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A repeal of the $415 million tax cut passed this year — and even tax increases — are possible in plans announced Thursday by the state’s top elected Republican leaders to move toward “comprehensive budget and tax reform.”
Gov. Phil Bryant, Lt. Gov. Tate Reeves and House Speaker Philip Gunn said they will establish several groups in the coming days to closely examine state agencies’ budgets and the state’s complete tax system.
The groups – made up of 13 Republican lawmakers, five Democratic lawmakers and appointees by the governor – will review Mississippi’s tax policy and the budgets of specific state agencies in search of “unnecessary expenditures” and “ways to spend our money more effectively.”
The tax group will also inspect the $415 million tax cut signed by Bryant in May, which is the largest in state history and is set to go into effect in July 2018. That law, championed by the Republican leadership, will phase out the three percent tax bracket for individuals and corporations, as well as eliminate the franchise tax on businesses.
That law has been met with continued criticism from Democratic and some Republican officials after Department of Revenue statistics were published, citing previous corporate tax cuts as a reason current state revenues have been down.
“It would be very possible, as this thing unfolds, to take what was passed this session (the historic tax cut) and fold it into a comprehensive plan that may or may not include what was passed this past session,” said Gunn, R-Clinton. “If we’re going to take a comprehensive look, let’s include it all. We’ve got two years to do that. Hopefully we can come up with a system that incorporates what we passed this year.”
On the budget side of the reform plan, Republican leaders will continue to tighten their grip on state agency budgets, closely examining – line-by-line when necessary, Reeves said – annual budgets for numerous state agencies, including the departments of Education, Mental Health, Health, Medicaid, Institutes of Higher Learning, Transportation, Corrections and Public Safety.
“When we started five years ago, we were focused on growing the size of Mississippi’s economy, not the size of its government,” said Reeves, R-Florence. “You can see what we’ve done in those five years as it relates to that commitment. This plan is just a continuation of that.”
In fiscal year 2016, which ended June 30, Bryant was forced to cut agency budgets two different times mid-year to help offset revenue shortfalls. During the 2016 legislative session, lawmakers voted to cut the budgets of a majority of state agencies for fiscal year 2017 – as much as 47 percent in the case of the Mississippi Developmental Authority.
Adding to the dismay of some agency heads was a bill passed late in the session called the Budget Transparency and Simplification Act, which will sweep $187 million of multiple agencies’ special funds into the general fund.
That law, which went into effect July 1, has been blasted by Attorney General Jim Hood, the only Democrat elected to statewide office. Hood’s office has issued legal opinions to numerous state agencies, including the Department of Finance and Administration, which manages the state budget, that many of their special and trust funds cannot legally be swept into the general fund.
“I don’t take budget advice from the attorney general,” Reeves said Thursday. “Heck, I don’t even take legal advice from him.”
Almost without exception, the Legislature in the past five years has appropriated a lump sum amount to agency heads, who then decide how to spend the funds. Both Reeves and Gunn said Thursday that the plan announced Thursday could lead to the Legislature going line-by-line through an agency’s budget.
“We have legislative authority over every line item in every state budget,” Reeves said. “We don’t always use it, but the Legislature is the entity that appropriates money. To the extent that we need to put and line-item every expenditure, we’re willing to do that if that’s what’s in the best interest of taxpayers.”
David McDowell, executive director of the Mississippi Democratic Trust, said the plan announced Thursday “is just the beginning of another ill-fated attempt at corporate handouts at the expense of Mississippi’s most vulnerable and our dwindling middle class.”
In recent weeks, Reeves, Bryant and Gunn have all acknowledged that problems with the special fund sweeps bill and overcoming expected fiscal year 2017 revenue shortfalls will be at the forefront of the next legislative session in January. The working groups that were announced Thursday may take a look at the special fund sweeps bill, Reeves said, in addition to the budget and tax items discussed.
“Our effort to reform state government and eliminate waste will never end,” Reeves said. “There’s no specific timing to it other than knowing it needs to get done.”
Working group membership:
Rep. Shane Aguirre, R-Tupelo
Rep. Mark Baker, R-Brandon
Rep. Angela Cockerham, D-Magnolia
Rep. Mark Formby, R-Picayune
Rep. Chris Johnson, R-Hattiesburg
Rep. Robert Johnson, D-Natchez
Rep. Trey Lamar, R-Senatobia
Rep. Jeff Smith, R-Columbus
Rep. Sonya Williams-Barnes, D-Gulfport
Sen. Joey Fillingane, R-Sumrall
Sen. Buck Clarke, R-Hollandale
Sen. Willie Simmons, D-Cleveland
Sen. John Polk, R-Hattiesburg
Sen. Terry Burton, R-Newton
Sen. Dean Kirby, R-Pearl
Sen. Sally Doty, R-Brookhaven
Sen. Kevin Blackwell, R-Southaven
Sen. Juan Barnett, D-Heidelberg