Public Contract Reforms Unsung But Epic

As the dismal saga of bribery and extortion swirling around former Commissioner Chris Epps and Mississippi Department of Corrections contracts continues to make headlines, epic reforms to the public contracting process slipped through the Legislature with scant media attention.

Longtime champion of contract reform Representative Jerry Turner passed legislation that completely revamps the public contract review board and tightens up its procedures. Governor Phil Bryant, another champion of contract reform, signed his bill into law on March 29th.

A similar bill authored by Senator John Polk died but a companion bill passed that further tightened definitions related to public purchasing. His bill was signed into law by Gov. Bryant on March 20th.

These changes build and improve on earlier reforms Rep. Turner pushed through during the 2015 legislative session with help from Gov. Bryant’s special Task Force on Contracting and Procurement in the Mississippi Department of Corrections co-chaired by Judge Robert Gibbs and Andy Taggart.

Taggart described these latest changes as “significant.”

Back in January, Turner and Polk, chairmen, respectively, of the House and Senate Accountability, Efficiency and Transparency Committees, issued a joint press release on their proposed changes.

“For too long Mississippi has had a less than adequate contract and personal services contract approval system,” said Polk. “A good attempt was made in 2015 to improve the system by enacting HB825.  But we have found that some state agencies have found ways around the intended controls, and have interfered with the full intent of the law.”

“Today I am pleased to announce the introduction of new legislation which will greatly enhance standards for procurements by the solicitation of ‘Requests For Proposals,'” said Turner.  “Also, the Department of Finance and Administration ‘Public Procurement Review Board’ (PPRB) will be reconstituted to include the powers and duties of the PSCRB.”

That “also” was a pretty big deal. The Public Procurement Review Board is under the Department of Finance and Administration (DFA) while the Public Service Contract Review Board (PSCRB) is under the State Personnel Board. The chair of the PSCRB by statute is the State Personnel Board Executive Director. The chair of the revamped PPRB will be elected by its appointed members and the Executive Director of DFA relegated to an ex officio and non-voting member of the panel.

Turner’s bill gives the reconstituted Public Procurement Review Board broad oversight and policy control over the public contracting process. Other changes establish detailed guidelines regarding RFP solicitations and evaluations, require the PPRB to pre-approve RFP evaluation weightings for each contract, require price to be at least 35% of the evaluation weightings, spell out requirements for sole source contracts, and clarify limited activities over which the board will not have oversight.

Polk’s bill creates new, specific definitions for public funds, commodities, equipment, furniture, emergencies, and construction along with guidelines for Certified Purchasing Offices, Agents, and Procurement Managers.

The bills were highlighted by columnists Geoff Pender and Wyatt Emmerich early in the process, but they seemed to go invisible after that.

They won’t go unnoticed by state agencies when they take full effect on January 1, 2018.

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A Peek behind Legislative Leaders’ Spending Rhetoric

Lt. Gov. Tate Reeves and House Speaker Philip Gunn are touting their great success this year in holding down the cost of government.

“We Republicans have campaigned for many, many years that we are for living within our means, we are for controlling spending, we are for reducing the size of government,” Gunn told reporters according to the Associated Press.

Reeves added, “That’s what voters elected us to do. They elected us to live within our means,” reported the AP. “They believe they ought to send less money to the government. They believe that they are already overtaxed and overburdened.”

Sounds like a good plan that came together, huh?  Well, only if it’s a sneaky deep state scheme to disrupt rather than reduce spending.

Voters might want to peek behind the rhetoric.

You see, legislators didn’t really plan to spend less. Most cuts Reeves and Gunn are taking credit for result from mid-year budget cuts ordered by Gov. Phil Bryant. Legislators wanted to spend more money, but when the revenue didn’t come in to cover the bills, Bryant had to take action. In so doing he forced the state to live within its means and he reduced the size of government, not legislators. Legislators, then, had little choice but to roll these forced cuts into the budget for next fiscal year since revenues continue to lag.

This adds to the growing notion that our legislative leaders really don’t know what they’re doing with state finances. Oh, they know how to cut taxes, but, apparently, not how to anticipate and manage the consequences. Over several years they pushed through a multitude of tax cuts with little idea what the impact would be. They touted resulting economic growth would generate revenues to offset the tax cuts.  Oops, the growth didn’t happen, the offset didn’t happen, and Bryant had to step in. Oh, even bigger “growth” spurring tax cuts kick-in next January.

Indeed, reduced spending was not supposed to stem from revenue shortfalls. Instead, a new performance-based budgeting system was to identify programs whose funding could be curtailed or eliminated. Oops, the performance-based budgeting system isn’t up to speed yet, so cuts were generally across-the-board, impacting high performing and essential programs as well as poorly performing and non-essential programs.

