submitted requests that contained no additional funding. Joel Bennett, of the PSC’s finance division, told lawmakers that the Commission “respectfully reserves the right” to alter its budget request after the legislative session starts in January.

“I think they’re all adjustable,” Lt. Gov. Phil Bryant said.

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Department of Education makes pitch to JLBC

September 23rd, 2009 No comments

A quick recap of this morning’s proceedings at the Woolfolk Building as the Joint Legislative Budget Committee continues to hear budget requests from state agencies.

As expected, the presentation by interim State Superintendent of Education Dr. Daniel Jordan and Board of Education President Bill Jones drew the largest crowd yet in the JLBC’s hearing room.

The numbers: Education is asking for an increase of $173 million over FY10 funding. That figure operates on the assumption that about $160 million in federal stimulus money that was appropriated this year will be available next year. Without it, the increase would rise to roughly $330 million. Those numbers fully fund the Mississippi Adequate Education Program, whose full-funding number rose $47 million from last year, add ons like the National Board Certification teacher salary supplements and a 3 percent pay raise for all teachers.

“No one is naive about the (revenue) situation,” Jones said. “The numbers are what they are.”

“We understand these are critical times,” Jordan said.

MAEP’s total figure was broken down into two categories: $97 million that was made up of $61 million for full funding in FY11 and $36 million in the restoration of funds that were diverted from the program the past 10 years. The remaining $66 million of the program would fund teacher recruitment initiatives, the high school redesign program and the 3 percent teacher pay raise.

Rep. George Flaggs, D-Vicksburg, asked Jones which of the two facets of MAEP held more priority — the base funding or the add ons.

“That’s like asking me which child I want to shoot,” Jones said.

“Well, you may have to,” Flaggs responded, adding he would “lay his life on the line” to ensure the $97 million base formula was fulfilled.

Several lawmakers brought up the idea of school consolidation as a means for the state to trim some of the $2.3 billion cost from the education budget. Consolidation has traditionally been a political hot potato.

“Find me two schools that want to merge with each other and we’ll do it,” Jones said.

After education presented its budget request, the hearing room held a much smaller crowd to hear Mississippi Department of Agriculture and Commerce Commissioner Lester Spell asked for $9.5 million for FY11 — the exact figure his office got in FY10. Spell noted that since he took office in 1996, his staff had shrunk from 362 folks to 251, while his budget had grown from $8.5 to $9.5 million.

State money makes up about 61 percent of the Department of Agriculture and Commerce’s total budget, with federal money filling in the rest.

Because the JLBC was about 20 minutes late starting this morning, the Public Service Commission’s presentation was pushed to 1:15. Magnolia Marketplace will have the details as soon as they are available.

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Former Toyota counsel amends complaint

September 22nd, 2009 No comments

The budget hearings continue this afternoon at the Woolfolk Building, after a marathon session this morning, but Magnolia Marketplace is at the Official Magnolia Marketplace Cubicle working on some stuff for the paper edition of the Mississippi Business Journal. That doesn’t mean we can’t pass along some news.

I wrote a story for the Sept. 14 edition of the MBJ that detailed a former Toyota lawyer’s suit against the company. The attorney, who was the architect of the company’s defense against rollover lawsuits that were so popular several years ago, claimed that Toyota destroyed evidence and hindered his investigations into accidents, both of which allowed vehicles that did not meet federal roof crush standards to remain on the road.

In response to the lawsuit, Toyota issued a blistering statement that basically said Dimitrios Biller, the plaintiff, had failed to perform his duties while employed by the company and had “grossly mischaracterized” Toyota’s reporting to the National Highway Traffic Safety Administration.

In his response to the press release, Biller has filed an amendment to his original complaint that accuses Toyota of defaming him. The details are here.

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Day two of budget hearings reinforces a theme

September 22nd, 2009 No comments

Three more agencies brought their budget requests to the Joint Legislative Budget Committee this morning, and all three received the same message other agencies got yesterday: There just isn’t a whole lot of money to go around.

State Treasurer Tate Reeves led off the day’s proceedings with a $3.3 million request, which is about $296,000 more than his office got in fiscal year 2010. The extra cost, Reeves said, would fill two new positions in his office and pay for the purchase and repair of technology to track the state’s finances.

As he has with every agency that requested an increase in money, Senate President Pro Tem Billy Hewes, R-Gulfport, asked for a justification.

