The House and the Senate both began wading through this budgetary "morass" this week, as February 23 is the deadline for floor action to be taken on revenue and appropriations bills in the respective chambers of their origin. Last Wednesday the House took up and passed 56 separate appropriations bills, even as the Senate was addressing a like number of bills for a similar number of different state agencies and programs. (The Senate and House each author bills for about one-half of the total number of state agencies, and then "swap" and consider each other’s proposals for the other half later on in the Session). The final Fiscal Year 2006 General Fund Budget is expected to be approximately $3.9 billion.

The Senate approach this week, reportedly, was to make its appropriations based upon the admittedly-low Joint Legislative Budget Committee recommendation (LBR) released in December, while the House optimistically crafted its bills assuming the existence of some $55 million in additional fee revenues and approximately $90 million in additional cigarette tax revenues – a largesse to be derived from tax hike measures which, although they narrowly have passed the House, remain very dubious of ultimate survival in the Senate. As a consequence, the two chambers are using different numbers and are making different assumptions for both revenues and expenditures. The whole budgetary process, as always, is headed toward the last few days of the Regular Session when a relatively few members of key conference committees will make the ultimate concessions and critical decisions leading to the adoption of an overall budget. It is still simply too early to guess how the final budget actually will look.

Because of the political gamesmanship inherent in the budgetary process in both chambers at this still-early stage, the appropriations votes taken in the Senate and the House this week are largely meaningless. For example, although the House "on paper" managed to pass an appropriations bill which "fully funds" K-12 education, it was able to do so only by shorting dedicated debt service to the tune of some $100 million – clearly a fiscal impossibility, as the state has no alternative to paying its bond debt when due. The value of the House vote to "fully fund" K-12 education when there are insufficient funds (even by the House’s optimistic calculations) available to do so therefore would seem to be wholly symbolic, and of no real substance at all. Similarly, although there was much widespread anxiety expressed about this week’s House vote to gut the Department of Wildlife, Fisheries and Parks and thereby close all but two of the state’s 28 state parks, most members considered the measure to be little more than a leadership tactic meant to bludgeon some erstwhile fiscal conservatives into considering further tax increases, or perhaps as an early warning to the public that any eventual spending cuts indeed would be very painful and would hit close to home. In any event, the Senate leadership reportedly has vowed that state parks will not be closed, regardless of this week’s House action to the contrary.

Just because this week’s appropriations actions represent only the first, preliminary steps toward an eventual final budget does not mean that the true fiscal scenario is anything less than very scary. House members were told that even if the House budget plan assumed as the foundation for this week’s appropriations measures were ultimately to go into effect, as many as 3,000 state employees could be laid off, including some staffing of such vital operations as the University of Mississippi Medical Center and the State Department of Mental Health. And, even though the House plan purportedly "fully funds" K-12 education, on paper anyway, the same surely cannot be said for the state’s universities or the community college system – both systems are targeted for cuts of approximately 10%. Many other agencies are slated for cuts that approach 20%, and an endangered few (Wildlife, Fisheries and Parks among them) are facing virtual budgetary obliteration. Thankfully, the FY 2006 General Fund budget truly remains a "work in progress," so there is still time for the Legislature to make the many needed adjustments.

Some potential good news is found in the fact that, contrary to the mistaken assumptions of some people both inside and outside of government, Mississippi’s economy is performing very well. Indeed, state tax collections for the first seven months of FY 2005 (July through January) are $99.1 million, or 5.2%, more than for the same period the year before, and $50.8 million, or 2.6%, above the state’s official revenue estimate for that period. State revenue appears to be in a solid growth mode, which simply serves to highlight all the more the obvious truth that Mississippi’s current budgetary problems have resulted from over-spending, and not from any revenue shortfall. If the Legislature can simply muster the political will to make the spending reductions necessary to bring the upcoming (FY ‘06) budget back to within structural balance, then there is every reason to believe that Mississippi’s economy will provide the steady revenue growth necessary to adequately fund state government next year and in the years ahead.

Before a FY 2006 budget can be crafted, however, the Legislature still must deal with the $268 million Medicaid deficit in the current (FY 2005) budget. Crunch time indeed has arrived, as on February 28 the Medicaid program literally will not be able to pay its bills if the Legislature does not find a way to fund the deficit. The initial House approach was to address the deficit by raising tobacco tax by 50 cents and to "capture" and divert money otherwise intended to go into the tobacco trust fund. The Senate initially dealt with the issue a little more directly, proposing simply to take $200 million from the tobacco trust fund itself. Everyone agrees that additional cuts will have to be made in the Medicaid program in order to stabilize it and make it sustainable, but there is no consensus yet between Senate and House as to what form these cuts will take. A conference committee composed of three members of the Senate and three members of the House is currently working toward a compromise on the Medicaid deficit. Again, the Senate and the House have only until February 28 to agree on a bill that Governor Barbour will sign into law; otherwise, quite simply, Medicaid will be out of business.