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State General Fund Revenue Estimate: FY 2012 Revised and FY 2013

March 27, 2012

Filed under: Budget & Tax — Tags: , , , , , — admin @ 9:44 AM

Last Tuesday, State Economist Darrin Webb shared the State’s General Fund Revenue Estimate for FY 2012 (revised) and FY 2013 with the Legislature.  The table below includes a breakdown of these revenue estimates.  The total revised General Fund Revenue Estimate for FY 2012 is approximately $4.8 Billion and $4,761 Billion for FY 2013. The estimate stayed roughly the same.

Since the last revenue update, the economy has been growing.  However, this growth is at a slow pace and remains vulnerable to shock.  Additionally, Dr. Webb stressed that even if the nation does not enter a recession, there is still a chance that Mississippi will—the state has experienced four consecutive years of declining employment.

While it is encouraging to see that revenues are projected to exceed original estimates, there are ways that our state can take a more balanced approach. Opportunities for revenue growth include: Updating the state’s sales tax base to include more services, funding and implementing the hiring and retention of auditors and collectors for the Department of Revenue, and closing corporate loopholes by supporting HB970.

A copy of the full document can be found here

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

 

Cuts to Education Will Have Long Term Effects on Mississippi

March 21, 2012

Filed under: Education,Income & Working Families — Tags: , , , , — admin @ 9:00 AM

A publication from the Center on Budget and Policy Priorities, entitled, “New School Year Brings Steep Cuts in Funding for Schools,” illustrates the continuing effects of budget cuts on state-funded services like education.  On a national level, many elementary and high schools are receiving less state funding than last year and are now funded at below pre-recession levels.

Key findings from this study:

  • State-level K-12 cuts have large consequences for local school districts as they have little ability to replace lost state aid on their own.  Cuts at the state-level mean that local school districts have to either scale back the educational services they provide, raise more revenue, or both.
  • Cuts in school funding undermine education reform and hinder the ability of school districts to deliver high quality education, further resulting in long term negative consequences for the nation’s economic competitiveness.

How does Mississippi Compare?

Mississippi falls on the lower end of the spectrum when looking at cuts across the states by the percentage cut with a 12.2% percent reduction in funding per student (see Figure 1).  Continuing cuts to Mississippi’s education program will diminish the quality of education of elementary and high schools.  At a time when the nation is trying to produce workers with the skills needed to master technologies in an ever-changing global economy, cuts in education funding threaten essential building blocks for future prosperity.

What this means for Mississippi:

In the figure above, many states have managed to increase their funding for education programs.  This growth in spending reflects policymaker’s prioritization of education funding despite fiscal stress.  While Mississippi is not as affluent as other states, there are still methods that our state can use to gain a greater capacity to invest in programs such as education.  These methods include increasing the sales tax base, updating personal income and corporate taxes, and reducing certain tax expenditures.¹Without a balanced budgeting approach that includes raising revenues, Mississippi will be less competitive when prosperity returns.

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

¹Sara Miller, Revenue Options for Mississippi’s Fiscal Crisis, Updated August 2, 2011

 

House Bill 970 Would Help Curb Tax Avoidance

March 15, 2012

Filed under: Budget & Tax — Tags: , , , , — admin @ 8:48 AM

House Bill 970 would not allow corporations to deduct payments to related corporations that are not for legitimate business expenses. Closing this loophole would bring in an additional $30 million for the state of Mississippi.

Tax Avoidance: How does it work?

Some corporations set up a related corporation in another state that “owns” an intangible asset of the company, such as their logo.  They then pay royalties to that related corporation and deduct those royalties so that their profit, or taxable income, seems lower in Mississippi at tax time.  House Bill 970 would not allow deductions of these royalty payments, or payments for other purposes, unless there is a legitimate business reason for them beyond tax avoidance.

