Republican Lt. Gov. Tate Reeves recently touted at a meeting of legislative leaders that the state’s rainy day fund would be filled to its capacity of $554 million when the books are closed on the 2019 fiscal year, which ended June 30.
Soon after that on social media, Reeves, who is locked in a contentious gubernatorial campaign with Democratic Attorney General Jim Hood, said “huge news. Our rainy day fund is expected to be full for the first time. That is how we weather crises—recession, storms, or any disaster.”
A little context might be appropriate. If the Working Cash Stabilization Fund (commonly called the rainy day fund) is filled to capacity in the coming weeks, it would not be the first time.
The fund, which was created in fiscal year 1993 to provide a cushion when state revenue collections do not meet projections, also was filled to its cap in fiscal years 1995, 1998, 2008 and 2014, according to information compiled by the staff of the Legislative Budget Committee.
What would be different this time is that in the 2017 special session, the law was changed to move the cap from 7.5 percent of the annual general fund appropriation to 10 percent. So, if the rainy day fund is filled, it will mark the first time since the cap was moved to 10 percent.
There is a possibility, based on recent estimates, that the amount of money in the rainy day fund might be about $4 million less than the cap. But still, to have a Working Cash Stabilization Fund of about $550 million would be notable – the most in the history of the state.
In addition, the state has about $101 million in its capital expense fund, prompting outgoing Gov. Phil Bryant to exclaim on social media, “Mississippi is now in better fiscal condition than anytime in the state’s history. Thanks to Republican leadership we will fill our savings account.” Reeves has made similar claims in the past.
Again, some historical context might be needed. As stated earlier, the rainy day fund has been filled in the past, granted, at the 7.5 percent cap as opposed to the 10 percent cap. Also, during some of those times, the state had $500 million in reserves primarily from the settlement of its lawsuit against the tobacco companies. During that time, the state general fund budget was about $3 billion as opposed to the more than $6 billion it is now, meaning $500 million in the 1990s and early 2000s was a much larger share of the overall state budget. In other words, there were most likely times in the state’s history when reserves exceeded what is on hand now, especially when factoring the size of the budget into the equation.
Reeves also boasted on social media that the current amount in the rainy day fund was “a 4,000 percent increase from when Democrats controlled the governorship. That is fiscal responsibility at work.”
The Reeves campaign did not respond to requests to explain what he meant when he referenced the 4,000 percent increase. A check of the records of the Legislative Budget Committee show that fiscal year 2003, the last full year of the term of Democratic Gov. Ronnie Musgrove, ended with $22.6 million in the rainy day fund. After the books were reconciled, the new fiscal year began with $51.8 million in the rainy day fund.
It is true that the Musgrove term coincided with a national recession that resulted in a drop in revenue collections. Despite that drop, the Musgrove administration, with the agreement of the Legislature, rightfully or wrongfully still opted to begin the phase in of what is still the largest teacher pay increase in the state’s history and to fully fund the state formula that provides the bulk of state money for the basic operation of local school districts. The formula has been underfunded by more than $200 million annually during each year of Reeves’ tenure as lieutenant governor.
In addition, the rainy day fund dropped to even a lower level – $18.9 million – at the end of fiscal year 2006 under the tenure of Republican Gov. Haley Barbour.
Then there is the issue of actual revenue collections. Reeves has reason to boast that state revenue collections have been on an uptick. During the past fiscal year, revenue collections grew by a healthy 4.9 percent. The strong revenue collections for the just completed fiscal year come after four years of sluggish growth rates including one year where the state collected less revenue than the previous year for only the fourth time since 1970.
There were times in the 1990s when the state experienced multiple years of double digit revenue growth.
Based on history, it is true that Democrats in general have been more willing to tap into the rainy day fund to avoid cuts than have Republicans.
But during the current election cycle, various candidates for political office, both Democrats and Republicans, have cited the state’s lack of investment in various programs, ranging from infrastructure to teacher pay to health care, as reasons Mississippi has lagged other states and the nation in terms of economic growth, including jobs growth.
In what was a direct shot at Reeves, state Rep. Robert Foster, who lost the Republican nomination for governor and who has now endorsed Reeves, said during the party primary contest, “to invest in our students, we must first invest in our teachers. That means making sure teachers are properly compensated for their work – and not just in election years.”
If Reeves and the leadership had made an investment in teacher salaries similar to what was made during the Musgrove administration – $335 million over six years, that definitely would have impacted the ability to grow the rainy day fund.
State economist Darrin Webb has pointed out that between 2009 and 2018 Mississippi’s economy grew 2.2 percent compared to 22.1 percent for the nation and 10.8 percent for the four contiguous states.
At the legislative hearing Reeves pointed out in recent years legislative leaders made the hard choices “to right size” state government, putting the state in position for growth in the future.
State Personnel Board Executive director Kelly Hardwick pointed out to the legislative leaders that there are now 26,414 state employees, almost 4,000 less than five years ago.
“When you are successful in right-sizing government, you free up resources to do other things,” Reeves said.
Of course, at the same hearing legislative leaders expressed concern about the long waits and lack of access to bureaus across the state to obtain and renew driver’s licenses. Department of Public Safety Commissioner Marshall Fisher said part of the problem is caused by lack of staffing. He also attributed the heavy work load as the reason for the state not being able to recruit medical examiners. Of course, one way to solve that problem, like with the driver’s licenses bureaus, would be to appropriate more funds to hire additional people.
Reeves and the legislative leadership during the past eight years have chosen to focus on tax cuts and building reserves.
Whether that is good or bad is in the eye of the beholder.
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