State spending, federal aid make for a shaky partnership

By Steve Wilson | Mississippi Watchdog

Two trends run through Mississippi’s budgets each year — the state spends more money and the percentage of the revenue from the federal government continues to increase.

FLOODED: Like with the recent flood waters on Mississippi’s Pearl River, there’s a definite correlation with the ever-increasing state budget in Mississippi and the higher percentage of state revenues composed of federal funds.

Think they’re not related? Think again.

Mississippi’s budget has increased for the fourth consecutive year, even though Republicans control the trifecta of the governor’s office, the House and the Senate.

“Unfortunately, regardless of the political party in control, state and federal policymakers have an incentive to increase spending,” said Nicole Kaeding, a budget analyst for the Cato Institute focused on federal and state spending policy.

The state will spend $6 billion in fiscal 2015, which begins July 1. That’s an increase of 18.8 percent from 2014′s budget of $5.05 billion. State revenue was predicted to rise by 2.7 percent this fiscal year. The state spent $4.75 billion in 2013.

According to Seethespending.org, Mississippi’s budget has been on the rise since decreasing in 2011, 2010 and 2009. That’s despite the Republicans controlling the governor’s mansion since 2004 and the Legislature since 2012.

One of the biggest drivers behind the increases is Medicaid. The state will spend $885 million in fiscal 2015 to cover 640,000 Medicaid patients. Last year, the state spent $840 million. Seventy percent of that money comes from Washington, D.C.

Gov. Phil Bryant opposes the expansion of Medicaid, even though most of the increase would be borne by federal dollars under the Affordable Care Act.

“That seems like a good deal for Mississippi, but it subjects the state to the whims of the federal government,” Kaeding said. “When the federal government finally decides to tackle its ever-growing debt problem, Mississippi could be on the hook for millions more for its Medicaid program. Additionally, when Mississippi agrees to use federal dollars in Medicaid, it gives up a great deal of control over the program.”

RISING TIDE: Mississippi’s state spending has been on the rise for the past four years.

Thanks to Medicaid and other federal programs, the state’s take of the federal pie has steadily increased.

From 2001-12, more than 45 percent, on average, of Mississippi’s budget has come from Washington; 50 percent of the state’s revenue from 2004 to 2007. Hurricane Katrina, which hit in 2005, and the federal stimulus in 2009 boosted those numbers.

It’s a dangerous trend, said Joe Luppino-Esposito, editor and author at State Budget Solutions and co-author of a report on increased federal aid to states.

“Federal money makes it much easier for state politicians to increase spending because in the short-term, there is no need to raise revenues,” Luppino-Esposito said. “That means there are no new taxes or fees, but more services, and this makes constituents happy. This is a smart political arrangement, but it is a fiscal disaster waiting to happen.”

The Magnolia State isn’t alone in collecting more from the federal piggy bank. Forty states saw an increase in their respective take from the federal till.

More than $5 trillion flowed to state budgets from Washington. Should the feds turn off the tap, Mississippi’s would be disproportionately affected.

“As Mississippi increases its reliance on D.C., the state will put itself in a vulnerable position,” Luppino-Esposito said. “Congress is finally aware of its own spending problem. Chances are that aid to states will be the first line- items cut. If Mississippi does not have a plan in place prior to these cuts, the state will be forced to make draconian cuts across the board, without regard to the needs of its residents.”

Contact Steve Wilson at swilson@watchdog.org
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