State tax hike waits at the end of the standoff

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January 26, 2010

By Sid Salter/syndicated columnist The Meridian Star The Meridian Star Tue Jan 26, 2010, 07:37 PM CST

MERIDIAN — While the state budget standoff continues, the fact remains that regardless who "wins" the current argument it's clear that special funds or "one-time money" and existing revenues sources won't be sufficient to carry Mississippi through the next three years of fiscal woes.

    House Speaker Billy McCoy and the Democratic leadership of the House, Lt. Gov. Phil Bryant and the Republican leadership in the Senate and Gov. Haley Barbour are all on the record as seeing any new tax revenue as a political non-starter this session.

    Given that fact, the options left to state government are pretty slim. Cutting spending is already on the table as Barbour has whacked some $437 million from the original 2010 fiscal year budget.

    Barbour made the cuts after seeking additional targeted budget cutting authority from the Legislature. The House offered Barbour some additional authority, but Barbour said it wasn't enough. Failing that, Barbour went ahead and cut the state budget based on existing law - which impacted critical state agencies along with lesser functions of government.

    Monday, the House offered a $100 million supplemental spending plan that took $50 million from the so-called "rainy day" fund and $50 million from the Health Care Trust fund to offset Barbour's latest cuts.

    That after the Legislature bailed out the FY 2009 budget at the wire (just before the start of the FY 2010 budget year on July 1, 2009) with $20 million from the "rainy day" fund and used $95 million from it already in the FY 2010 budget for a total of $115 million.

    Even if the Legislature capitulates to Barbour's insistence that existing special funds be rationed over the next three fiscal years, it's unlikely that existing revenue sources and those funds will produce enough revenue to avoid even larger, more catastrophic state budget cuts over that period.

    Why? Revenue shortfalls are forecast to be at least $380 million in FY 2010, as much as $750 million in FY 2011 and as much as $1.2 billion in FY 2012. The largest current pools of special fund revenue to throw into the budget gaps include $220 million in the Health Care Trust Fund (state tobacco settlement fund) and $235 million in the Working Cash Stabilization Fund or so-called "rainy day" fund.

    The hard truth is this - between now and 2012-2013, Mississippi will either have a much smaller government that provides fewer services with fewer employees or Mississippi will enact a tax increase.

    The likely targets? Individual and corporate income tax rates will be restructured. Count on it.

    But the other hard truth is that lawmakers won't vote for a tax hike until after they've faced the voters in the 2011 general election.

    If the House leadership prevails and the special funds are spent to the nubs, there won't be enough special fund money to carry the state through without much deeper budget cuts or a tax hike. If Barbour prevails and the special funds are rationed, there won't be enough money to carry the state through without much deeper budget cuts or a tax hike.

    The House leadership is betting on an additional federal stimulus package for the states from their fellow Democrats leading Congress. The outcome of the Massachusetts Senate race - and all that implies - suggests that outcome is unlikely.

    Contact Perspective Editor Sid Salter at (601) 961-7084 or e-mail ssalter@clarionledger.com. Visit his blog at clarionledger.com. His talk radio show, On Deadline with Sid Salter, is broadcast on the SuperTalk Mississippi network.

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