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Who’s next on the chopping block?

Gov. Barbour has the ax out but has yet to take another hack at the 2010 budget

 

When Mississippi’s tax collections for September came in Oct. 1, they fell short of estimates that were made only a few months ago, estimates made even with a recession in mind.

Still, the numbers produced a fair amount of shock.

The damage: The state collected $404.9 million in September, 10 percent less than the revenue estimate made when the Legislature adjourned in late June. The total shortfall for the month was $45 million. 

Gov. Haley Barbour has already trimmed the state’s fiscal year 2010 budget by $170 million, after August revenue collections were about 2 percent short of estimates. Most of that $170 million cut was drawn from the K-12 education and the Institutions of Higher Learning budgets. Overall, those two education sectors had $158 million drained form their FY10 spending. 

The education entities were one of the last parts of state government that had not had their budgets cut 5 percent based on the FY09 appropriations.

State law prohibits Barbour from cutting any agency’s budget more than 5 percent until all agencies have been slashed by at least 5 percent.

In a statement released shortly after September’s revenues came in, Barbour said with the 5 percent maximum now touching most every state agency, bringing the state’s overall budget into focus would present “challenges.”

Barbour added that more cuts to the FY10 budget were probable, if not all but guaranteed. That guarantee won’t become until reality until at least Oct. 23. Last week, Barbour ordered state department heads to prioritize their programs to guide him as he makes another round of budget cuts.

“Balancing the FY 2010 budget will likely require reductions of more than 5 percent,” Barbour said in a statement issued last week. “To fully balance the budget through cuts, I would have to impose significant cuts to Medicaid, as well as to other programs already cut by 5 percent or more in the FY 2010 budget itself.”

To comply with the 5 percent law, Barbour’s options are few. A few education line items — such as the $6,000 National Board Certification salary supplement for teachers, student financial aid and University of Mississippi Medical Center’s rural physicians scholarship — have not yet been cut 5 percent.

The state’s court system hasn’t been cut 5 percent either, but based on Chief Justice Bill Waller’s testimony before the Joint Legislative Budget Committee, in which he told lawmakers that the courts already don’t have enough money to make it through the budget year, it seems unlikely the courts would be brought up to the 5 percent level.

Court-ordered settlements and debt service would also be held harmless.

The two agencies who haven’t been cut 5 percent, and that would probably have the most profound impact on Mississippians, are the Department of Corrections and the Division of Medicaid. Barbour went out of his way when he announced the $170 million in cuts to education that cutting the Corrections budget would basically entail “turning prisoners out on the street.” Commissioner of Corrections Chris Epps declined multiple interview requests from the Mississippi Business Journal. 

Division of Medicaid director Dr. Robert Robinson said keeping the DOM’s administrative costs as low as possible is the first step in holding expenses down.

“It is important to keep in mind that our program’s needs are partially driven by our state’s economic environment,” Robinson said in an email. “When our economy suffers, our program enrollment increases and costs increase accordingly.  Much of that is out of our control.”

If the federal Center for Medicaid Services (CMS) approves the language of a bill the Legislature passed in June, any deficit incurred in the Medicaid budget would be made up of a combination of increased assessments on hospitals, a reduction in payments to providers or the transfer of money from the Health Care Trust Fund tobacco companies pay into as part of their settlement with the state. “The objective is to avoid reductions in services to beneficiaries,” Robinson said.

State economist Phil Pepper told the JLBC during the budget hearings late last month revenue collections will almost certainly continue to dwindle the rest of the fiscal year.

“There will be little bounce to state and federal economies when recovery (from the national recession) does occur,” he said. Recovery will be slow and steady. We’ve got hard times ahead.”

Barbour agreed.

“Financially for the state, we’ve got a budget storm on the horizon. We can’t avoid the storm, but the best thing is to prepare early and act early.”

 

By CLAY CHANDLER I STAFF WRITER

clay.chandler@msbusiness.com

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