Then, there are cuts that aren’t real cuts. For example, legislators cut college scholarship funds. They also cut funding for community colleges that will result in tuition and fee increases. Oops, with these changes legislators didn’t so much live within their means as shift the burden from the state to parents.

“A tuition increase is going to be necessary,” Pearl River Community College President William Lewis told the Hattiesburg American. Jones County Junior College President Jesse Smith said his college will have to “increase our tuition significantly to make up the gap.”

Cuts to other programs will shift costs from state government to local government, forcing many to increase property taxes. Oops, these shifted costs aren’t real cuts either.

Yep, peek behind the rhetoric and you see lots of oopses, not a coherent plan.

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Legislature Needs Rightsizing Too

Republican legislators insist they are making the right moves to “rightsize” state government, which includes shrinking the state budget. If they mean what they say, the Legislature, itself, should be on the rightsizing menu too.

Mississippi has one of the larger legislatures in the United States, especially for our small population. We have 122 representatives and 52 senators for a total of 174 legislators. This means the 50th state in wealth has the 14th highest number of legislators and the 12th highest ratio of legislators per capita.

Mississippi has by far the most legislators and highest ratio of legislators per capita in our region.

Looking at our neighboring states, we see Louisiana has 144 legislators, one for every 31,482 people; Alabama has 140 legislators, one for every 34,141 people; Arkansas has 135 legislators, one for every 21,599 people; and Tennessee has 132 legislators, one for every 48,077 people.

In comparison, Mississippi has 174 legislators, one for every 17,053 people.

Going with Tennessee’s ratio of legislators per capita would have the most impact. That would give Mississippi 62 legislators, one for every 48,077 people. Going with Arkansas’s ratio would have the least impact. That would give Mississippi 137 legislators, one for every 21,599 people.

It probably makes more sense to use the average of our neighboring states as a guideline. In that case, Mississippi would have 88 legislators, one for every 33,712 people.

Rightsizing the Legislature makes more sense now than in past years. It’s pretty obvious that most legislators are just not needed. Decisions on legislation come down from on high. Lt. Gov. Tate Reeves and his key committee chairmen keep tight rein on legislation in the Senate. Speaker Philip Gunn and his key committee chairmen do the same in the House.

Hmmm.

Since it’s clear Mississippi is wasting taxpayers’ dollars by having so many legislators and even more clear we don’t need 174 legislators to pass legislation, why not save millions of taxpayer dollars by reducing the size of our Legislature?

The number needed is really very small, but why not go with the average ratio of legislators per capita from our neighboring states? That would give us 88 legislators, about half the number we have now. If the rightsizing is done right, i.e., no changes in salary or expenses per legislator, this reduction would save taxpayers a substantial portion of the $28 million legislators spend on themselves each year.

So, how can our legislators rightsize down to this number?

Section 254 of the state constitution says they can pick any number of senators and representatives as long as they do not exceed 52 and 122, respectively. So, all our legislators have to do is reapportion the state to say 26 senators and 62 representatives (the same ratio we have now) and we’ll be down to 88 legislators.

Since our Republican legislators are dead set on, and surely sincere about, rightsizing state government and shrinking the state budget, we should expect something like this to happen in time for the next elections.

Or will the ganders not goose themselves like they are everything else?

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Republican Leaders Turn Legislative Session into Fiasco

Give it a break, guys. The we-can’t-spend-money-we-don’t-have argument is just a little too false-hearted.

The GOP talking point was embellished by House Public Health Committee Chairman Sam Mills:

“What I always tell my children, gentlemen, is that we can’t print money,” Mims said. “Often I look outside in my backyard, and I say, ‘Do you see a money tree?’ And I don’t see a money tree. … So tell them we’re doing the best we can with the budget we have today.”

Well, of course there is no money tree, because the Legislature, under GOP leadership, has been impulsively whacking mature money trees and not planting new ones.

“More than 40 tax cuts lawmakers have passed over the last five years,” the Clarion-Ledger reported, “for next year will reduce state revenue by more than $350 million.”

“Tax collections have been lagging for two years, thanks to tax cuts and a barely growing state economy,” reported the Associated Press.

Starting next fiscal year, another $415 million in tax cuts will begin phasing in, whacking even more money trees.

Meanwhile, efforts to plant new money trees have been blocked.

Gov. Phil Bryant encouraged legislators to consider a state lottery that could generate $100 million in new money.

House Speaker Philip Gunn blocked that money tree.

The Speaker pushed to collect taxes on Internet sales that could add $60 to $100 million in new revenues.

Lt. Gov. Tate Reeves blocked that money tree.

The Tax Foundation expert Gunn and Reeves brought in to help revamp the state’s tax structure said gas taxes should be increased to pay for needed road and bridge repairs.

