Mississippi can quit federal money habit

By Steve Wilson | Mississippi Watchdog

Mississippi can’t shake its addiction to federal funds.

State lawmakers are in the final stages of drafting the state’s $6 bi-lion budget, from which an increasing part comes from Washington. From 2002 to 2012, Mississippi received the largest percentage of its annual revenue from D.C. — more than any other state — according to a recently released report by State Budget Solutions, a national organization focusing on fiscal responsibility.

From 2001-2012, more than 45 percent, on average, of Missisippi’s budget has come from D.C. Twice in that time the state’s federal take pushed above the 50 percent line — in 2004 and 2007. Hurricane Katrina, which hit in 2005, and the federal stimulus in 2009 also boosted those numbers.

Mississippi is just part of a larger, national trend toward greater dependence on federal funds by state governments, with 40 other states receiving increasing percentages of their budgets from federal money from 2002-2012.

More than $5 trillion flowed to state budgets from D.C. and, since 2001, 34 percent of states receive at least 30 percent of their revenue from the federal government.

But with increased flow of money comes serious consequences for state governments.

“States cannot act as sovereign governments if the central government can control a state’s actions by attaching strings to its finances ,” said Joe Luppino-Esposito, one of the authors of the report. “As Congress continues to grapple with rising debt, there is no doubt in my mind that state programs will be the first to go. Some of the largest expenditures at the federal level are from Medicare and Medicaid, which are joint state-federal programs.”

Joe Henchman, vice president of legal and state projects for the Tax Foundation, said the unemployment insurance program is a prime example of how money from Washington is changing policies at the state level for the worse.

“A lot of scholars have argued that our unemployment insurance program is broken,” Henchman said. “Right now, the program is paying people to be unemployed rather than focusing on getting people employed. The states can make no changes to this because the federal government pays the administration costs of a bunch of employees cutting checks.”

Mississippi’s total federal take — more than $81 billion from 2002-2012 — pales in comparison to California, which took home $639 billion. The highest-rising state in the amount of its budget coming from federal funds is Louisiana, whose revenue from D.C. rose more than 12 percent from 2002-2012.

“It’s made the federal government this giant redistribution mechanism to the states,” Henchman said. “This is something that has steadily grown for the past 77 years. The consequence is it has shifted power from the states to the federal government and that is a detriment to the states because it makes them so dependent on Washington.”

On the political map, Mississippi is one of the reddest of the red states, with both of its senators and three of its four members of the U.S. House from the Republican Party. The amount of money flowing from the federal government to Mississippi contrasts strongly with Republican ideals of fiscal conservationism.

Luppino-Esposito takes it a step further.

“For all the ‘red’ states that receive buckets of federal money, the hypocrisy is evident,” Luppino-Esposito said. “That many ‘blue’ states are similarly situated should not matter. It is important for state officials to put aside ideology and partisanship and recognize the financial reality that every single year, states spend much more money than they take in. Sometimes, this is masked in budget gimmicks. But a large percentage of the issue comes from this federal money infusion. This is a revenue source that is out of the state’s control.”

Contact Steve Wilson at swilson@watchdog.org
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