January « 2012 « Policy Matters

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Budget Reform with Performance Based Budgeting, Part Two

January 31, 2012

Filed under: Budget & Tax,Budget Reform,Performance Based Budgeting — Tags: budget, evaluate performance, funding decisions, Mississippi, performance based budgeting, programs, public programs, smart budget act, tax, tax expenditures — admin @ 8:17 AM

Last week, in part one of our examination of budget reform, we discussed some of the basics of Performance Based Budgeting. This week, we will outline some concerns about the how Performance Based Budgeting might be implemented.

Performance Based Budgeting aims to collect and evaluate performance data on programs and use that data to inform funding decisions. However, its effectiveness much depends on how a program’s performance is defined and how the data collected are used.

First, the standards by which public programs are measured should be crafted with public input and with acknowledgement of the outside factors influencing their results.

By their very nature, state agencies deal with complex problems, often with multiple influencing factors and without easy ways to measure results.

Second, budgeting decisions should continue to be based primarily on public needs and priorities.

While the budget process is not always smooth, the reason budget decisions are made by our legislature is because they reflect the priorities of the public through representative government. The most “successful” programs may not be the priority programs or vice versa. Would one want to cut public safety spending, because the crime rate went up?

Third, after years of budget cuts, how does one account for the chronic underfunding of programs contributing to an agency’s shortcomings?

Many programs have had year after year of budget cuts. The Mississippi Adequate Education Program is in line to be underfunded by about $1 Billion since it was last fully funded in 2008. Responsible implementation of Performance Based Budgeting would take into account lower funding levels and their impact on a program’s performance.

Finally, Performance Based Budgeting, if implemented, should be applied to all state programs, including those administered through the tax code, like economic development tax breaks.

Performance Based Budgeting is designed to judge the effectiveness of programs funded through the appropriations process. However, tax expenditures and incentives should also be reviewed for their effectiveness. They are enacted for a public purpose but are not regularly reviewed and in most cases data are not available to the public about how they are used.

Performance Based Budgeting can be used to inform the budget process and to improve budget transparency. It should not however replace public budget deliberations that take into account the needs and priorities of the people.

In the final post from this three part series, we will look at how Performance Based Budgeting is being used in other states.

Author: Sara Miler, Senior Policy Analyst

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State of Working Mississippi 2012 Chapter 2: WAGES

January 30, 2012

Chapter 2 of MEPC’s latest State of Working report reveals that many members of the state’s workforce have not seen an improvement in their wages during the last ten years as employers and businesses were hit hard by two economic downturns, and state and local budgets tightened.

The table in this post looks at median wages –or the middle wage- for Mississippi workers at the beginning and end of the decade. All Mississippi wages have been adjusted for inflation and are in 2010 dollars.

WAGES BY EDUCATION, GENDER AND RACE

Overall, median wages for Mississippi workers changed by $0.32 over the decade from $13.13 in 2000 to $13.45 in 2010. Mississippi’s median wage falls below Southern norms. Wages for different education levels show that increases in educational attainment lead to wage gains particularly for adults that pursue post-secondary education and college.

In 2010, the median wage for men was $14.29 compared to $12.75 for women. The gap between men’s and women’s wages remains; however, it narrowed in Mississippi between 2000 and 2010. In 2000, the median wage for women equaled 71% of men’s wages and by 2010 median wages for women equaled 89% of their male counterparts. While women’s wages advanced over the decade, two economic downturns and job loss in traditionally male-dominated industries like manufacturing contributed to the reverse effect in men’s wages.

In contrast, wage disparities between white and African-American workers have persisted at a similar level for two decades. The median wage for white workers was $15.66 in 2010 while the median wage for African-American workers was $11.02. In 2000 and 2010, wages for African American workers measured approximately 70% white workers.

RECOMMENDATIONS

Over the last decade tuition at community colleges and universities has increased more rapidly than the small change in hourly wages for Mississippi workers. As a result, the cost of a college education now takes up a larger portion of a family’s income than it did in 2000. The rising cost of college education makes it harder for Mississippians to climb the economic ladder.

