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Cuts Remain a Challenge for State Budget as Legislative Session Ends

April 11th, 2017

The 2017 legislative session has ended with another year of budget cuts for most state agencies, which will likely translate into more job losses for state employees and reductions in state services. Some of the most recent examples of the impact of the state’s budget crisis include the closure of beds at the state’s mental health facilities and layoffs at the University of Mississippi Medical Center. In addition, the state’s budget crisis could result in fewer resources for teachers in the classroom, fewer Highway Patrol officers to protect Mississippians, tuition increases at Universities and Community Colleges, and further delays in maintenance for failing roads and bridges. Mississippi’s dwindling resources are the result of revenue shortfalls due to near-stagnant economic growth and several tax cuts enacted over the last five years that largely benefit corporations. With the largest of the tax cuts enacted to take effect next year, there is an even bleaker outlook for the state budget in the years to come, barring legislative action to repeal, or roll back, the future cuts.

The last week of the legislative session was dominated by heated budget negotiations, resulting in budget cuts for most agencies, and leaving a few budget questions unanswered. Just before negotiating final appropriation bills, the Revenue Estimating Committee announced a reduction of the amount available for lawmakers to spend for the 2018 budget by $175 million. The committee also reported on further budget shortfalls for the current 2017 budget year, leading Governor Phil Bryant to announce the fourth round of budget cuts for the current year, bringing the cumulative total of mid-year cuts to $171 million.

Since Fiscal Year (FY) 2015, the state’s total budget has been effectively reduced year over year (Figure 1.) What looks like an increase from FY 2015 and FY 2016 is due to budget changes that now count special funds, once collected and directed for specific purposes as defined by law, as part of the total state support budget available for discretionary spending by the legislature. While that made it seem as if more money was available, the activities the special funds supported still must be funded as well, if they are meant to continue. An example is this year’s budget for the Mississippi State Department of Health. Looking only at the amount of their appropriation for 2018 overestimates the amount of general funding for agency programs because they must use a portion of their appropriation to pay for a trauma care fund that was once paid for directly by special funds.

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In FY 2016 and FY 2017, revenue shortfalls (when revenue comes in below estimate after appropriations have been made) necessitated mid-year cuts of $64.8 million and $171.2 million, respectively. The mid-year cuts were to some extent mitigated by the use of a portion of the state’s rainy day funds to offset the need for further cuts. The mid-year cuts are in addition to the cuts made by reductions in appropriations made by lawmakers from one year to the next.

Preliminary budget numbers for the FY 2018 state budget, most of which was adopted before the end of the session, suggest that next year will see the largest cuts over the last few years, reducing the state’s discretionary budget over $300 million, likely leading to more cuts for schools, public and mental health services, public safety, and roads and bridges.

One reason the FY 2018 budget numbers are unofficial, preliminary estimates is that while most of the budget was adopted before the end of the session, funding bills for two agencies failed to pass before negotiations broke down. One such bill would provide funding for the Office of the Attorney General and the other was for the Department of Transportation. The FY 2018 preliminary total in Figure 1 includes the proposed funding for the Office of the Attorney General. With more work to be done to fund these agencies, the legislature will have to hold a special session called by the Governor before the next budget year begins on July 1, 2017.

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