Several years ago, Mississippi closed a similar loophole that allowed businesses to deduct royalty payments to a holding company in another state that essentially did nothing other than own intangible assets.  However, businesses found another loophole by moving the intangible asset to companies in other states that had some real business operations.  Since the royalty payments to operating entities located in other states were eligible for deduction from corporate taxable income, corporations  simply moved the ownership of the intangible assets, such as the logo, to operating entities in other states—but for no business purpose other than tax avoidance.

Why should we close this loophole?

  • The bill is not a tax increase, instead it would limit tax avoidance by corporations who should already be subject to the income tax.  Last year, PEER found that 8 out of 10 corporations in Mississippi pay no state income tax.  Some of those corporations do not pay income tax because they legitimately have no profit to pay taxes on or they receive credits that have lowered their taxes to zero.   However, some are not paying taxes by taking advantage of tax avoidance measures.
  • The bill would help level the playing field for local businesses that don’t have out of state subsidiaries and must pay taxes on their full profit.
  • Recent polling by Better Choices Mississippi found that a majority of Mississippians favor closing corporate tax loopholes.  Three out of five Mississippians support a balanced approach to building a budget that includes raising some revenue. Of those supporting a balanced approach, 60% favor closing corporate loopholes as a means for collecting additional revenue.

Individuals and corporations alike benefit from our state’s infrastructure, education systems, court systems, and other state services.  During these tough budget times, we should be making sure that we maximize revenue collections that should already be owed to our state.  House Bill 970 would help address some of the challenges in collecting our taxes and help curb tax avoidance.

Author: Sara Miller, Senior Policy Analyst

New Polling Data Released: Mississippians Support a Balanced Approach

February 24, 2012

Filed under: Uncategorized — Tags: , , , , , — admin @ 9:02 AM

Yesterday, Brad Chism with Fondren Strategies discussed the results of a telephone poll that was conducted in early February regarding Mississippians views on cutting the budget, raising taxes and various options on raising revenue.  Some of the more interesting findings included:

  • Nearly seven out of ten respondents stated that cuts should be based on the impact that they have on people and savings.  Only 22% supported across the board cuts
  • 60% of respondents were in favor of at least some revenue increases to balance the budget while only 19% favored a cuts only approach

  • Among the respondents that supported some revenue increases, at least sixty percent of respondents were in favor of the following types of tax increases – cigarette, alcohol, tax increases on high income earners and closing corporate loopholes.

Also of interest, 43% of the respondents self identified as Republicans and 34% as Democrats.  The findings of the poll reveal that a wide swath of Mississippians supports a balanced approach.

Over the next several weeks, we’ll be participating in town hall forums held around the state to share this information along with regional economic snapshots and how budget cuts are affecting local communities with our partners through an emerging coalition called Better Choices for Mississippi. See the forum dates and locations here.

If you are interested in hearing more about the coalition or having the coalition come to your town, contact krobinson@childrensdefense.org

 

5 FUNDAMENTALS OF TANF

February 21, 2012

Filed under: Budget & Tax,Income & Working Families — Tags: , , , , — admin @ 8:59 AM

On the national level, there continues to be discussion over the ability of social assistance programs to insulate families from unemployment, underemployment and periods of economic hardship during the economic downturn. A recent Mississippi Public Broadcasting segment explains that many areas of Mississippi have seen increased enrollment in SNAP (formerly food stamps) among families that have never before applied for benefits.

Temporary Assistance for Needy Families (TANF) likewise provides emergency assistance to families with children to cover basics like rent, transportation, food or utilities. The TANF program supplies temporary cash welfare to very low-income families with children that are facing a financial emergency. Today’s post highlights key information on TANF eligibility, enrollment and benefits.

