State revenue collections are running ahead of target. The state rainy day fund and other reserves are full of cash. Agency budget cuts appear to be behind us. Pointing to all this, Lt. Gov. Tate Reeves said “Mississippi is in our best financial and fiscal shape in our history.” Speaker of the House Philip Gunn chimed in saying, “This is the result of conservative practices over the last seven years.” That seven years covers the tenure of Reeves, Gunn and Gov. Phil Bryant in their current leadership positions.
So, all is good, right?
Well, not so fast, according to a column Bobby Harrison wrote last week in Mississippi Today. The state’s financial condition, he said, is debatable. And debated it will be during this year’s election bombast.
Here are some tidbits that will add to that debate.
Two key indicators of financial health are debt levels and debt trends. Reeves, Gunn, and Bryant took their current leadership positions in January 2012. They inherited the state’s existing level of total bonded indebtedness, which was $3.8 billion on June 30, 2011, and the existing unfunded pension liability at PERS, which was $12.3 billion. During their tenure total bonded indebtedness increased to over $4.2 billion and PERS unfunded pension liability surged to $16.6 billion.
That’s over 10% growth in bonded indebtedness and nearly 35% growth in PERS unfunded pension liabilities. Credit rating agencies Moody’s and Fitch took notice, additionally PERS had to jack up the rate employers contribute. Debt and unfunded liability levels and trends surely don’t qualify as the best ever.
Another key indicator of financial health is revenue growth in comparison to expenditure growth. State revenues, as reported in the State Auditor’s Comprehensive Annual Financial Report, grew from $15.0 billion in FY 2012 to $16.1 billion in FY 2017. Over the same period expenditures grew from $15.5 billion to $16.9 billion. (The 2018 CAFR is not yet published.)
So, revenue grew 7.3% while expenditures grew 9.0% during our current leaders’ tenure. That seems upside down.
One more indicator of financial health is the condition of essential infrastructure as measured by deferred maintenance estimates. (Deferred maintenance refers to needed repairs to facilities and equipment that are not made when they should be.) The state does not provide any overall data on deferred maintenance related to essential infrastructure. However, we do know there is a huge shortfall in funding available for critical road and bridge repairs, estimated at over $6 billion. The American Society of Civil Engineers estimates Mississippi’s drinking water and wastewater infrastructure needs top $10 billion. And more millions are needed for school building repairs. All this is noticeably less than optimum.
So, while some things are looking up others are not, so let the debate begin over the condition of state finances.
P.S. The State Auditor publishes an annual report entitled “Expenses and Appropriations of the Mississippi Legislature.” Reeves and Gunn control legislative expenses. The 2011 report showed the total cost for operating the Legislature, which included a special session, was $18.5 million. For 2018, without special session expense, the cost was $24.1 million, a jump of 30%. Key increases for legislators were out-of-session per diem, mileage rates, and travel expenses – far too much is spent on out-of-state travel according to one long-time state official.