MISSISSIPPI HOUSE OF REPRESENTATIVES
WEEKLY SUMMARY REPORT FOR WEEK ENDING FEBRUARY 22, 2002

JACKSON, Miss. – The House of Representatives (followed shortly by the Senate) on Friday raided the Tobacco Trust Fund to bail-out the state’s struggling Medicaid program to the tune of $158 Million, with even the Chairman of the House Public Health and Welfare Committee, Bobby Moody (D-Louisville), frankly admitting that “[t]here ain’t nothing about it I really like.”   Nevertheless, with House members informed that the program, which serves some 650,000 needy, elderly and disabled Mississippians, would run out of money within a week unless emergency action were taken, the House held its nose and passed the HB 1200 conference report by a vote of 94-20.  Later in the day the Senate also approved the measure that even proponents concede is a temporary “band aid.”   Indeed, with both the nation and the state suffering from the current recession, Legislators were warned that the Medicaid bail-out would be just the first of several very tough and distasteful votes this session.   

Against the backdrop of bailing out the Medicaid deficit in the General Fund of the current (FY 2002) fiscal year, the proposed $3.5 billion General Fund budget for the next (FY 2003) fiscal year took another step toward finality this week as the "money committees" in the House of Representatives considered spending plans and revenue-producing measures for FY 2003.  The General Fund constitutes a little over one third of the total state budget (approximately $10 billion), with the other two-thirds funded by special funds (i.e., gasoline taxes funding MDOT, etc.) and Federal funds (i.e., funding in many education and health care areas, etc.).  But it is the General Fund that is funded by the revenue of taxes directly imposed by the state (i.e., income taxes, sales taxes, etc.) to pay for the most basic costs of state government. 

The House is working toward a Wednesday, February 27 deadline for action in the full House on agency spending and revenue-generating bills that originated in the House. Meanwhile, the Senate is also working on bills of this type originating in that chamber. Traditionally, the House handles on first consideration one-half of the 100-plus agency appropriation bills, and the Senate takes the other half. A final resolution of these budgets and the overall FY 2003 budget will come together near the end of the 90-day session, which is scheduled to adjourn sine die on April 7.

Compiling the FY 2003 budget is particularly difficult and painful this session due to the recession and the resulting drastic shortfall of revenue.  State tax revenues have been far below expectations since the current fiscal year (FY 2002) began on July 1, 2001 . The budget debacle in the Governor's Office of Medicaid, which necessitated this week’s massive HB 1200 bail-out, has immeasurably worsened the situation.  Long-time observers at the Capitol say that the state’s budgetary situation has not been so critical for several decades. 

The House Appropriations Committee this week did approve a stop-gap plan to help the state's public schools and higher education system survive financially through FY 2003. So-called "bridge funding," or one-time money, of $69 million will be split among K-12, universities and two-year colleges under the plan. The money would come from a pool of almost $120 million expected to be drawn from a proposed law requiring businesses with tax liability of at least $20,000 monthly to expedite their June 2003 payment to the State Tax Commission.  The money collected by expediting these payments therefore is not really new or additional money, but rather money which will come into state coffers early, in time to be appropriated for expenditure within FY 2003 which will end June 30, 2003.  Although some may therefore see this as a budgetary "trick," it nonetheless does provide a means to lessen the FY 2003 cuts in the priority area (education) to the greatest extent possible, with the hope that an improving economy will make establishing the eventual FY 2004 budget (to where the "expedited" payments otherwise would have been applied) a somewhat easier task.

Although education is and continues to be the number one priority of the Legislature, the current budget crisis has meant that all of the various educational entities have experienced budget cuts this year, as have other state agencies. Nevertheless, public education K-12, including the state's educational television system, will receive a total of about $2.4 billion in special and general funds in FY 2003.  Funds for the next scheduled phase of the 5-year plan to bring state teachers' salaries up to the Southeastern average are also included in the public education funding.  For a variety of reasons both practical and political, the promised teacher pay raise is as close to being "written in stone" as virtually any other aspect of the budget. 

The state's estimated 30,000 non-education public employees are also tentatively slated to receive pay increases in the next fiscal year's budget. Many of these employees have received no raises at all for three or more years.  State agencies' appropriation bills include language to give most state employees modest increases of at least $600 annually, starting half-way through FY 2003, on January 1, 2003 .  No raises are provided for elected officials, and despite erroneous media speculation to the contrary, no raises are included for members of the legislature, for whom salary has not been increased for many years.

Proposed FY 2003 spending bills for a number of state agencies were approved in the Appropriations Committee this week, including Governor's Medicaid Office ($2.4 billion, which includes matching Federal funds), Human Services ($404 million), Rehabilitation Services ($105 million), Attorney General's Office ($18.3 million), Department of Insurance ($6.5 million, all generated by the agency through fees), State Courts System ($35 million), Institutions of Higher Learning ($810 million, including $36.8 million for tuition aid), community colleges ($360 million), Department of Corrections ($251 million), Department of Health $270 million (mostly generated from fees and Federal funds) and Veterans Home Purchase Board ($25.1 million).

The House Ways and Means Committee also handled several revenue-related measures during the seventh week of the session.  Among these were HB 1834 to increase bonds that fund various economic development programs, HB 1830 providing funding for a water pollution control program, HB 1745 to increase a fund administered by the Mississippi Arts Commission, and HB 581 to fund a grant program for the economic development of small towns and counties.  This committee and then late the full House also approved HB 1739 to assess catfish ponds for property taxes in the same manner row crops are assessed, instead of being assessed as building structures.  The Ways and Means Committee also approved HB 1835 for the issuance of about $113.4 million in bonds to finance construction and repair projects at the state's universities, community colleges and state agency facilities.  Included within that sum is some $15 million earmarked for the recently approved settlement of the long-running Ayers university desegregation case.

Ways and Means also heard a plea from the Mississippi Municipal League to allow cities to generate additional revenue through a 1 percent local sales tax.  Such an additional tax would require a 3/5th majority vote by citizens on the front end, and could be used for only a specific project.  Under the plan, once the project was completed, the additional tax would end.  Voters would then have the opportunity to approve any further tax for any new project.  Although the Legislature traditionally has been very jealous of the sales tax and intent upon implementing it only at a state level, the money crunch afflicting the state’s municipalities may mean that the local option sales tax has a greater chance of passage this year than it has for many years.  It remains to be seen, however, whether there is sufficient support even to get the measure out of committee and to the House floor for a vote.