Keeping the post-secondary education affordable should remain a priority as the state makes critical decisions through the budgeting process. Mississippi needs a balanced approach that includes raising revenue instead of a cuts only approach that may threaten access to higher education.

The next State of Working Mississippi 2012 blog will feature findings on income and poverty from Chapter 3.

Author: Sarah Welker, Policy Analyst

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State of Working Mississippi 2012 Chapter 1: JOBS

January 26, 2012

The release of MEPC’s State of Working Mississippi 2012 reveals that the 2000s challenged many Mississippi businesses, as well as working adults and their families. Chapter 1 of the report details trends in the state’s workforce, jobs and unemployment.

CHANGE IN EMPLOYMENT BY DECADE

Mississippi’s job losses in the 2000s appear particularly harsh when compared to the growth of the 1990s (see chart). Mississippi’s employment grew by 23.2% during the 1990s, in contrast to a 5.5% decline in the 2000s. The South experienced similar trends of strong job growth during the 1990s; however, the region did not experience the same level of overall decline in the last decade.

The latest data reveals that Mississippi was one of four states with an unemployment rate still above 10% in December 2011.

SHIFTS IN EDUCATIONAL ATTAINMENT AND AGE OF WORKFORCE

The percentage of workers with at least a bachelor’s degree rose to 22.8% during the decade, and 57.1% of the workforce has taken at least some college coursework. Even with gains, the state’s portion of adults with college experience registers below national norms (60.5%). Overall, more than 350,000 working-age adults still lack a high school diploma and college experience.

Older adults now represent a larger share of Mississippi’s workforce. Throughout the economic downturn in the late 2000s, many Americans delayed retirement to build economic security after suffering financial losses. In 2000, 13.3% of Mississippi workers were age 55 or over. By 2010, 18.7% of Mississippi’s labor force was at least 55 years old. In contrast, younger Mississippians now represent a smaller share of the state’s workforce.

RECOMMENDATION: (For full recommendations see complete State of Working 2012).

Increase wrap around supports for adults in adult basic education, job training and post-secondary courses. Strong wrap-around support services are critical for adults returning to school with the hope of gaining skills and moving into higher wage employment. Without these resources, even the strongest students will struggle to meet both the needs of their families and the demands of training. Examples of supports include: transportation vouchers, child care and staff dedicated to helping adults in adults basic education and GED programs transition to college-level classes.

Tomorrow: The SOW 2012 series continues with a closer look at wages by race, gender and educational attainment.

Author: Sarah Welker, Policy Analyst

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INTRODUCING THE STATE OF WORKING MISSISSIPPI 2012

January 25, 2012

Many communities across Mississippi continued to experience persistently high unemployment and underemployment, stagnant wages and economic insecurity. However, the state’s workforce remains resilient and continues to be one of the state’s greatest assets. Understanding how workers, industries and families have been affected over the last decade can lay a foundation for building up the workforce in the years ahead.

MEPC’s latest report, State of Working Mississippi 2012 is a comprehensive piece that looks at key aspects of the economy affecting Mississippi’s workforce from 2000 to the present. Specifically the report:

Inspects changes in critical areas of Mississippi’s economy since 2000 including: jobs, the workforce, wages, income, and state revenue.
Compares information in these areas with trends nationally and among Mid South states.
Examines each of these areas through the lens of race, gender and educational attainment.
Summarizes key takeaways and makes recommendations in each chapter for advancing working Mississippians and their families.

SELECT FINDINGS FROM STATE OF WORKING MISSISSIPPI 2012

TWO RECESSIONS RESULT IN JOB LOSS OVER THE DECADE

In Mississippi, employment peaked in February 2008 and then steeply declined until February 2010. In total, Mississippi lost 76,800 jobs over the two-year period. Mississippi’s job losses in the 2000s appear particularly harsh when compared to the prosperity of the 1990s. Mississippi’s employment grew by almost 25% during the 1990s, in contrast to a 5.5% decline in the 2000s. The Southern region and the United States experienced similar job growth during the 1990s; however, neither the South nor the nation experienced the same level of overall decline in employment in the 2000s.

