BRADENTON, Fla. - After a year of much bigger revenue declines than anticipated, Mississippi Gov. Haley Barbour late last week ordered 5% cuts in most of the state's budget items.
There will be no funding reductions for debt service, Medicaid, corrections, some social services, and auditing "due to extensive auditing requirements under the federal stimulus," Barbour said.
The cuts announced by the governor will be in the $5.5 billion general fund supported by state revenues. The total budget for fiscal 2010, including federally funded programs, is $19.8 billion.
"It's hurricane season," Barbour said, noting that Aug. 29 was the fourth anniversary of Hurricane Katrina, which devastated southern Mississippi. "We've got a budget storm on the horizon. We can't avoid the storm but we know the best thing is to prepare early."
Most of the cuts will be made in education, which was trimmed less during this year's legislative session because of federal stimulus funding.
To support the reasoning for the newest budget cuts, Barbour said revenues in July, the first month of fiscal 2010, were down $26 million, or 11.3% below what was projected. The reduced amount was also $56 million less than what was collected in July 2008.
August revenues were down $5.5 million, or 1.69%, below state estimates. Actual collections were $31 million, or 5.65% fewer than in August 2008.
Using the two months as an indicator to project what the state could be facing through the budget year, Barbour said the shortfall could be as high as $823 million.
However, he also said that he believed that realistically the shortage most likely would fall between $175 million to $350 million by the end of the fiscal year.
The cuts announced last week are not the first for Mississippi, which had seen remarkable revenue growth in the reconstruction years following Katrina.
In November and January, Barbour cut $200 million from the fiscal 2009 budget due to declining revenues.
Despite an economy lagging the rest of the nation, rating agency analysts have rewarded Mississippi with a stable outlook for conservative budgeting and timely budget cutting. The state has about $3.4 billion of outstanding general obligation debt that is rated AA by Fitch Ratings and Standard & Poor's.
Moody's Investors Service, affirming its Aa3 on the state's GOs in March, said the credit rating is strengthened by the fact that Mississippi is legally required to address general fund revenue shortfalls of more than 2% after the first four months of a fiscal year by reducing spending allocations.
"This mechanism, an important strength in the state's governance framework, has helped the state avoid negative general fund balances in difficult economic times, both during the period from fiscal 2001 through 2003 and again during fiscal 2009," Moody's said.