Reeves was ready.

“You can’t just look at FY10 versus FY11,” he said. “My agency took an 18 percent cut (in FY10 compared with FY09) while other agencies took a 6 percent cut.”

Budget numbers back up Reeves’ claims. In FY09, Reeves office received $3.55 million. In FY10 the Treasurer’s office got $3.024 million.

Secretary of State Delbert Hosemann asked for a 4.7 percent decrease, prompting Hewes to jokingly ask if there was something wrong with Hosemann.

“We’re just doing a lot more with the same people,” Hosemann responded. There were several potential revenue streams for the state that were not included in Hosemann’s $12.5 million request. One involved Hosemann’s signaling that he would push the Legislature to pass a law that required limited liability corporations to register annually with his office. Currently, only corporations have to file annual updates. LLCs only have to register when they’re formed, and aren’t required to file after that. Hosemann said the measure would protect consumers.

“(Unregistered LLCs) become a vehicle for people to hide things,” he said, citing the trouble some cemeteries and funeral homes have found themselves in with their pre-need insurance.

Ed LeGrand, the executive director of the Department of Mental Health, asked for $50 million more than the agency received in FY10, but the vast majority of that is comprised of federal stimulus money and increased state obligations to Medicaid-funded services at the state’s 15 community mental health centers. At a minimum, LeGrand said it would take $10 million of that $50 million for the CMHCs to operate at the level they are now.

“I don’t anticipate” that the full $50 million will be allocated, LeGrand said.

Senate Appropriations Committee Chairman Alan Nunnelee, R-Tupelo, said even rounding up the $10 million would be “very difficult.”

LeGrand said he was “cautiously optimistic” that Congress wouldn’t allow the state departments of mental health to “fall off a cliff” when it came to the disappearance of stimulus money and the modifications to Medicaid matching rules.

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More fake Viagra in the Delta than money in the state’s bank account

September 21st, 2009 No comments

Mississippi Attorney General Jim Hood told the Joint Legislative Budget Committee this afternoon that there was a warehouse in the Delta full of counterfeit Viagra, but his consumer protection division was having a hard time working up a case.

“We can’t get any witnesses,” Hood said. “Everybody wants to remain anonymous.” The story drew laughter from committee members and the audience gathered to watch the budget hearings that are the first steps in preparing the fiscal year 2011 budget.

The forecast for the revenue that will fund the budget, which takes effect next July 1, is a little less entertaining.

Four agencies had their turns to make their budget requests today, and all of them were told variations of the same thing: There is very little — if any — chance that anybody will receive even a tiny increase in the funding they got this  year.

Hood’s office requested what amounted to level funding, or no increase to the $9.5 million it got in FY10.

“We hope we can stay where we are,” Hood said.

Mississippi Supreme Court Chief Justice Bill Waller presented what on paper looked like a 9 percent increase from FY10 to FY11, but Waller said the state’s courts were merely trying to return to the funding level they received in FY09, when they got about $6.5 million. The FY10 allocation was 9 percent less.

“We’ve got to keep the courthouses open,” Waller said, in response to a question Senate President Pro Tem Billy Hewes, R-Gulfport, asked about the justification for an increase when state revenue if down 14 percent in the first two months of the current fiscal  year. “We’ve got to have enough money to operate. It’s simple.”

Waller said the court system has already implemented a hiring freeze and has canceled pay raises for court administrators who have reached service and education milestones. The decrease from FY09 to FY10 will essentially “turn the lights out” on the court system two months before the fiscal year ends, Waller said, leading to layoffs.

Department of Finance and Administration deputy executive director Freddie “Flip” Phillips was conciliatory during his presentation to the JLBC. He admitted that he didn’t expect to receive a 9 percent increase in general fund money in FY11 the agency is requesting.

Sen. Alan Nunnelee, R-Tupelo, chair of the Appropriations Committee, told Phillips and his staff that adjustments to the state employee health insurance system would be one of his priorities when the Legislature convenes in January. Premiums, which the state pays in full for state employees, are set to rise 11 percent in FY2011 and another 17 percent in FY12. The two years combined would lead to an $83 million deficit in the fund the state uses to pay the premiums.

“I don’t think we can afford that,” Nunnelee said.