MISSISSIPPI WORKERS EXPERIENCE LITTLE CHANGE IN WAGES

Many members of the state’s workforce have not seen an improvement in their wages since 2000, as companies were hit hard by two economic downturns, and state and local budgets tightened. The inflation-adjusted median wage in Mississippi grew marginally from 2000 to 2010, from $13.13 to $13.45. The gap between men’s and women’s wages narrowed over the decade, while the wage gap between white and African American workers persisted from 2000 to 2010.

WORKFORCE ADVANCES IN EDUCATIONAL ATTAINMENT

Mississippi’s workforce advanced in educational attainment over the decade, but needs to raise skill levels further to reach national norms. In 2000, 20.8% of the workforce received a bachelor’s degree or higher compared to 22.8% in 2010. Overall 57.1% of the state’s workforce has taken at least some college classes. However, over 350,000 working-age adults still lack a high school degree, and the share of workers without high school equivalency is larger in Mississippi than in the U.S.

Over the next several days we will take a closer look at the key findings and recommendations from each chapter of the report.

Author: Sarah Welker, Policy Analyst

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Budget Reform with Performance Based Budgeting

January 24, 2012

Filed under: Budget & Tax — Tags: budget, Mississippi, performance based budgeting, smart budget act — admin @ 8:01 AM

With the beginning of the legislative session and change in executive leadership, there has been renewed talk of state budget reform. Budget reform is necessary to improve the transparency of the process and to increase budget accountability.

One proposed reform includes Performance Based Budgeting. Performance Based Budgeting reforms aim to use data about the effectiveness of programs to inform budget decisions. Performance Based Budgeting can accomplish some of these goals. Budgeting is complicated, however, and any reform should be made with care.
In this three-part blog series on Performance Based Budgeting, we will delve into those issues. In part one we will go over a few basics about Performance Based Budgeting.

Performance Based Budget reforms seek to collect and evaluate performance data on programs and use that data to inform funding decisions. There are a wide range of budget reforms that can fall under a performance based budgeting system.

According to the National Association of State Budget Officers, twenty five states use some kind of performance budgeting. Mississippi currently collects some performance information that is reported by state agencies to the Joint Legislative Budget Committee annually on their agency budget request.

Last year, the State Senate passed the Mississippi Smart Budget Act (SB 2301) that would have implemented some performance based budgeting reforms. However, the bill was not passed in the House. It is likely that a similar bill will be introduced during this legislative session.

The next blog post in this series will explore some challenges to the implementation of effective Performance Based Budgeting and some concepts/questions that should be considered if it is to be implemented in a constructive manner.

Read my opinion piece on this in the Hattiesburg American.

Budget Reform with Performance Based Budgeting, Part Two

Author: Sara Miller, Senior Policy Analyst

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Legislative Economic Briefing Highlights

January 20, 2012

Filed under: Budget & Tax — Tags: employment, federal expenditures, general fund, jobs losss, Legislative Economic Briefing, Mississippi — admin @ 8:13 AM

Thursday, the Mississippi Legislature was briefed by the state economist and the state treasurer on the state’s current economic growth, employment, General Fund revenue, bonding and future outlook.

Below are 4 key points made by State Economist Dr. Darrin Webb during the Legislative Economic Briefing at the Capitol on January 19^th.

Mississippi’s overall employment is not projected to reach 2000 levels until 2016. The state still has 55,000 fewer jobs than it did at the employment peak in February 2008.
Many communities continue to experience challenges after the recession. Forty-six Mississippi counties lost jobs from 2010 to 2011.
Mississippi’s General Fund collections are still down after the recession, and state revenue will not pass FY2008 levels for several years.
Federal expenditures represent 1 out of every 3 dollars of Mississippi’s economy.

FACTORS CONTRIBUTING TO SLOW GROWTH IN MISSISSIPPI

Dr. Webb placed particular emphasis on a number of reasons why the state is projected to have slower growth than the nation in coming years. The first was the state’s larger than average share of resources coming from federal dollars. Federal expenditures are not likely to increase substantially in the years ahead and could face cuts. Mississippi’s economy will be influenced by the lack of federal growth more than other states.

