Despite cig tax compromise, lawmakers still far apart on budget

May 6, 2009



JACKSON -- The state Legislature ended its five-week recess today and returned with plans to easily approve a cigarette tax increase to raise more revenues and relieve car owners from higher taxes, but passing a state budget will be a struggle. 


"Across the board, economic trends are running against us," said Gov. Haley Barbour, who''s been sounding dire warnings about the state''s budget woes. 


"There is no escaping the fact that revenue collections continue to fall far short of revenue estimates, and budgets based on these estimates will have to be cut further," Barbour said. 


State revenues continue to decline as the recession takes its toll -- forcing cuts in state services by as much as $400 million this year and more next year. 


Mississippi is getting about $2.8 billion in federal economic stimulus funds and a $100 million-plus boost from the cigarette tax increase, but the extra funds fall short of what''s needed. 


The revenue shortfall is complicated further by the legislative dispute over raising more Medicaid funds with a hospital tax. 


"It looks like we''re still far apart," said Rep. Gary Chism, R-Columbus. "Until that''s resolved, I don''t see how we''ll accomplish anything." 


In plugging the $90 million budget hole for Medicaid, the Senate and Barbour favor a higher hospital tax than the House of Representatives. Without the state funds and the additional federal money that draws, Mississippi''s Medicaid program stands to lose about $360 million. 


The Senate wants a $90 million tax on hospitals. The House has proposed $45 million. 


In session since January, the Legislature on April 1 decided to take a break and delay adopting the state''s $19 billion budget until lawmakers know more about how to spend the federal stimulus funds. The money is going to a wide array of programs for state and local governments and be available through 2010. 


Legislators want to finish the budget in a few days, but the process could take weeks. 


"I hope we''ll be done by Friday, but as far as what actually happens is anybody''s guess," said House Democratic Leader Tyrone Ellis of Starkville. 


He acknowledged the House and Senate could get tangled in a protracted disagreement. "We''re notorious for that," he said. 


However, Ellis said he hopes budget cuts won''t be so bad with the influx of federal stimulus funds offsetting some of the state funding shortfall. 


The House and Senate have a bill ready for a final vote to increase Mississippi''s 18-cent-a-pack cigarette tax to 68 cents. Some of the new revenues is to fortify the state''s diminishing car tag reduction fund. 


The tax bill was in limbo since January, but House-Senate negotiators last week reached a compromise that will generate an estimated $112 million a year. 


"It''ll easily pass the House. Everybody is resigned to the fact we''re going to have a cigarette tax increase, and 68 cents is a fair compromise," said Chism, who noted he''ll vote for the bill after previously being against it. 


The legislation should preserve most of the discounts provided to automobile owners on their car tags. A decline in auto sales revenue had forced the state Tax Commission to shrink that discount. 


"It''ll offset the car tags. We''ll be raising taxes on one end and cutting it on the other," Chism said.