But, both Gunn and Reeves blocked that money tree.

They also ignored a call by House Conservative Coalition President Becky Currie to delay the upcoming tax cuts.

The combination of widespread tax cuts, minimal economic growth, and no new revenue sources has resulted in four mid-year budget cuts by Gov. Phil Bryant this year, following two last year, deep draws on the state’s rainy day fund, and a miserable budget outlook for the coming year.

“This is deliberate wreckage we have brought on ourselves,” said Democratic Sen. David Blount, pinning the tail on the Republicans’ we-can’t-spend-money-we-don’t-have donkey.

“I have never seen it this bad,” said House Appropriations Chairman John Read.

It got worse.

The House and Senate have been killing each other’s bills. During the last days of the session things came to a head over the bond bill, Internet taxes, and transportation funding. The House put voluntary Internet tax collections into the bond bill to help fund road and bridge repairs. Reeves, then, killed the bond bill. In response, Gunn got the House to kill the Department of Transportation appropriation bill.

Reeves, then, accused House members of lying.

Appropriately, both houses adjourned without resolving differences, making a special session needed to finish their business.

Descending from false-hearted statements to falsehoods is a needless fiasco for our GOP leaders, just like their budget and this legislative session.

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Stores Closed by Online Competition Affect Community Finances

J.C. Penney announced it will close five stores in Mississippi communities – Columbus, Corinth, Greenville, Meridian, and Oxford. Earlier Sears announced three closures in Columbus, Jackson, and McComb, with more to come. Even Wal-Mart has closed stores, in Belmont, Mantachie, Sardis, Walnut, Derma and Nettleton.

Two years ago Radio Shack closed 20 stores in Mississippi, in Jackson, Hattiesburg, Meridian, Cleveland, Biloxi, Gulfport, Ocean Springs, Waveland, Vicksburg, Tupelo, West Point, Grenada, Greenville, Corinth, Greenwood, Laurel and Natchez.

“Brick-and-mortar stores are suffering due to competition from online sales, and the closures just keeping coming,” reads a March headline at TheMotleyFool.com. “Last year took a devastating toll on the retail industry, and the carnage will continue in 2017,” the story reported. “A number of chains will likely not survive the year, and many that do will finish 2017 smaller than before.”

“Sporting goods stores are down for the count,” begins a story in USA Today. “The scourge of insolvency is sweeping through the sector as online sellers gain the upper hand over yet another corner of retail just recently dominated by big-box chains, specialty stores and mom-and-pop shops.”

As if individual stores closures aren’t enough, “Store closures will push 30% of US malls to the brink of death,” Business Insider reported. “Since the start of the year, more than 1,500 store closures have been announced by retailers including JCPenney, Macy’s, Sears, American Apparel, The Limited, and Abercrombie & Fitch. Most of the closures will happen over the next several months.

Guess what all these brick-and-mortar Mississippi stores had in common?  They all charged and collected sales taxes. While their closure reduces state sales tax collections, they really hit tax revenues in affected municipalities…especially when you add in lost property taxes.

Local communities could at least recoup taxes lost to Internet sales if the state collected use taxes from online vendors and shared them with communities. Lt. Gov. Tate Reeves killed the online tax bill that passed the House.

Alabama passed a bill to collect taxes on online sales in 2015. However, it provided incentives for online vendors to voluntarily collect taxes. Today, 85 retailers with no stores or physical presence in Alabama have signed up for the “Simplified Sellers Use Tax” program, according to AL.com. Mississippi’s bill did not use Alabama’s approach, but chose a mandatory approach that has been outlawed by the U.S. Supreme Court.

However, mayors in affected communities shouldn’t worry, because their state legislators surely don’t. At least that’s what many mayors have come to believe. “They don’t (unprintable language),” said one mayor.

Not only do legislators not pass most proposals mayors request, they continue to make decisions that push costs down to the local level.

“I am not sure anyone in the legislature understands the feelings of numerous mayors and supervisors as to concerns facing them on a daily basis,” said another mayor.

Ever-increasing online sales driving brick-and-mortar stores out of business is just one of several systemic changes affecting how communities finance government. At some point, the growing number of perturbed mayors, and other local officials, will get legislators, or their opponents, to pay attention.

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Fuel Diversification Real Lignite Plant Issue for PSC

What will natural gas prices look like over the next 40 years?

Well, over the past 20 years, prices recorded at the dominant Henry Hub distribution center in Erath, LA, ranged from a low of $1.05 per million Btu to a high of $18.48. Over the past 10 years prices ranged from $1.46 to $13.31.

The current price is $2.60. Forecasts show prices rising over the next two decades, but they vary in pace and amount. The U.S. Energy Administration projects natural gas prices through 2040 using multiple scenarios that encompass demand, supply, exports, and various consumption projections. Its latest forecasts indicate prices may remain below $4.50 or jump as high as $9.20.

