Analysis: Reeves’ praise of state’s financial and fiscal health will be a campaign mantra

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Eric J. Shelton, Mississippi Today/ Report for America

Mississippi Lt. Gov. Tate Reeves speaks during a special session of the Legislature at the Capitol in Jackson Thursday, August 23, 2018.

In the midst of presenting the budget proposal of the legislative leadership last month, Lt. Gov. Tate Reeves boldly proclaimed that “Mississippi is in our best financial and fiscal shape in our history today.”

Reeves, the former state treasurer with a background in finance in the private sector before entering the political fray 15 years ago, prides himself on his understanding of the state’s budget and state finances.

His statement did not go unnoticed and will likely surface again as Reeves pursues the governor’s office in 2019. It is expected that the Republican will spend a significant amount of time on the campaign trail touting the state’s finances and fiscal condition.

A matter of fact, he already is.

It is difficult to objectively determine when the state was in its “best financial and fiscal shape.” And how does the state’s fiscal condition measure against significant budget cuts in recent years of more than 10 percent for many agencies?

That issue most likely will be fully debated between the party front-runners for governor – Reeves and Attorney General Jim Hood on the Democratic side.

In recent years state employees have been laid off, programs have been cut and schools from the kindergarten to university level have been underfunded or have seen funding cuts. For instance, the state has underfunded local school districts $2.3 billion since 2009. During the 2015 session, universities were funded at $748.3 million compared to $670.1 million in 2018 and community colleges received $258.2 million in the 2015 session compared to $237.2 million in 2018.

In addition, infrastructure needs were neglected for years until just being addressed in recent months, but with less money than many experts say is needed.

Legislative leaders, such as Reeves and House Speaker Philip Gunn, R-Clinton, say those cuts were needed “to right-size” state government. Others argue Mississippi has many needs – from health care to education to mental health – that are not being met.

But in terms of just the state’s fiscal condition, it is true that after slow or non-existent revenue growth earlier during this four year term, state tax collections are growing, albeit moderately. And it also is true that the state is flush in reserve funds — $790 million, including more than $400 million in the Working Cash Stabilization Fund.

But there have been times in the state’s history – even recent years – where revenue growth was much more robust. In the 1990s, the state had several years of growth of more than 5 percent — 10 percent some years — as the casino industry started and grew in the state.

During part of that time, the state’s rainy day fund was filled to the limit of more than $200 million and the state had reserves — primarily from the initial payments from the settlement of a lawsuit against the tobacco companies by then-Attorney General Mike Moore of more than $500 million.

Economic activity caused by the rebuilding after Hurricane Katrina ravaged the Gulf Coast in 2005 also filled state coffers for a period of time before the Great Recession hit in 2008.

And after the Great Recession, the state experienced three consecutive years where revenue growth was more than 5 percent annually before revenue began to slow dramatically. Since those strong three years coming out of the Great Recession, state revenue has either decreased annually or has grown by less than 3 percent.

Gunn also touted the state’s fiscal condition.

“This is a result of conservative practices over the last seven years, such as not using one-time money on recurring expenses ,” he said.

Public Service Commission

PSC Commissioner Cecil Brown

Central District Public Service Commissioner Cecil Brown, a Democrat, who previously was a key member of the House Appropriations Committee and is a former state fiscal officer, said the policies of cutting agencies have been detrimental to the state.

Brown pointed out during a recent speech to the Mississippi State University Stennis Institute/capitol press corps that state revenue growth since 2015 has been minimal.

“The state revenue estimate for the (current) 2019 fiscal year is $39 million more than the revenue estimate for 2015,” he said. “That is an annualized increase of less than one-quarter of 1 percent. That is pitiful.

“And, if you consider that millions of dollars of what used to be special funds (earmarked for specific programs) are now in the general fund, there is probably no growth at all. As a result, we have had significant budget cuts in the last four years, and most of our state employees have not had a pay raise in more than 10 years.”

During that same time period about 50 tax cuts have been passed, which are being phrased in and eventually will reduce the state revenue stream by more than $700 million.

But in the meantime, after years of cuts, the Legislature will have unallocated funds for the 2019 session to allocate just before they start campaigning for re-election.