Reserve funds, revenue growth declining
Nov. 28, 2001
At this juncture, most Mississippians are aware that money is tight in state government.
The ongoing circus between Gov. Ronnie Musgrove and the leadership of the Mississippi Legislature on the question of revenue estimates for the next fiscal year has made that reality crystal clear.
Despite rosy legislative projections of revenue growth glowing projections made primarily in an effort to provide so-called "bridge money" opportunities to the state's colleges and universities the fact is there was precious little state revenue growth last year and things aren't expected to get much better in the coming fiscal year. Few really believe it will.
Are these budget constraints an indictment of either Musgrove or the Legislature? A look at the other 49 states would suggest that the answer to that question is "no." But they aren't out of the woods.
State mirrors the nation
The National Council of State Legislatures issued comparisons this month which show that while Mississippi faces tough sledding in terms of revenue growth, it could be worse here than it is.
How? Mississippi struggles with declining revenue growth rates. But the key words to consider remain "revenue growth." Incrementally, we're growing.
Twelve states Utah, Illinois, Pennsylvania, South Carolina, Nebraska, South Dakota, Oregon, Maine, Michigan, Delaware, Wisconsin and Alaska reported outright declines in tax collections ranging from .3 percent in Utah to 21 percent in Alaska.
Nationwide, the NCSL reported state revenue growth at 2.6 percent the slowest in a decade and credited that modest growth "almost exclusively" to growth in personal income taxes. Sales tax revenue growth the bedrock of Mississippi's tax structure has also fallen to the lowest rate in a decade.
What should be alarming to Mississippi taxpayers is another statistic contained in the NCSL report the fact that nationally state reserve funds as a percentage of general fund spending has decreased from 11.25 percent in FY2000 to an estimated 8.2 percent in FY2001 and a projected 6.3 percent in FY2002.
For Mississippi, state reserve funds as a percentage of general fund spending has decreased from 8.2 percent in FY2000 to an estimated 6.1 percent in FY2001 and a projected 5.8 percent in FY2002.
Mississippi held 3.1 percent less in reserves as a percentage of general fund spending than the national average in FY2000 when economic times were good.
The NCSL report estimates that we will be 2.1 percent below the national average in FY2001 and projects that we'll be a half-percent behind the national average in FY2002 in the rosiest of scenarios.
The decline in state reserve funds nationally was the first since 1992 the end of the last major recession. The drop from 11.5 percent in FY2000 to 8.2 percent in FY2001 is the largest percentage drop since FY1980 encompassing the high inflation and soaring interest rates of the Carter administration.
And there are other economic clouds brewing.
Pre-Sept. 11 forecasts
The numbers reflected above in the NCSL report was made on Aug. 1 41 days before the Sept. 11 attacks. These numbers don't reflect the adverse economic impact of that tragedy on government at all levels and on the consumer.
The bottom line is that there appears to be only two reliable short-term measures that will have any appreciable impact on Mississippi's current state budget woes cut spending or raise taxes. In this economy, it's unlikely that either Musgrove or the Legislature is foolish enough to embrace any form of increased taxes.
That leaves only the least popular word in politics as the final word "no."
Sid Salter is Perspective Editor/Columnist at The Clarion-Ledger in Jackson and a syndicated Mississippi political columnist. Contact him at (601) 961-7084, P.O. Box 40, Jackson, MS 39206, or e-mail email@example.com.