STATE CUTS REVENUE ESTIMATE

March 20, 2009

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JACKSON -- State lawmakers might delay building Mississippi''s budget for the coming year because state revenues are falling far worse than the Legislature expected and questions linger about the federal economic stimulus funds coming to the state. 

 

"It''s very frustrating," said Senate Appropriations Chairman Alan Nunnelee, R-Tupelo. 

 

The Legislature learned today it''ll have about $400 million less than it planned to spend from state tax collections. Lawmakers have a self-imposed deadline next week to pass the budget through the House and Senate, but there are many unknowns about spending the estimated $2.8 billion in stimulus funds allocated for Mississippi by the American Recovery and Reinvestment Act. 

 

"I think the best thing we can do is wrap up the legislative session right now without a budget and come back later when we get more details on ARRA and have time to incorporate this $400 million downturn into our budget," Nunnelee said. 

 

"I cannot see any way we can meet Wednesday''s deadline," he said. 

 

The House and Senate have been in session since January, but it appears they must go back to the drawing board for the budget. 

 

Republican Lt. Gov. Phil Bryant -- who presides over the Senate -- said plans are being discussed to wrap up work on bills not related to the budget by the end of March and ret urn in May. 

 

House leaders agree and plan to ask the Legislature next week to halt its annual session set to end April 4 and return later to finalize the budget. 

 

"There''s been discussions with the speaker and lieutenant governor and governor and other House and Senate members for recessing or extending the session until more information is gained regarding the stimulus package," said House Clerk Don Richardson. "I think the consensus is it may be three or four weeks before we know exactly how the stimulus money can be plugged into the budget." 

 

The fiscal year starts in July. 

 

Mississippi is receiving a financial boost from the federal package that President Obama signed into law last month to help heal the country''s recession-ravaged economy and distribute funds to state governments suffering revenue shortfalls. 

 

Mississippi''s "deteriorating economy" is causing a substantial slump in the state''s sales and income tax collections, said Phil Pepper, state government''s chief economist. In response, the Joint Legislative Budget Committee today reduced by more than $400 million the revenue estimate used by the House and Senate in funding state government. 

 

 The state''s general fund is now projected to get about $4.6 billion in tax collections for the next fiscal year. This is $416 million less than what state government began with in the current fiscal year, according to the Legislative Budget Office. 

 

This decline would translate into deep budget cuts for public services such as education, health care and law enforcement. Incoming federal funds will help alleviate the impact, but legislators don''t know yet exactly how much money can be spent and where, when it''ll come and what the federal rules are for spending it. 

 

"That''s a big issue because some of that money can be used to offset some of the shortfall," said House Education Chairman Cecil Brown, D-Jackson, one of the House budget leaders. 

 

"I don''t know what we''re going to do." 

 

Meanwhile, House-Senate negotiators are 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 hangup has been over how much it should be and what to do with the revenues. 

 

Tax increases proposed by the House and Senate could generate anywhere from $80 million to $180 million a year. 

 

The stimulus funds provide a huge windfall for the state''s financially strapped Medicaid program. About $790 million is earmarked for the health care program. In addition 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.