5 FUNDAMENTALS OF TANF IN MISSISSIPPI

  • Eligibility. In Mississippi, a family with one adult and two children earning less than $458 per month is eligible for TANF assistance. Eligible families must meet work and job search requirements during their participation in TANF. Like most states, Mississippi has a 60-month lifetime limit on family eligibility for TANF benefits.
  • Enrollment. In late 2011, 12,272 families received support through TANF. Very low-income children make up the bulk of TANF recipients, representing 71% of the overall caseload.
  • TANF and Poverty. In 2010, 643,880 residents lived in poverty while 25,301 were enrolled in TANF. The TANF caseload equaled 3.9% of the state’s residents living in poverty. Nationally, the number of individuals receiving TANF is the equivalent of 9.5% of individuals living below the poverty line.
  • TANF and the State Budget. In FY 2010, TANF payments represented 0.1% of the state budget.  Mississippi distributed $20 million in TANF support in FY 2010, the bulk of which comes from federal funds.
  • Benefit Levels. Fourteen states have TANF benefit levels below $300 per month for a family of three. Mississippi is one of these states, and as the chart below shows, Mississippi’s benefit level for a family of three is $170 a month, the lowest in the nation.

The recession brought an uptick in recipients as families turned to TANF during periods of unemployment. However, TANF benefits now cover a smaller share of critical family needs, such as housing or utilities than they did in the late 1990s. As the state and nation continue to face a strained budget environment, it remains important that resources are protected from programs like SNAP, TANF or child care vouchers.

These programs and others that make up the social safety net are instrumental for many families struggling to make ends meet while working hard across Mississippi.

Author: Sarah Welker, Policy Analyst
Sources: U.S. Department of Health and Human Services, Mississippi Department of Human Services, Center on Budget and Policy Priorities, and Urban Institute’s Welfare Rules Data Book.

State of Working Mississippi 2012 Chapter 5: ADVANCING TO A STRONGER WORKING MISSISSIPPI

February 10, 2012

Filed under: The State of Working Mississippi 2012 — Tags: , , , , , , , , , , , — admin @ 9:02 AM

After looking at the first 4 chapters of The State of Working Mississippi 2012, we have come to the final chapter. Chapter 5 focuses on recommendations.

Mississippi’s labor force remains one of the state’s greatest assets. However, the last ten years have made many Mississippi workers and their families feel less secure.

As Mississippi’s economy, jobs and workforce recover from the two recessions of the last decade, the state has the opportunity to ensure that all employers, workers and families can advance and prosper.

To this end, a variety of strategies can be implemented statewide through the state’s leadership in the private, public and non-profit spheres.

♦INCREASE EMPHASIS ON REGIONAL SECTOR INITIATIVES
Employers need skilled workers and access to quality training for their current employees. The state’s workforce also needs training to access employment with sufficient wages. Mississippi has already experienced success through sector initiatives, but a greater emphasis and more resources are needed. Further developing these efforts with state support can connect more working adults with the training and wrap-around support services they need to raise skills and gain higher wage employment.

♦KEEP POST-SECONDARY EDUCATION AFFORDABLE
Ensuring that tuition is affordable for all students is becoming increasingly important for keeping the doors of higher education open to the state’s workforce and recent high school graduates alike.

♦SUPPORT WEALTH CREATION AND ASSET BUILDING
Building assets and saving for higher education, emergencies and homeownership are important tools for growing wealth and creating income mobility across generations. Making more alternatives to high cost financial services available, strengthening consumer protections, enhancing access to financial education and connecting more unbanked families with financial institutions can all help increase wealth building among Mississippi’s households.

♦BUILD A PIPELINE FROM BASIC EDUCATION TO COLLEGE COURSES
The state stands to gain from better connecting basic skills education, GED preparation, workforce training and college courses. Improving the design of courses, so they stack in pathways from basic skills to post-secondary training, can advance more working adults without a high school degree onto a path to job opportunities with higher wages.

♦STRENGTHEN WORK SUPPORTS
For many adults, working full-time is not enough to provide for all the basic needs of their families. Adults in low-wage jobs need a variety of work supports to make ends meet. To assist these families, Mississippi needs to increase funding for affordable housing, childcare and energy assistance. Doing so helps ensure that parents can work and provide a safe, healthy environment for their families.

