Budget Matters: The Basics

December 17th, 2015

As HOPE’s focus on the state budget continues this week, in our second post we look at the basics of the state budget, including the size and sources of the state budget as well as how the funds in the state budget are used.

In the current budget year (July 1, 2015-June 30, 2016) the state budget includes appropriations that total $21.8 billion. Forty-four cents of every dollar spent through the state budget comes from federal sources, like grants. The rest is made up of state general funds at 26 cents of every dollar (mostly from state taxes like sales and income taxes) and special funds at 30 cents of every dollar (from fees and some special taxes with a dedicated purpose).

How are those funds used? About two-third of the state budget goes to education (K-12 schools, community colleges and universities) and healthcare (Medicaid, Mental Health, and Public Health services). However, of note, is the fact that education and healthcare differ greatly when it comes to the sources of funds. Health services are overwhelmingly paid for through federal funds while education spending, is mostly paid for with general funds and non-federal special funds.

In recent years, the total amount of state general funds has been recovering from a deep trough caused by the national recession of 2008 and 2009. Because of the reduction in state tax collections, most state services were scaled back through year after year of budget cuts. In real terms (measured in inflation-adjusted dollars) state revenue has still not recovered to pre-recession levels.

Most recently, the 2016 revenue estimate, upon which 2016 appropriations were based, was just revised downward by $64.9 million. Unless revenues unexpectedly rebound, this will mean some current year cuts and/or by using money from the state’s rainy day fund.

Earlier this week, we talked about what’s at stake through the state budget and what year after year of budget cuts have meant for the services we depend on daily. In the final post for HOPE’s Budget Week, we will discuss what the budget debates look like for the coming year, including the legislative budget recommendations released earlier this week, and how you can take action on state #BudgetMatters in Mississippi.