Outlook better, but purse still light, Reeves says

Published 12:04 pm Friday, June 11, 2010

Mississippi’s economy is improving, but it will take a couple of years for tax revenue to return to levels of earlier state spending, state Treasurer Tate Reeves told a Vicksburg civic club Thursday.

“I think it’s going to take a while, but I’m very optimistic we will see an economic recovery,” Reeves told the Rotary group. “I think we will start seeing an uptick in revenues, but the budget will probably not improve until 2013 or ’14.”

Before that happens, the state will have to wean itself off millions in federal funds provided by the American Recovery and Reinvestment Act, funds scheduled to stop flowing into the state in 2012.

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The current budget is “propped up” by $452 million in federal stimulus funds, Reeves said. The total represents about 10 percent of the general fund budget.

“The bad news is next year’s budget is also propped up by federal dollars. In fiscal 2012, the federal money goes to zero.”

Asked about the revenue impact of the Gulf oil spill, Reeves said, “We have seen a reduction in tourism on the Gulf Coast that is not justified in terms of the actual presence of oil.” In the short-term, there will be decreased tax revenues from lower hotel, restaurant and casino spending by tourists.

“The long-term impact is more difficult to assess,” he said. “BP has smart people working on (the spill), but the reality is they haven’t got it stopped — and our people deserve better than that.”

Reeves said too much attention has been paid to Gov. Haley Barbour’s spending cuts and not enough on how far revenues have fallen in the last two years — especially in view of the fact that the sudden drop followed three years of double-digit revenue gains, on average.

“We saw tremendous revenue growth in 2006, 2007 and 2008,” Reeves said. Over the three years, an increase of about 30 percent — between $1.1 and $1.2 billion more revenues, primarily individual and corporate income taxes and sales taxes — was recorded from fiscal 2005 to 2008.

That began to reverse in the summer of 2008, when gas prices hit $4 per gallon, businesses began cutting jobs and production, and unemployment and underemployment — and lower tax revenues — resulted.

Until 2008, only once in 30 years did Mississippi revenues decline from one year to the next — even during the recessions of the late 1970s, early 1990s and early 2000s, Reeves said.

Yet in fiscal 2009, revenues declined 4 percent from 2008 levels, and projected declines for the fiscal year ending June 30 are at about 6 percent, he said.

Barbour has cut spending five times during this fiscal year, with the aggregate cuts totaling about $499 million out of the original $6.01 billion passed by the Legislature a year ago.

Barbour said in May that revenues were down for the 20th out of the last 21 months, but he did not anticipate having to make further cuts before June 30.

Reeves, 35, a native of Rankin County and honors graduate of Millsaps College, was the first Republican to be elected treasurer in the state’s history.

He made a mark early in his first term when he stood against allowing a $20 million tobacco settlement to be spent by a private entity. He was warned his stance could jeopardize his political career, he told Rotary members, but decided he had run “to be a watchdog for the taxpayers and that had been accomplished.”

Reeves was re-elected in 2007 with 61 percent of the vote, and has been mentioned as a possible candidate for lieutenant governor in 2011.

He and his wife, Elee Williams Reeves, a Tylertown native, have two daughters and attend Galloway Memorial United Methodist Church.