Additionally, human capital was mentioned as another weakness that will affect the state’s growth and competitiveness. Without the further development of a skilled and healthy working population, Mississippi’s ability to maintain and attract businesses will be hindered.

PATHWAYS TO RAISING ECONOMIC GROWTH AND OPPORTUNITY

The information provided today raises the urgency to pursue policies that increase growth and build adequate state revenue. Investing in pathways to increase educational attainment remains critical at all levels of the education spectrum.

Equally pressing is the need to consider a balanced approach that includes raising revenue instead of a cuts only approach to ensure that Mississippi has the resources needed to enhance the delivery of education from workforce training to secondary schools and post-secondary institutions.

LEGISLATIVE ECONOMIC BRIEFING (printable pdf)

Author: Sarah Welker, Policy Analyst

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Part 3: A State Earned Income Tax Credit – Estimated Cost, Eligibility, and Encouraging & Rewarding Work

January 18, 2012

Filed under: Budget & Tax,EITC — Tags: Earned Income Tax Credit, EITC, household income, Mississippi — admin @ 9:32 AM

The previous posts addressed the increasing gap between the state tax threshold and the federal poverty line and introduced a state Earned Income Tax Credit (EITC) as a potential solution. This post will explain more about instituting a state EITC in Mississippi.

Estimated Cost
The cost of a State EITC in Mississippi depends upon the percent of the federal EITC selected for the credit. Most states’ EITC provide benefits as a set percentage of what the federal program pays. The table below includes the estimated cost of a state EITC in Mississippi.

Who Is Eligible, and For How Much?
In the 2011 tax year, over 26 million working families and individuals received the federal EITC—including 404,394 Mississippians. The amount of the EITC depends on a recipient’s income, marital status, and number of children (See figure below). Each tier of benefits rises with earned income until it reaches a maximum level and then begins to phase out at higher income levels. For example, the highest credit amount of $5,751 is for married filers with three or more children and a household income between $13,000 and $21,000, while the highest credit amount for married filers with one child is $3,094.

Encouraging and Rewarding Work
The EITC is designed to promote and reward work. Only families with at least one member in the workforce are eligible for the credit. Starting with the first dollar, a worker’s EITC grows with each additional dollar of earnings until the credit reaches the maximum value. The amount of the credit rises as income increases until it reaches a maximum amount and then begins to phase out at higher income levels. This “phasing out” effect ensures that a family does not lose its EITC benefit based on a single dollar of income. Research has shown that most families use the EITC to pay for necessities, home repairs, maintaining/replacing vehicles needed to commute to work, and obtaining additional education or training to boost their employability and earning power.¹

Our next post will discuss additional benefits of a state EITC and address policy specific recommendations for making our state’s income tax system more equitable.

Author: Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow

¹Timothy M. Smeeding, Katherin Ross Phillips, and Michael A. O’Connor, The Earned Income Tax Credit: Expectation, Knowledge, Use, and Economic and Social Mobility. http://ideas.repec.org/p/max/cprwps/13.html

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Part 2: Making Mississippi’s Income Tax More Equitable—The Earned Income Tax Credit

January 13, 2012

Filed under: Budget & Tax,EITC,Income & Working Families,Income Tax — Tags: Earned Income Tax Credit, Federal Poverty Line, income tax, Mississippi, Regressive Tax System — admin @ 10:11 AM

Our first post addressed the increasing gap between the state tax threshold and the federal poverty line. One policy solution that would reduce the effect of the state income tax on the poor is for our state to institute an Earned Income Tax Credit (EITC).

The federal EITC is the nation’s most effective anti-poverty program for working families.¹ It is designed to encourage and reward work as well as offset federal payroll and income taxes. In 2009, it lifted 6.5 million people above the federal poverty line—including 3.3 million children, nationally. Additionally, the federal EITC is refundable, meaning that if it exceeds a low wage worker’s income tax liability, the IRS will refund the balance.

