JACKSON — If you accept what some car dealers (and a few politicians) have to say on TV, Mississippi’s economy right now is doing a lot better than the “news media” would have you believe.
As usual the “news media” is made the fall guy. It’s the old story that when you’re brought bad news, kill the messenger.
Well, these skeptics are in for a disappointment. There’s a reality check on the state’s economy coming out next week in the December issue of the “Mississippi Economic Review and Outlook” from the State College Board’s Center for Policy Research and Planning.
In it, senior economist Dr. Marianne T. Hill says: “Mississippi will not escape the current national recession unscathed,” She goes on to relate that employment here is now well below the level a year ago and unemployment is forecast to hit 8.7 percent by 2009, the highest in 26 years. That’s just part of the bad news in the report (note: no myth created by the damnable “news media”). State revenues are headed down, and recovery here from the national downturn will take longer than from the last two recessions says Dr. Hill.
Already, as the Hill report points out, Gov. Haley Barbour has initiated mandatory cuts in state budgets based on early shortfalls in projected state tax collections, especially in sales, personal and corporate income taxes.
Hill sounds an even more somber warning about future state revenues due to the almost certain shrinkage in federal funds that had been coming to the state as a result of Katrina. She points out that 50 percent of the $17.6 billion state budget for FY2009 is financed directly by federal funds, compared to 39 percent pre-Katrina.
The forecast shows that Mississippi will have relatively slow population growth through 2020 and even 2025, which will be accompanied by a shrinking work force, an aging population and a rising aged and total dependency burden.
How does state leadership plan to cope with the dismal economic picture that’s being laid out for them? Certainly Governor Barbour’s Tax Study Commission, despite all the hoopla when it was first created last January, offers virtually no hope in its recent final report that hit with a resounding thug when it came out.
As expected, it was heavily laden with tax breaks for corporations and business and nothing to equalize the state’s existing inequitable tax burden which is tilted too heavily against the poor and low income people — of which Mississippi has many — and favors upper income people. For years, the state has relied too heavily on consumer taxes (sales the most prominent one) and less on excise or income taxes.
At least the Tax Study has given Barbour a crutch to propose increasing the state’s ridiculously low cigarette tax, however his recommendation for only 24 cents more isn’t going to fly in the Legislature. Even Barbour’s study committee recommended a 32 cent hike.
Both Barbour and his Tax committee recommended any increase in the cigarette tax should go into the state’s general fund, rather than earmarked for any specific program such as Medicaid. Therein will come one of the major battles in the 2009 session of the Legislature: lawmakers — certainly the House — will fight to put any tobacco tax increase into the Medicaid program, which already is known to face a huge deficit.
Mississippi’s Medicaid problem is about to get even worse: only last week (thanks to the New York Times) it was learned that a new rule posted in the Federal Register shifts to states a higher co-payment on Medicare recipients for medical care and prescriptions and also a premium charge. That means unless the state comes up with additional matching funds, thousands of low-income Mississippians will have to pay the higher costs or forego care, this coming at a time the economy is in steep decline.
The Hill report doesn’t attempt to propose any specific tax Mississippi could increase to find new revenue, however it does point out Mississippi’s 5 percent top bracket on corporate income is below the national 6.1 percent average.