♦RESTORE PUBLIC STRUCTURES BY REFORMING TAX SYSTEM
Public investments should provide a quality education for all students, a healthy workforce and an infrastructure for business development that creates more jobs with quality wages. Ways to increase revenue, including adding new brackets to the income tax, closing corporate loopholes, and broadening the sales tax base to include more services, need to be considered to lift Mississippi and its workforce to greater economic competitiveness

State of Working Mississippi 2012 Chapter 3: INCOME and POVERTY

February 7, 2012

Filed under: Income & Working Families,Poverty,The State of Working Mississippi 2012 — Tags: , , , , , — admin @ 9:14 AM

MEPC’s State of Working Mississippi 2012 series continues with a look at household income over the decade from chapter 3. A post on key findings from chapter 2 illustrated that wages have not changed substantially, and a lack of change in wages relates directly to trends in household income.

Across the Mid South, households earned lower median incomes than did U.S. families overall, but changes from the beginning to the end of the decade were not the same for states around the region. Mississippi households have consistently had less income than households in neighboring states.

After falling from 2000 to 2004, Mississippi’s household income fluctuated around $37,000 for the rest of the decade. Mississippi’s household income of $36,851 in 2010 was $4,500 less than in 2000. Louisiana was the only state in the region to experience an increase in median household income over the decade.

In Mississippi, median household income varies considerably by race. While families of all demographics are having a hard time making ends meet in the current financial climate, a larger portion of African- American households struggle to cover all their basic needs and build wealth for long-term economic security. Income for white households ($46,799) was close to twice the median income for African- American households ($24,838) in the late 2000s.

Hear Ed Sivak, MEPC’s director, speak about disparities in income and employment by race on MPB’s Morning Edition radio interview.

RECOMMENDATION

ENSURE EMPLOYMENT-BASED BENEFITS KEEP FAMILIES HEALTHY AND SECURE

Adults in low-wage jobs that are part-time, seasonal or lack employer-sponsored benefits like health insurance or sick leave will often struggle to meet the needs of their families while working. For many families living below economic security a wide range of work supports are necessary to elevate families toward greater security. Programs and funding dedicated to providing affordable housing, health care, and child care are critical to move people along the path towards basic econnomic security and beyond.

Author: Sarah Welker, Policy Analyst

 

HOUSE COMMITTEE REPORT: Community College Appropriations

February 3, 2012

Filed under: College,Education — Tags: , , , , , , , , , — admin @ 9:41 AM

On February 1st, the House Appropriations Committee heard testimony from the Mississippi Community College Board as they made funding requests for FY2013. Dr. Eric Clark, the Community College Board’s Executive Director, noted that the trend of growing enrollment and additional financial need continues for the colleges and across the education spectrum. Dr. Clark noted the colleges “can’t do more with less indefinitely.

The chart below illustrates that both colleges and universities have seen growth in full-time enrollment since FY2000 and declines in per-student funding.

MID LEVEL FUNDING
The community college leadership outlined two critical priorities in the hearing. First, to advance toward the Legislature’s Mid-Level Funding formula that promises to fund community colleges at the mid-point between per student funding at universities and K-12 schools.

To advance in full to Mid-Level Funding the colleges would need an additional $154 million above prior year funding, but the colleges’ final request is to move to ½ that amount- equal to a request of an additional $77 million in FY2013. Neither the Legislative Budget Recommendation nor the Executive Budget Recommendation includes increases in funding for community colleges.

CRITICAL REQUEST: DROPOUT RECOVERY FUNDS
Importantly, the Community College Board also asked the committee to increase the annual appropriation for Dropout Recovery Funds. Dropout Recovery Funds are resources to enhance the delivery of Adult Basic Education and GED courses offered on the 15 community college campuses.

The goal of additional resources is to increase the number and success of students enrolled in GED preparation, increase support services –child care, tutoring, transportation, mentoring- and integrate job skills into GED curriculums.

