Mississippi Gov. Haley Barbour called for an average 8% reduction in state spending in his $5.46 billion general fund budget for fiscal 2012, which was submitted to the Legislature on Monday.

Barbour, a Republican rumored to be considering a run for president in 2012, said projected tax revenues are expected to be about 7% below pre-recession levels.

“My final executive budget outlines difficult, but necessary, decisions that must be made to guide Mississippi out of the recession and back on the path to strong economic growth,” Barbour wrote in his letter on the budget.

Barbour said the state faces a structural shortfall of $634 million due to the loss of federal stimulus funds, generally flat state tax collections, and an increased demand on Medicaid.

Another $71.4 million has been requested for the state’s pension and health care programs, but Barbour said he will not support paying the increase from the state budget. He wants a thorough study of both programs.

Barbour said state agency budgets must be reduced “and structural change must be made in state government.”

His budget includes a plan to have some agencies share administrative functions, such as purchasing, and consolidating similar agency functions under one roof.

Barbour’s proposal includes dipping into reserves and various trust fund reserves to support the fiscal 2012 budget. His recommendations call for spending $88 million from the working-cash stabilization fund, also known as the rainy-day fund, $56.3 million from the health care trust fund, $27.8 million from the hurricane disaster reserve fund, and $26.5 million from the capital expense fund.

Another $58.8 million would come from carryover amounts from the general and educational enhancement funds.

The plan would leave $185 million in the state’s reserves.

No immediate information was available on the governor’s recommendations for borrowing.

“We work with the Legislature on a bond bill, as we do annually, but I haven’t heard the governor roll out any specific number on bonds for the coming fiscal year,” said Dan Turner, Barbour’s spokesman. “In general, he wants to hold the amount of borrowing to no more than what has been paid off.”

Other features of Barbour’s recommended spending plan include level funding of just over $2 billion for public education while cutting higher education funding less than 2%, keeping Medicaid provider payments to current-year levels, and reducing mental health funding by 7.24%.

The Mississippi Economic Policy Center, a public policy think tank, criticized Barbour’s attempt to address the budget’s structural imbalance.

“The governor aptly illustrates the depth and breadth of the state’s ongoing revenue problem, but falls well short of providing a balanced approach to solving the state budget crisis,” the center said in a blog analysis. “The cuts will mean, among other things, more layoffs, closure of mental health facilities, and larger class sizes.”

Barbour, who has another year left before he is termed out of office, has been a vocal opponent of the new federal health care reform law.

He is recommending that the state implement a “market-based, consumer-driven health insurance exchange” to allow small businesses to provide health insurance to employees.

Mississippi has $4 billion of outstanding general obligation debt that is rated AA-plus by Fitch Ratings, Aa2 by Moody’s Investors Service, and AA by Standard & Poor’s.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.