March 14, 2006

STATEMENT FOR PRESS BRIEFING GOVERNOR HALEY BARBOUR

Yesterday, the revenue estimating committee met to revise the estimates for FY 06 and FY 07. Their work is not public yet, and it has to be ratified by the Joint Legislative Budget Committee. But their meeting signals it is time to focus on completing the budget for the next Fiscal Year.

I am pleased the Legislature has, for the most part, refrained from serious budget deliberations until they could get the most current information about state revenues and expenditures. My budget recommendation last November and the Legislative Budget Committee recommendation in December were both based on a revenue estimate made in October, less than two months after Hurricane Katrina. Since then, through the end of February, state revenue collections have come in about $192 million above that October estimate. Based on this, it is reasonable to expect the new, revised revenue estimates for FY 06 and FY 07 will be substantially higher than the ones made last October.

It is likely a large part of this revenue growth is the result of a six-month flood of one-time money in the form of insurance, FEMA, SBA and other payments totaling more than $9 billion. If only one-third of this money was spent on durable goods, that would explain a sales tax revenue increase of $210 million, which is excess of the $192 million collected. Hence, we continue to have great uncertainty about our budget situation.

Last night, I vetoed Senate Bill 2504 which proposed to allow the Legislature to appropriate 100% of estimated General Fund revenue in Fiscal Years 2007 and 2008. I vetoed this legislation, even though I myself advocated the appropriation of 100% of General Fund revenue for Fiscal Year 2007 in my budget message back in November. However, since last November, revenue collections have increased enough to provide needed resources for state priorities, but the possible one-time nature of much of the increased revenue causes uncertainty about future collections. Both factors are arguments for reinstituting the extremely positive and statutory practice of setting aside 2% of revenue in a “rainy day fund.” SB 2504 also waived the 2% set aside and authorized spending 100% of revenue in FY 2008. That is clearly premature and is in itself solid grounds for my veto.

I believe most Legislators and a large majority of citizens recognize a 2% set aside and a healthy “rainy day fund” are very important to the State’s financial stability. Having inherited a $700 million budget shortfall myself, I definitely understand the value of a robust “rainy day fund.”

As the budget is developed for the next fiscal year, our goal should be the full 2% set aside; if the revenue estimate determines that is not achievable, the Legislature can always revisit this issue during the budget process.

In addition to reestablishing our “rainy day fund,” there are other goals which should guide the budget deliberations of the Legislature in the coming weeks:

• An honest budget with no pre-planned deficits;
• Increased funding for K-12 education, universities and community colleges;
• A state employee pay raise plan that sets a minimum across the board pay raise of at least $1200 and phases in the realignment recommendations of the State Personnel Board over two years. It is my hope and expectation and I will propose state employees also get another raise next year;
• No raids on special fund agencies to generate one-time money for recurring expenses;
• Give agency directors the maximum flexibility possible to run their operations through lump sum budgets and other management tools;

A top priority in the budget process must be to set aside the necessary funds to pay the state match to the federal government for FEMA’s individual and public assistance programs. The President recently extended for the fifth time the deadline for the federal government to pay 100% of the cost for debris removal and other services, for which I am very grateful. However, we have already received a bill for $55.4 million to cover the state’s share of individual assistance which FEMA has paid directly to Mississippians through November 30, 2005.

At the end of January, the Congress provided $2 billion for Mississippi, Alabama, and Louisiana for health care costs, a portion of which should save Mississippi hundreds of millions of dollars in state Medicaid costs. We have been working with the federal government to develop and implement the rules and regulations so that we can access these funds. When they become available, I support setting aside all of these savings in the state’s Disaster Trust Fund to pay the state’s match for FEMA funds. I ask the Legislature to implement the necessary legislation to make this possible.

But until these funds become available, we will need to continue to use the state’s line of credit or our “rainy day fund,” which is another important reason why we should have the goal of replenishing this account by setting aside 2% of General Fund revenues.

 

 


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Governor Haley Barbour
P.O. Box 139 Jackson, MS 39205
Phone: 601.359.3150 Fax: 601.359.3741