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Budget hearings begin today

September 21st, 2009 No comments

At 1:45 p.m. today, the Joint Legislative Budget Committee will start the first round of hearings that will shape the revenue for the budget for fiscal year 2011. FY11 starts July 1, 2010.

Nailing down the theme is easy: There is not a lot of money to go around. Compounding that is the disappearance of a lot of federal stimulus money next December, money that filled a lot of holes in this year’s budget.

The JLBC will hear from the state Personnel Board, the Supreme Court, Attorney General Jim Hood’s office and the Department of Finance and Administration this afternoon.

The hearings that will receive more attention than most of the others is when the state Department of Education takes the mic Wednesday morning, followed by the Division of Medicaid Wednesday afternoon.

Agencies typically show up to these things with a number that is purposely inflated, and almost always receive less than they requested.

Just how much less during a time when the current budget is less than three months old and has already been cut remains to be seen, but state economist Dr. Phil Pepper could offer an idea Thursday when he briefs JLBC members on the long-term revenue outlook Thursday afternoon.

The hearings will take place in the legislative conference room of the Woolfolk Building. The full schedule is here.

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Toyota betting $1 billion on recovery

September 17th, 2009 No comments

The horses for the regular edition of the MBJ are in the barn for the most part, but there’s some news to pass along before we turn our focus completely to tonight’s Georgia Tech-Miami game. (Magnolia Marketplace has never been a fan of ACC football, or the ACC in general, but that Georgia Tech spread option offense is fun to watch.)

Down to business:

The annual Toyotathon sales drive will have a little extra punch when it starts in November.

Toyota is spending $1 billion on a marketing drive designed to boost U.S. sales in the fourth quarter, which has traditionally been a strong period for all automakers. A company spokesman says that is a new record for ad spending in one quarter.

The spokesman goes on to say that Toyota is confident that the automotive sales market, which has been decimated during what is now being called “The Great Recession”, is on the brink of making a comeback.

It’s impossible to tell if Toyota’s gamble will pay off. But think back to last September, when the first wave of fear was strangling the economy, and a lot of folks were terrified that the U.S. was in a nosedive toward a depression. A lot of that fear is gone, and folks will argue until their last breath the reasons behind it, but the reality is this time last year Toyota would have not even considered spending such a huge sum of money on advertising and marketing in one quarter. Now they are.

And now let’s hope that everybody buys a Prius so we can get that plant in Blue Springs humming.

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Defense Secretary Gates makes major move on tanker contract

September 16th, 2009 No comments

The years-old fight between Northrop Grumman/EADS and Boeing to supply the Air Force with a new fleet of refueling tankers had a pretty significant development this morning.
Since Defense Secretary Robert Gates reopened the bidding due to a Boeing protest after Northrup Grumman had originally won it, his office had total oversight over the rebidding process. That is no longer the case, or as much of the case as it used to be (if that makes sense).
Gates has restored to the Air Force the control over the process it enjoyed before the Boeing flare-up. Gates did say in a speech at the Air Force Association trade show that his office will continue to closely monitor things.
This probably doesn’t provide any sort of advantage to either company as the rebidding moves forward. Northrop Grumman’s victory was greeted with a lot of high-fives in Mississippi, specifically on the Gulf Coast. Northrop Grumman plans to build the KC-45 Tanker in Mobile, which could spin off suppliers and supplier jobs — not to mention direct jobs — to the area. Over the life of the contract, the deal could exceed $100 billion.
George Freeland, the executive director of the Jackson County Development Foundation, couldn’t overstate its potential during a conversation with Magnolia Marketplace a couple months ago.
The details of Gates’ speech can be found here.

Brookings Institution likes Jackson

September 15th, 2009 No comments

A report released today by the Brookings Institution may offer a glimmer of hope that some sort of economic recovery is gaining traction.

Brookings analyzed the 100 largest metropolitan areas in the U.S., basing their strength on four factors:

• Percent employment change from peak quarter to the second quarter of 2009

• Percentage point change in unemployment rate from June 2008 to June 2009

• Percent change in gross metropolitan product from peak quarter to the second quarter of 2009

• Percent change in housing prices from the second quarter of 2008 to the second quarter of 2009

Of the 100 metro areas, Brookings listed the 20 strongest and the 20 weakest, relative to how they are weathering the recession. Jackson was among the 20 strongest.

The full list, complete with data from each area, can be found here.

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