Pot of money for education being cut, lottery won’t make up difference

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Even as numerous House and Senate members bemoan that education might not be a beneficiary of Gov. Phil Bryant’s lottery proposal, other legislation is going through the ongoing special session that could have much more of a negative impact on Mississippi’s schools – from the pre-kindergarten to university level.

That legislation – to divert state funds to local governments for their infrastructure needs – is going through the special session with little opposition.

Bryant has proposed for the special session that the state enact a lottery and for the next 10 years the revenue from that lottery be spent on transportation problems on the state’s highways and bridges.

Rep. Willie Perkins, D-Greenwood, said during debate Friday, for instance, that he supported the lottery, but could not vote for it if its revenue did not benefit education.

After all, in most other states that offer a lottery, though not all, the revenue is earmarked for education – often for college scholarships. Some, such as Arizona, do earmark at least a portion of the lottery revenue to transportation.

Even a recent Mississippi Today unscientific poll showed overwhelming support for earmarking lottery revenue for education.

As the debate about whether education should benefit if Mississippi becomes the 45th state to enact a lottery, the cumulative vote total in the two chambers in favor of the diversion bill has been 159-8. Thus far the two bills have passed both chambers, but in differing forms. Starting Monday the two chambers will try to work out their differences on both the lottery and diversion bills.

The diversion bill would divert 35 percent of the state’s use tax (one of its fastest growing sources of revenue) from state services to county and city governments to help them with their infrastructure needs. The use tax is a 7 percent tax on retail items purchased out of state by Mississippians, such as via the internet or catalogs or even on vehicle purchases.

Eric J. Shelton, Mississippi Today

Sen. Hob Bryan, D-Amory, speaks to the state Senate concerning infrastructure during a special session of the Legislature at the Capitol in Jackson Friday, August 24, 2018.

“What we are doing is taking money out of the general fund to send to cities and counties for infrastructure,” said Sen. Hob Bryan, D-Amory, one if the few legislators to voice concern about the impact to state services by the diversion. “First all, we don’t have money in the general fund to do that.”

Any hit to the general fund disproportionately impacts education. While there are multiple state government funds to provide money to various agencies, the general fund is by far the largest at about $5.6 billion. Education – kindergarten through the university level – will receive 53 percent of the total general fund revenue for the current fiscal year. The bulk of that 53 percent – well over half – goes to kindergarten through 12th  grade schools.

When the use tax diversion is fully phased in, if passed, in four years, it will take an estimated $120 million out of the general fund or more than 2 percent of the total general fund revenue. That total is expected to continue to grow as internet sales grow while at the same time some expect revenue from the sales tax (7 percent on retail items purchased in Mississippi stores) to slow, further impacting the state general fund.

During the past seven sessions with Republicans controlling the governor’s mansion and both chambers of the Legislature for the first time in the modern era, legislation has been passed that has significantly impacted the general fund. During the first four years, about 50 tax cuts were passed taking more than $300 million out of the general fund.

Then in 2016, the largest tax cut in the state’s history – aimed both at corporations and on personal income – was passed. Over 10 years, that tax cut will take $415 million in today’s dollars out of the general fund. The state’s Republican leadership says the tax cuts will improve the state’s economy in the long run. And Republican leaders say the state can absorb the additional hit that will occur with the use tax diversion.

They pointed out the state ended the past fiscal year with a surplus in the general fund. But in recent years the Legislature has made multiple cuts to most agencies – more than 10 percent for many agencies to offset the slowdown in general fund revenue. Education has been underfunded $2.3 billion since 2009 and $239.9 million for the current year, according to the Parents Campaign.

Eric J. Shelton, Mississippi Today

Mississippi House Speaker Philip Gunn speaks during a special session of the Legislature at the Capitol in Jackson Friday, August 24, 2018.

But Gunn said the state is in good financial shape,

“If we had to cut 2 percent we could probably do it, just by sheer cutting and a lot of people would favor that. It is not a bad thing to do. But we also could cover it through growth,” said Gunn. “…But spending it on roads is not a misspending” of the diversion.

“I am optimistic about revenues,” Reeves said. “And because I am optimistic about revenues and because there is already a $130 million “cushion” in the fiscal year 19 budget, I am comfortable agreeing to this because I think it makes sense long-term. But If you spend money that otherwise would have been in the general fund for cities, for counties…, yes by definition less money is available in out (future) years for other areas of state government. My opinion is that this is a responsible way.”

But Bryan said in a recent commentary, “The state is broke.  At the peak of the economic cycle, tax collections are barely keeping up with inflation. In violation of state law, our public schools are underfunded. In violation of common sense, our community colleges and universities are underfunded. In violation of common decency, our state agencies are denied the staffing levels they need to properly function, and then they are berated for failing to perform at superhuman levels. In violation of the common good, our highways are deteriorating.

“Meanwhile the legislature has been handing out billions of dollars of tax credits and tax cuts. They’ve given tax credits to shopping center developers, to insurance companies, to natural gas storage companies, and to Walmart. They’ve given huge tax cuts to multistate corporations. They’ve even cut taxes on whiskey.”

He contends that the funds the state has received from the settlement of the 2010 BP oil spill –$750 million over multi years – could be used to address city and county infrastructure needs. And the BP funds could provide immediate relief for the local governments because the state could issue bunds (incur debt) to receive immediate money and pay that debt off with the BP settlement funds.