Adam Ganucheau: What is our position today regarding the budget for fiscal 2016, which expires June 30, 2016? Lt. Gov. Tate Reeves – It seems like there is an attempt to combine two issues that aren’t the same. These may cause frustration among agency heads. FY16 (fiscal Year 2016) and the midyear budget cuts by Gov. Bryant. Bryant. To meet the revised revenue estimate for FY16, we will need to collect $725 to $750 million each month in June. The current revenue estimate was approved in March 2015. The Revenue Estimating Group, a group consisting of five top financial officers in the state who make budget recommendations to legislatures, sat down to give a recommendation to the legislative leaders. In March 2015, the legislative leadership followed exactly the recommendations of REG. In October 2015, we met again and the REG requested that the legislative leadership reduce the estimate. We did exactly what they asked. The REG requested that we revise down the revenue estimate for the current fiscal years. We did so again when we met in April 2015. We need to collect $725-750 millions in June in order to meet the revised estimate. This estimate has already been revised down twice in six months. A significant portion of our revenue, or around 40%, is collected during the final three months of the fiscal years, which are April, May, and June. This is a problem in revenue. So, if you want to know if we will make it in June, you can be sure that I don’t know. Ask 100 people from the state government and they will tell you if we are going to make it. We don’t know. As we approach the end of the month, we’ll find out more. There is a chance we can make it. We also have the chance to fail. Here is what I know. The state of Mississippi has an expected revenue of approximately $350 million from its “Rainy Day Fund”. We also have an additional $150 million in reserve accounts. These are the numbers we expect at the end next fiscal year. There is approximately $500 million that we have that can be used to offset any revenue shortfalls. Let me tell you the bottom line: I do not know if June’s revenues will meet the revised down conservative estimate. But I can tell that Mississippi is in a good position to close FY16. What happens if FY16 is not balanced? Reeves says there are many options for how to handle that. If this happens, the governor and legislative leaders are always in constant communication. We believe in praying for the best, preparing for the worst, and expecting something in the middle. We are prepared for the worst, we’re considering our options, and eventually, the legislative leadership, governor’s office, and other fiscal offices will all come together to make the final decision, should it arise. We could discuss every possible scenario for six months if I had to speculate. Although the fiscal year lasts 12 months, accounting allows for different things to be accounted for at least until August. Let’s assume that every agency has $149 millions in spending authority. They won’t necessarily spend all of it. There will be a give-and-take on both the revenue and expenditure sides. Dollars that are not used for revenue reductions will be reverted to the general fund. It’s not going to be huge, but it will be significant. This is in the $10 million to $100 million range. All of this is not finalized until August. There is a two-month lapse period. This is the time between when revenues are received and when they go away. This is not your personal checking account. It’s quite complex. What are the causes of low revenue? Reeves, You haven’t been covering me that long. I was a member of the REG for eight year (when Reeves served as Mississippi State Treasurer). As you can see, I was an active member of this group. Over the years, I have said that the only thing we know about REG and the final revenue estimate is that they will always be wrong. There are 25 tax categories and $6 billion in receipts. $30 million is half of one percent. It’s always wrong. Most years, or at least the last 13, the REG was too optimistic and we actually received more than we expected. However, this year that is not true. It appears that we are going to be wrong this time because we are always wrong. It is an estimate. The Obama economy is the main reason we aren’t seeing significant growth. Look at the main streets of Mississippi and America. We are slowly recovering from the 2008 and 2009 national economic recessions. That’s my biggest concern macroeconomically. The downturn in energy has had a significant impact on Mississippi’s microeconomic situation. The downturn in drilling/exploration has had a greater impact on the overall economy than many of us expected, especially REG. What is our position in terms of having a final budget that shows how the Transparency and Simplification Act affects everything? Reeves, We have a final budget we adopted Monday after the conference weekend in April. There are approximately 110 appropriations bills which outline the budget for each state agency. They include details about their spending authority and what they can spend in their annual appropriations. You’ll find that many state agencies, especially the ones complaining loudest, used funds that were not in their budget and spent them without the knowledge or approval of the legislature. Many of them are upset, but not all of them. They won’t be able to use these funds to do things they have done in the past without legislative approval. The Transparency and Accountability Act plays a crucial role in this. The legislature might decide that some of these things are worthwhile spendings. However, this decision is for elected representatives of the people and not bureaucrats from agencies. So that’s where we are now. Every agency has its appropriations bill, and they know how they can spend it. There were some questions raised when the legislature assumed that