The only knowable thing about natural gas prices is they are volatile.

When Mississippi Power Company proposed its Kemper lignite plant to the Public Service Commission (PSC) over a decade ago, traditional coal-fired plants were under attack by environmentalists and EPA and natural gas prices were high, averaging $7.81 at Henry Hub from 2005 through 2008. The company and the commission deemed it prudent for Mississippi Power to pursue an alternative fuel source for its next baseload power plant. The alternatives were nuclear and clean coal. Given Mississippi’s vast, cheap lignite deposits, the clean coal alternative was chosen.

All know what happened next. Shale oil discoveries dramatically ramped up gas supplies, driving down prices. And the costs to build the lignite plant skyrocketed.

Over the next several months, PSC commissioners will be tempted, and politically pressured, to gaze into a crystal ball and guess what natural gas prices will be over the next 40 years. That’s because the lignite plant will soon come fully online and the commission has linked the “viability” of the plant to natural gas prices.

Yes, the technology works. Syngas produced from lignite coal has powered electricity generation which has been delivered to Mississippi Power customers for weeks now. Carbon dioxide has been sequestered, sulfuric acid produced, and both delivered to downstream users.

The final hurdle for the plant to come fully online is for both syngas turbines to operate simultaneously for a specified period of time.

When it does, the company will ask commissioners to approve rates to allow recovery of costs for building and operating the multi-function facility. Building costs for the power plant were capped at $2.8 billion. Another $1.4 billion was authorized for the CO2 pipeline, the coal mining operation, and limited other items. Allowable operating costs have yet to be determined.

How much cost to allow Mississippi Power to recover from ratepayers will be the great challenge for our elected commissioners. Politicians tend to focus on the moment. Utility companies must focus on multiple decades. That’s why major power generators have diversified baseload fuel supplies. History has shown reliance on a single fuel source over time to be imprudent.

So, the real analysis facing commissioners is not what natural gas prices may do, but how much rate payers should invest to provide Mississippi Power necessary and prudent fuel diversification.

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Day Shows Rural Communities Can Succeed

Rural communities in the South can succeed.

Thomasville, a small town in Alabama’s poor “Black Belt,” has thrived under the leadership of Mayor Sheldon Day. Indeed, Day has his folks believing it is “cool to be rural.”

Census data shows Thomasville with 4,209 residents and a low family poverty rate of 13% compared to 25% for the whole of Clarke County and 19% for Alabama. The town’s poverty rate has been in steep decline since 2010 as median household income jumped 28% from $28,234 to $36,146.

The 500 student Thomasville High School, with 48% minority students and 63% who qualify for free and reduced lunches, boasts a stellar graduation rate of 95%.

During his 20 years as mayor, Day has attracted over $700 million in capital investments and increased the number of industrial parks from one to five. He estimated 50% of the businesses along the Highway 43 by-pass in Thomasville have opened during his tenure and sales tax collections have tripled.

In 2013, Thomasville beat 62 other sites to secure the $100 million Golden Dragon Precise Copper Tubing facility, the first major manufacturer from China to locate in Alabama.

Day is especially proud of the partnership he built among the high school, Alabama Southern Community College, and industries. The dual enrollment program he championed in welding 14 years ago now includes industrial maintenance, information technology, pre-engineering, pre-nursing and sports medicine.

“Today there are more dual enrollment high school students at the Thomasville campus than regular students on Alabama Southern’s main campus in Monroeville,” Day said. Coupled with an intensive work-based learning program at the high school, the dual enrollment program, Day says, has been a “major catalyst to attract industry.”

Fascinated by his success, Betsy Rowell, executive director of the Stone County Economic Development Partnership, invited Day to tour her county and speak at her annual meeting. “He has obviously had great success with partnerships in his area.  Our local leadership needed to hear his message.”

How is Thomasville succeeding in an area where most rural towns struggle?

Day said when he was first elected mayor in 1996 he spent time searching out the best models for rural development. He found that model in Tupelo. He studied Tupelo and became a disciple of Vaughn Grisham, director emeritus of the McLean Institute for Public Service and Community Engagement at the University of Mississippi.

Day points to several similarities. One is the broad cooperative spirit he has nurtured. “In Thomasville, the school, chamber, industry, and city are all partners,” he says. “Everybody talks to each other to get things done.” Another has been his intense focus on developing the local workforce. And, like Tupelo did with Toyota, he collaborated with an adjacent county, Wilcox, to create an industrial park to locate a major industry. Now, he is copying Tupelo’s healthcare model and will soon build a new regional hospital.

No longer the student, he now lectures on how to succeed in rural communities at Auburn’s Economic Development Institute.

“His insight was invaluable,” said Rowell.

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