It’s crunch time for cig tax, stimulus $

March 14, 2009



JACKSON -- The Legislature has two weeks to finish up the state budget for the next year, but it has two big unanswered questions. 


What revenues will come from a cigarette tax increase the House and Senate still haven''t agreed on? 


"It''s going to be extremely difficult to build a 2010 budget without that bill," said Senate Appropriations Chairman Alan Nunnelee, R-Tupelo. 


How will the federal economic stimulus money play into the state budget? 


"We don''t have any idea. We don''t know the impact that stimulus money will have," said Rep. Gary Chism, R-Columbus. 


Mississippi is receiving an estimated $2.8 billion from the federal package President Obama signed into law last month to help heal the country''s recession-beaten economy and distribute funds to state governments suffering revenue shortfalls. 


However, legislators don''t know exactly how much money can be spent and where, when it''ll come and what the federal rules are for spending it. 


Meanwhile, House-Senate negotiators have begun bargaining over their differing versions of a cigarette tax hike. The governor, the House and Senate all support increasing the 18-cent-a-pack tax, but a hang-up could be over how much it should be and what to do with the revenues. 


The House and Senate passed different cigarette tax-increase bills in January, but little progress has been made since then toward a final version. Legislative negotiators did agree last week to meet and review a compromise Wednesday. 


The Democratic-dominated House voted to increase the tax to $1 - generating an estimated $180 million a year. The Republican-run Senate wants the tax at 49 cents a pack - generating an estimated $68 million. 


The House wants to put all the money in the state''s general fund and divvy it out. 


The Senate wants to use some of the tax increase to replenish the state''s car-tag reduction fund to ensure property taxes don''t go up. A slump in automobile sales has caused the fund to run low, prompting concerns that property taxes on vehicles will rise to offset this shortfall. 


In building the state''s $18 billion budget for the fiscal year that starts in July, the Legislature has a self-imposed March 27 deadline to approve all final versions of its budget bills. However, much remains in limbo. 


"This is still a work in progress," Nunnelee said. 


Legislators say it''ll be easier to finish writing the budget if they knew when the various chunks of federal stimulus money are arriving and whether it replaces state dollars to pay for state programs. 


The funds can be used to cover expenses from this past October through December 2010. 


Another factor is Gov. Haley Barbour''s power over this influx of federal funds. The U.S. Congress placed governors largely in charge of the funds. Barbour says state legislators will have limited say in deciding how the federal stimulus money is spent. 


Nunnelee said at least $480 million "goes straight to the governor" for him to spend, with about 82 percent of that earmarked for education. He said Barbour plans to use some of the money to restore funds the governor cut in recent months from elementary-secondary schools and colleges because of revenue shortfalls. 


Nunnelee said the stimulus funds will also provide a huge windfall for the state''s financially strapped Medicaid program. About $790 million is earmarked for the health care program. 


"We''re going to have more than enough money than we need for Medicaid," Nunnelee told the Senate last week. 


However, he acknowledged the state could have problems sustaining the program after 2010. "That''s when we start running out of money," he said. 


For the fiscal year that starts next July, Nunnelee also expressed hope the Legislature will be able to fully fund education and avert the state budget cuts that had been feared for state agencies before the federal economic stimulus funds were passed in February. 


However, House Appropriations Chairman Johnny Stringer, D-Montrose, said he''s still uneasy about the budget despite the windfall of federal funds coming to Mississippi. 


"I don''t feel that confident ... It will help, but it''s not going to solve everything," Stringer said.  


In addition to the $790 million for Medicaid, the American Recovery and Reinvestment Act has about $785 million for education and $380 million for transportation construction, according to estimates provided by the Mississippi Legislature.