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Commentary

A Third Way of Addressing Mississippi’s Budget Woes


     
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Legislators meeting in the 2003 regular session face a state budget “crisis” of their own making. Although a weak national and regional economy surely has contributed to the failure of state tax receipts to grow as briskly as forecast by legislative budget planners, Mississippi finds itself in a fiscal bind because of past legislative shortsightedness. Like many states, Mississippi’s legislature responded to the robust revenue growth of the mid to late 1990s by embarking on a spending spree, incurring debt service obligations and expanding state government programs and public payrolls like there would be no tomorrow.

Now that the chickens have come home to roost, only two options seem to be on the table: raise taxes or cut spending. Because broad-based tax increases are never politically popular, proposals are being considered to balance the budget on the backs of the poor by dramatically hiking state excise taxes on tobacco products and beer. While such “sin” taxes appeal to the busybodies among us whose sensibilities are offended by smoking and drinking, the fact of the matter is that their burden falls most heavily on low-income consumers, many of whom will, if the state excise tax on cigarettes is raised by 50 per pack, pay more annually in tobacco taxes than they pay in income taxes.

Lacking the political will to prioritize spending categories, the legislature seems happy to force the governor to meet revenue shortfalls by ordering budget reductions across the board. The absurdity that all publicly financed programs are equally important, so that no one agency should be asked to cut spending more than any other—or, horror of political horrors, be considered for elimination altogether—has come dangerously close to cutting off the air supply to the state’s institutions of higher learning.

Happily, there is a third way of dealing with Mississippi’s budget crisis. That solution is not to raid Mike Moore’s tobacco trust fund, but to sell off some of the state’s nonperforming assets. During the administration of Governor Kirk Fordice, I served on a task force appointed by the State Auditor to study privatization initiatives. That task force was charged with the responsibility of identifying opportunities for reducing state spending by divesting operations and activities that could be carried out more efficiently in the private sector than in the public sector.

The task force developed a list of such opportunities, none of which to my knowledge has ever been implemented (see “Stop the Waste: The Report of ‘Initiatives for the Nineties’”). One of the task force’s leading candidates for privatization was Mississippi’s Veterans Memorial Coliseum, a sports facility that sits idle most of the time and a decade ago was generating annual operating losses of about $450,000. Jackson’s state fair grounds, situated on prime real estate within hailing distance of the capitol’s dome and likewise a regularly vacant eyesore, was another leading candidate: the average annual operating losses of the Mississippi Fair Commission amount to $216,000. No legitimate purpose of state government is now served, if it ever was, by public ownership of a football stadium or of urban property whose primary use is to host a fair once a year. Selling these and other mismanaged assets, including the Mississippi Coast Coliseum and the statewide telecommunications system of the Central Data Processing Authority, would not only enable the state to avoid the chronic losses incurred in operating them, but would transfuse tens of million dollars into the anemic budget.

Yet another piece of valuable real estate along Interstate 55 in Jackson is occupied by the Mississippi School for the Blind and Deaf, the first such institution established in the United States. The monies raised by selling that property almost surely would generate enough cash to finance the construction of a new state-of-the-art facility at some other location with a substantial sum left over for the general fund. Task force members were taken aback to learn that the State of Mississippi owns and operates a gas station in Jackson. That enterprise fails to cover its operating costs to the tune of $25,000 a year because, not surprisingly, it is more convenient for public employees to use state-issued credit cards to gas up their state vehicles at the nearest Shell or Chevron station.

There are many other assets owned by the State of Mississippi which currently represent items of public expense, but which could be transformed into sources of revenue. To be sure, privatization offers a means of supplementing the public budget that can be tapped one time only. But extraordinary budget times demand extraordinary measures. In addition to avoiding further spending cuts or tax increases in the short run, privatization also has the long-run benefit of getting the state out of the business of managing assets that it should not have gotten into in the first place.


William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.

Taxing ChoiceFrom William F. Shughart II
TAXING CHOICE: The Predatory Politics of Fiscal Discrimination
So-called “sin taxes”—the taxing of certain products, like alcohol and tobacco, that are deemed to be “politically incorrect”—have long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such “sinful” products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation? Learn More »»






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