404,394 Mississippians claimed the federal EITC in 2011 which brought an additional $1.5 billion into our state.² A state EITC would reduce the income taxes owed and provide a wage supplement for over 360,000 working families living in or near poverty in Mississippi. Finally, a state EITC that is tied to the federal EITC is automatically adjusted.

The next blog in this series will talk about the estimated cost and eligibility requirements for a state EITC while also describing the work benefits that an EITC could create in our state.

Author: Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow

¹EITC Statistics http://www.eitc.irs.gov/central/eitcstats/

²Arloc Sherman, “Stimulus Keeping 6 Million Americans Out of Poverty in 2009, Estimates Show,” Center on Budget and Policy Priorities, September 9, 2009.

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Making Mississippi’s Income Tax More Equitable

January 11, 2012

Filed under: Budget & Tax,Income & Working Families,Income Tax — Tags: Federal Poverty Line, income tax, Mississippi, regressive, Tax System — admin @ 9:08 AM

Mississippi’s state income tax threshold, the amount at which persons start having to pay income taxes, has fallen below the federal poverty line since 2005 (See Figure 1, below).

Each year, the federal poverty line increases due to increases in the cost of living. However, Mississippi’s income tax threshold does not adjust for inflation.

Without adjustment, the gap between the state’s income tax threshold and the federal poverty line will increase annually. In turn, there will be more individuals living below the federal poverty line that will be required to pay state income taxes.

This blog is the first of a series of posts on the state’s tax system. Forthcoming posts will include policy solutions to address the growing regressive nature of the state’s income tax system.

Author: Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow

Part 2: Making Mississippi’s Income Tax More Equitable—The Earned Income Tax Credit

Part 3: A State Earned Income Tax Credit – Estimated Cost, Eligibility, and Encouraging & Rewarding Work

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JOB WATCH: U.S. EMPLOYMENT GROWS BY 200,000

January 6, 2012

Filed under: Jobs — Tags: employment, job growth, Jobs, Mississippi, STEPS — admin @ 11:45 AM

Today the national employment data reported that the U.S. added 200,000 jobs in the month of December. The rise in employment brought the nation’s unemployment rate to 8.5%, down from 8.7% in November.[1] While the job numbers show positive momentum in employment growth, Mississippi’s unemployment rate of 10.5% registered above the nation’s last month, and the state’s leaders continue to focus on the need for substantial job creation.

A LONG TERM VIEW OF EMPLOYMENT

The figure below shows changes in Mississippi’s employment over the last three decades. In the 1980s and 1990s Mississippi experienced substantial employment expansion. However the early and late 2000s have brought decreases in overall employment with the largest decline (3.5%) coming in 2005-2010. In November 2011, Mississippi still had 50,000 fewer jobs than before the 2007 recession began. Unemployment rates for each of Mississippi’s counties can be found here.

POLICIES FOR ADDITIONAL JOB CREATION

Senior Economist Timothy Bartik from the W.E. Upjohn Institute researches state economic development policies that promote growth in jobs and earnings. Bartik’s findings have revealed that when states provide additional resources for customized job training to businesses, it increases job growth and per capita earnings substantially more than a general business tax cut per dollar invested. Customized training can provide skills to a business’ new or existing employees.

Enhancing funding for targeted job training provides the dual benefit of building up businesses already in a community and recruiting businesses to a region. Communities can also put policies in place to promote using customized training funds to prepare and hire unemployed workers from the local community.

In Mississippi, initiatives like the Subsidized Employment and Training Program (STEPS) used public funds to subsidize wages for businesses that hire and provide skills to unemployed workers. The Mississippi Community College Board’s Office of Workforce Education oversees resources to colleges that provide workforce training to local employers.

Mississippi continues to need actions that stimulate job growth across local communities. As state and regional leaders make decisions about how to spur job creation, dedicating additional resources to customized training and pooling industry training needs may offer an avenue to help Mississippi’s businesses compete and ensure more jobless Mississippians move into employment opportunities.

Author: Sarah Welker, Policy Analyst

[1] The U.S. unemployment rate in November was revised from 8.9% to 8.7% in the December release.

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