In total, the Board is asking for $11.5 million to enhance the delivery of ABE/GED programs, promote more students to college-readiness and equip them with the skills they need to enter and succeed in the workforce.

Dropout Recovery Funds represents an opportunity for Mississippi to raise the job skills, college-readiness, and employment outcomes for the 350,000 adults over 25 years old in the state without a high school credential. In an environment where Mississippi still has unemployment above 10%, adults without a high school degree are disproportionately likely to enter periods of unemployment.

Finding the resources to support efforts such as those proposed through Dropout Recovery Funds should be a priority.

Author: Sarah Welker, Policy Analyst

Governor Bryant Releases FY 2013 Executive Budget Recommendation

February 2, 2012

Filed under: Budget & Tax — Tags: , , , , , , , , , , , , — admin @ 8:26 AM

Earlier this week, Governor Bryant released his Executive Budget Recommendation for FY 2013.  The budget is to provide guidance as the legislature creates the budget.

It will be considered by the legislature in addition to the Joint Legislative Budget Committee’s recommendation and Governor Barbour’s recommendation that was released last Fall.

Bryant’s budget has some good elements as well as some proposals that bring cause for concern.  The key components of Governor Bryant’s recommendation are below:

  • Small Increase for Department of Revenue
    Bryant recommends a small $5million increase for the Department of Revenue to fund auditors who will collect more in taxes.  It is estimated that the $5 million increase will bring in over $10 million in revenue owed to the state.  However, even with the increase, the Department is still recommended for funding at a level below even FY 2011 levels.

  • Reduced Use of One Time Funds and No New Revenue
    Bryant recommends reduced use of so called “one time” special funds for recurring budget items.  This budgeting recommendation would make budgeting more straightforward.  However, Governor Bryant is opposed to raising taxes and would make up for the reduction in funds with a cuts-only approach.

  • Lump Sum Authority and State Personnel Board Waiver
    Bryant recommends that agencies be given “lump sum” appropriations.  Currently, funding is granted with certain amounts provided for specific budget line items, like personnel, travel, equipment , etc.  “Lump Sum” appropriations would allow agencies to move funds across budget categories without legislative approval.   Waiving State Personnel Board protections would allow agency directors to make personnel changes regardless of an employee’s state service status.  State Personnel Board protections promote a public sector work environment free from undue political influence.
  • Implement Performance Based Budgeting
    Bryant recommends passage of the Smart Budget Act which would incorporate Performance Based Budgeting.  For more information about Performance Based Budgeting see MEPC’s recent     blog series on the subject.
  • Keep Medicaid Funding Level Despite Projected Increase in Participants
    Governor Bryant recommends level funding for Medicaid.  However, more participants will likely necessitate either cuts in services provided or cuts to reimbursement rates for providers.

  • Cuts for Education
    Governor Bryant recommends a $72.9 million reduction in state funds for the Mississippi Adequate Education Program.  Both Governor Barbour’s and the JLBC budget recommended level funding for MAEP.  None of the budgets recommend full funding for the formula that allocates state funding across the state’s school districts.  Bryant explains the reduction by suggesting that school districts use their own reserve funds to make up for the cut.  School district fund balances are used for cash flow throughout the district’s fiscal year due to irregular funding schedules and for capital expenses.  Furthermore, the amount held by schools districts vary greatly from district to district.  Intending to address this concern, the Governor recommends only $6 million for an emergency loan fund for school districts with inadequate reserves.

While some of Bryant’s recommendations would improve revenue collection and make the budget process more straightforward, many of the recommendations would continue the “cuts-only” approach of the last administration.  A balanced approach that includes new revenue would help the state invest in education and workforce development—both important for the state’s prosperity in the future.

Author: Sara Miller, Senior Policy Analyst

 

Budget Reform with Performance Based Budgeting, Part Two

January 31, 2012

Filed under: Budget & Tax,Budget Reform,Performance Based Budgeting — Tags: , , , , , , , , , — 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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