Leaders struggle with state budgeting

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Adam Ganucheau, Mississippi Today

Senate Appropriations Committee chair Buck Clarke, R-Hollandale speaks at an MEC legislative program on Wednesday.

State budget cuts prompted by lower-than-expected revenue has prompted another legislative leader to opt for a more conservative budgeting process.

“The biggest question you have starting out is: What’s our beginning point?” Sen. Buck Clarke, R-Hollandale, the Senate Appropriations chairman, said at a Mississippi Economic Council session on Wednesday.

“Is it last year’s number?” Clarke asked. “We just got cut twice, so should we should start there?

Clarke was referencing budget cuts ordered by Gov. Phil Bryant — most recently last week — to bring state spending in line with the revenue coming in below estimates. Through the first six months of the fiscal year, the state had an $89 million revenue shortfall from projections.

The cuts put “extra confusion in the process. You have to start at whatever the lowest amount is, which right now, is the total after last week’s cut,” Clarke said.

Such mid-year budget cuts significantly affect how lawmakers, now in session at the Capitol, build budgets for the next fiscal year. To build a working budget for next year, leaders must first know how much money they’ll have to spend.

When Bryant last week ordered the fourth round of budget cuts in one calendar year to offset lower-than-expected revenues, the bottom line number decreased, throwing off budget discussions for next year, state budget leaders told Mississippi Today this week.

In addition to mid-year budget cuts, Bryant in one year’s time has moved around $120 million from the Rainy Day Fund into the general fund.

State law suggests (but doesn’t mandate) the Legislature set 2 percent of each year’s budget into the reserve. In recent years, the Legislature has suspended the 98 Percent Rule in order to allow its total proposed expenditures to exceed the General Fund revenue estimates. That happened for fiscal years 2010, 2011, 2012, 2016 and 2017, the current fiscal year.

After a breakfast meeting with legislators Wednesday, Clarke said crafting the budget based on projections works if the 98 percent rule is followed. Clarke said he plans to make sure his committee adheres to the 98 percent rule, as suggested in both the governor’s and Legislature’s budget recommendations.

“Following the law and setting aside 2 percent of available revenue in the Rainy Day Fund will lessen the likelihood of mid-year spending cuts if revenue comes in under projections,” Bryant said in his State of the State address Tuesday night.

Since last session, legislative leaders have been rethinking how the budgeting process should work. During the summer and fall, lawmakers peppered agency heads with questions about their budgets, trying to find inefficiencies and save additional money.

Mississippi Today

House Speaker Philip Gunn, R-Clinton

After the governor’s cuts last week, House Speaker Philip Gunn called the budgeting process “flawed” and pointed to the findings of the working groups and lawmakers’ apparent attempt to rewrite the public education formula.

“Revenues aren’t coming in like we projected,” Gunn said in a statement. “This is why we have brought performance-based budgeting in and why we are looking at different ways to fund education. Basing budgets on projections is something we need to try and get away from to the best of our ability. That is why we released our Legislative Budget Recommendation based on zero growth.”

Revenue estimates are fluid, which makes budgeting and deciding how much state agencies will receive in future fiscal years difficult.

But in recent months, fiscal experts have been purposeful about creating conservative projections so that the state might be able to keep up with lagging revenue collections.

“I have to say that I have been disappointed in the revenue,” said State Economist Darrin Webb, who works closely with other officials to project expected revenues. “I think we were fairly conservative with our estimate and yet revenues continue to underperform. I am especially troubled by sales and income taxes, which make up the largest shortfall relative to the sine die estimate.”

Last April, Bryant made a mid-year budget cut just days before the 2017 budget was finalized, throwing legislative leaders into a frenzy to pass a working budget on time. Lt. Gov. Tate Reeves noted that the mid-year cut complicated what is already a difficult process in ordinary circumstances.

Clarke on Wednesday said that April cut did have an effect on this year’s budget, but having the Rainy Day Fund to fall back on kept the budget in the black.

“I hate to use this term, but we don’t want to get caught with our pants down,” Clarke said.

“Whenever the 98 percent rule is brought up, it’s always in the context of sticking the 2 percent to set aside … This year, it’s not just that – it’s to cover your rear end in case revenues don’t come in,” he said.

“In that way, it’s like a safety factor, and that’s the way I’m looking at it right now for next year,” Clarke said.