BRADENTON, Fla. — Mississippi Treasurer Tate Reeves last Thursday urged the Joint Legislative Budget Committee not to authorize any new bonds in the 2008 session.
“Given the budget challenges that face the Legislature this year, the only fiscally prudent approach to bonds is to forego the pressure and not authorize any new debt,” Reeves said.
State economist Phil Pepper told lawmakers last week that the state’s economy is showing signs of weakening largely because of slowing retail sales and problems in the housing market. Pepper also said that the revenue estimate for this fiscal year, approximately $5 billion, may need to be adjusted as the Legislature contemplates the fiscal 2009 budget.
Additionally, the Mississippi Division of Medicaid is facing an $86 million budget shortfall this fiscal year.
In a fiscal briefing before the Joint Legislative Budget Committee, Reeves reviewed the state’s recent history with debt issuance and the importance of remaining in control of the state’s overall debt burden.
In 1990, Mississippi had $589 million of debt outstanding, which then was approximately 16% of the state’s constitutional debt limit. By 2004, outstanding debt had increased to more than $3 billion, or 36% of the state’s debt limit.
Over the last four years, Reeves said the total debt burden on Mississippi taxpayers has stayed the same and debt as a percentage of the constitutional limit declined to 25%.
“We have made great progress in the last few years reducing the overall debt burden on Mississippi taxpayers,” said Reeves, who also noted that debt service at its peak comprised nearly 10% of the state’s total state appropriations.
Currently, debt service is estimated to be 6.75% of the fiscal 2008 budget.
“Every dollar we spend on principal and interest is a dollar we can’t spend on public education,” Reeves told the committee. “Every dollar we spend on principal and interest is a dollar we can’t spend on public safety. And the nearly $400 million we spend on principal and interest this year is $400 million that we can’t spend on the other vital services that state government provides.”
So far this legislative session lawmakers have filed bills authorizing $14.5 million of state-issued general obligation bonds.
One bill would authorize $10 million of state-issued GO bonds to assist small municipalities and counties with various improvement projects, including highways, streets, bridges, sidewalks, utilities, airports, and purchasing equipment and real estate. Another bill would authorize $3.5 million of state GO bond proceeds to improve a Natchez golf course. A third bill would provide $1 million of bonds for the repair and renovation of the Natchez Institute school building.
The Legislature is in session until May 12 and lawmakers have more than two months to file additional bond bills.
In December, rating agencies affirmed their long-term ratings and stable outlook on the state’s approximately $3 billion of outstanding GO bonds. They are rated AA by Fitch Ratings and Standard & Poor’s, and Aa3 by Moody’s Investors Service.