By JEFF AMY
JACKSON — Mississippi lawmakers and Gov.-elect Phil Bryant will face a difficult task in crafting a state budget for the fiscal year that starts on July 1.
Bryant will propose a budget after taking office in January, but he has been vague about his plans. Lt. Gov.-elect Tate Reeves and likely House Speaker Philip Gunn also have made no specific proposals.
One legislative proposal would retain funding levels for public elementary and secondary schools as well as community colleges, but imposes funding cuts for other agencies that outgoing Gov. Haley Barbour said are unrealistically deep.
Lawmakers also will have to decide whether to renew a tax on hospital beds that funds Medicaid, and whether they want to change the state’s Public Employees Retirement System.
The Legislature convenes on Tuesday.
An overarching tone is likely to be whether Bryant and the Republican-controlled Legislature move toward more spending cuts, or raid state reserves to patch together a budget.
Because the state is spending the last of its federal stimulus money this year, spending will likely shrink in the new budget year. The Joint Legislative Budget Committee has proposed a 2.3 percent decrease, while outgoing Gov. Haley Barbour proposed a 2.9 percent cut.
The situation is made more unpredictable because there will be a new governor, lieutenant governor, House speaker and budget committee leaders.
Bryant spokesman Mick Bullock said the Republican governor-in-waiting regards work done to date on a new budget as only a “conversation starter.” Bryant will issue his own proposal after taking office. Bullock said top priorities will continue to be education, public safety, economic development and health care.
The legislative plan already floated seeks to hold funding levels for K-12 schools and community colleges, but cuts university funding by 1.93 percent. Reeves and Gunn, R-Clinton, echoed Bryant’s preference to protect schools.
“We’ve got to make sure we don’t compromise the quality of education we’ve got,” Gunn said.
“I believe you will see bills that pass the Senate that encourage more efficiency in our education spending and I expect an effort to improve funding for our schools,” Reeves said.
Rep. Cecil Brown, D-Jackson, who sat on the panel that wrote the legislative proposal, said members chose to reduce funding for some agencies to spend on schools. For example, he said, a proposed 19.6 percent cut in the state Health Department’s budget is an unrealistic number used to make ends meet.
Another area of concern is Medicaid. Brown said a 7 percent decrease in funding also is probably not achievable. Compounding worries about Medicaid, a tax on hospital beds that Barbour pushed through the Legislature in 2009 over the objection of the state’s hospitals expires at the end of the current budget year. Lawmakers will have to vote to renew that tax or find $60 million in additional cuts.
“They intentionally underfunded expenditures that we all know have to be funded,” Reeves said.
In his budget, Barbour took aim at proposals that lawmakers used to balance their plan. For example, he described the deletion of all unfilled state employee positions as “bad budgeting policy and simply unrealistic.”
“The Legislature has no intention of deleting all unfilled positions in state government,” the outgoing governor wrote. Barbour instead proposed cutting 25 percent of vacant positions in the current budget year, and 25 percent more in 2013.
It’s unclear whether Barbour will have much influence this year. His budget document rehashes proposals, such as school and university consolidation, that originally won little legislative support.
Most agree that Mississippi will have to tap some existing savings and find more one-time money to prevent searing cuts.
For several years, the state has used federal stimulus money approved by Congress when it was controlled by Democrats to prop up the Mississippi budget. But the last $126 million will be gone after the current budget year.
Barbour says the state’s reserve is likely to fall to about $240 million by the end of the current budget year, down from $800 million five years before. He wants the nest egg to be rebuilt, in accordance with a law that requires setting aside 2 percent of state revenue.
The Legislature proposes to override the 2 percent reserve law, as it is legally allowed to do. Even Reeves, who said he wants to use “recurring revenues for recurring expenses,” said “the budget situation we are inheriting is such that it will take several years to reach this goal.”
Lawmakers would rely on slight improvements in revenue, delays of some obligations and savings to spend about $367 million more than they otherwise could. For example, both Barbour’s proposal and the legislative plan would spend the $97.4 million remaining in a health care trust fund. Legislators created the fund in 1999 to save the proceeds of Mississippi’s 1997 settlement of a lawsuit against tobacco companies, intending to spend only interest it generates.
Barbour also is trying to renew a discussion of requiring schools, community colleges and universities to spend their own reserves to ease pressure on the state.
Lawmakers searching for cuts also could freeze or reduce the cost-of-living adjustment for those drawing benefits from the Public Employees Retirement System. One idea floated has been to freeze the annual 3 percent adjustment for three years. Proponents say that could save about $40 million a year.
Such a move would face opposition, said Rep. George Flaggs, D-Vicksburg. “I don’t think that’s something the Legislature’s going to hang its hat on.”
Reeves said he hoped lawmakers would review recommendations with an eye toward shoring up the retirement system.
“Long-term solvency is a benefit for new employees, existing employees, retirees and, in the long run, for taxpayers,” he said.