State budget practices receive mixed grades

Published 9:11 pm Monday, November 13, 2017

A nonpartisan group that evaluates state government budget practices is giving mostly mid-level marks to Mississippi.

The Volcker Alliance was formed four years ago by Paul A. Volcker, a former board chairman of the Federal Reserve, with the goal of making government more efficient.

The alliance issued a report Nov. 2 called “Truth and Integrity in State Budgeting,” which evaluates all states’ budget practices for fiscal years 2015 through 2017.

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Like most states, Mississippi has a fiscal year that runs from July through June. So, the period covered by the report for Mississippi is July 1, 2014, through June 30, 2017.

The report examines how states forecast the amount of money they will have available to spend. It looks at how states write their budgets, including whether they use recurring sources of money rather than sources that are “one-time infusions” of cash.

The report also looks at obligations such as government pensions and at whether states maintain financial reserves, commonly known as rainy day funds. States are also graded on transparency.

“Faced with constitutional, statutory, or customary requirements for annually balanced budgets, a large number of states have been forced to reduce or reallocate spending,” the report says. “The potential to defer or obfuscate in making these adjustments is very real. That is why the need for comprehensive and accurate accounting and transparent reporting of the financial positions of individual states is even more compelling.”

Each state receives a report card, with A as the highest grade and F the lowest.

Mississippi received mostly B’s for its three-year averages. It was among the 21 states receiving a three-year average of an A for the category of budget maneuvers.

The report says maneuvers can include balancing the budget by using one-time sources of revenue and by tapping into special funds to pad the budget’s general fund. The general fund covers most big-ticket expenses, including education. Special funds can come from fees people pay that are supposed to fund specific services or agencies.

Mississippi received three-year average of C for budget forecasting, with a C for 2015 and a D for both 2016 and 2017. The report says Mississippi did not follow best practices for making multiyear forecasts of either how much money the state would collect or how much money it would spend.

Republican Gov. Phil Bryant was forced to make multiple rounds of midyear budget cuts during fiscal 2016 and fiscal 2017 because tax collections fell short of expectations. State economist Darrin Webb recently told lawmakers that Mississippi is continuing to recover slowly from the Great Recession, and the state’s growth lags significantly behind that of the national economy.

The Joint Legislative Budget Committee recently set an estimate that Mississippi will have slightly less money to spend during fiscal 2019, which starts next July 1, than it has during the current year. The number was based on a recommendation from Webb and four other financial experts.

The Volcker Alliance report notes that many states are stretched by big expenses for Medicaid and public employee pensions. Mississippi is among them.

“The fiscal pressure is not likely to disappear anytime soon,” the report says. “The Volcker Alliance’s mission in grading states is to highlight those with practices that should be followed nationwide as much as it is to criticize those that fall short. The sheer magnitude of state and local spending — and the fact that much of the local portion comes from state budget appropriation — makes it essential that such expenditures are as transparent as possible, funded responsibly, and not left for future generations to shoulder.”

Emily Wagster Pettus has covered Mississippi government and politics since 1994. Follow her on Twitter at EWagsterPettus.