money would be collected from special funds and that it would be transferred to the general fund. We have to address a few questions. We’ve worked with the governor’s office, state agency directors, and the people who have been smart and willing to work with us. There have been those who cry and go to the media. But there are also those who try to find a solution with the legislative and executive branches. This isn’t going to be an easy transition, as I have repeatedly stated. Because people aren’t willing to change, it is always difficult in government to make changes. People feel that if they have done it the same way for 20 years, then they will continue to do it the same way. We want transparency in the budget process to allow taxpayers to see where their money is going. That’s where we are today. In the four years preceding 2016, Statement 1 (the full budget report for the prior and upcoming fiscal year released by the Legislative Budget Office), was not released after May 8. What is the status of Statement 1? Reeves, I expect that the budget summary/or “skinnybook” will be released within the next few days. First, this session was 120 days long, rather than the usual 90 day session. It’s fair for me to say that there has been more scrutiny on this year’s reports. It is important that it is done correctly and not too quickly. This is a summary of the individual bills. It doesn’t have anything to do with budget. It was 120 days long. Following that, I went on vacation. I brought my three little girls along, and I can’t believe it. That’s fine with taxpayers. I am currently looking at one or two items, and it will be available in the next few days. Is there any way to predict a major deficit or shortfall in the budget for the next fiscal year? Reeves, We will have to wait and see how revenues perform. Before you can answer that, we’ll have to see how revenues perform. The governor and I have both said that there will be unanticipated problems with SB2362 (the Budget Transparency and Simplification Act). One is those who are outraged and want to make sure that Medicaid doesn’t cover services provided by another agency to patients. This is not the intention of the law and we will have to address it. This was not the intention, and it may be necessary to correct that. I don’t know anything more. You won’t always be able to do everything you want, so you will have to figure out how you balance them all. You just mentioned Medicaid. Were those thoughts considered before the bill was passed, or were they drafted as it was being written? Or was this something you saw later and decided you had to reevaluate. Reeves: Several of these issues were addressed. The legislative session lasted 120 days. The Senate passed the bill sometime in January, or perhaps early February. I don’t believe that state agencies were caught unawares. They were not paying attention. Maybe they thought it wouldn’t make it through, but I don’t know. It shouldn’t surprise anyone that a bill passed the Mississippi Senate almost unanimously in February. As is the norm, there were many issues brought up during the process. My appropriations committee chairman, and his subcommittee chairsmen, did most of the work. The state agencies could have done the right thing through the subcommittee processes, met with their subcommittee chairsmen, and brought up important issues for everyone. Many of these were completed and resolved. The Medicaid issue is a clear example of this. Many of these issues were considered. Some state agencies are unhappy with the budgeting authority they received this year. They don’t want less control over how they spend that money. There are legitimate issues and others that have been created. All of these can and will be addressed during the fiscal year. Are you a believer that a special legislative session should be called to address the budget concerns brought up by so many people? Reeves says there are 100 people with 100 different opinions on why the legislature should return for a special session. First, only the governor can call a special meeting, and that decision will be made by the governor. Many people are proposing a special meeting for many different reasons. I don’t see any reason to hold a special session. As we go through FY2016 and look at where revenues are in June, I believe that the governor will need to make the right decision. Concerning the vast majority these issues, which relate to budget or state agencies and are unhappy because they won’t get large pay raises this fiscal year — and in some instances, they won’t be able fund raises that they should have given last year — I don’t believe those are the issues for which special session should be called. Is there going to be any disruptions in state government when the fiscal year ends? Reeves says that I don’t see any disruptions in state government. Since 1993, I have worked to improve our fiscal situation and the quality of how we budget. This has allowed us to be more transparent in the budgeting process. My view is that those who want to hide many of their expenditures over the years are the ones screaming loudest. They won’t be able. They won’t be able hide the expenditures that they have been concealing in budget accounts that no one knows about. I don’t see any major disruptions to state government. Is it possible to keep every program we have? We aren’t because there are programs that we don’t need and we are spending money on. Ask the Department of Mental Health about the program that they are closing down. How many of the 750 patients who were there last year have they seen repeat the program in the Department of Mental Health, or elsewhere? This seems like a fair question. It was a reasonable question. I was told that we don’t know. We spent $3.8million on a Whitfield and East Mississippi program – which was needed – but we don’t know the results and can’t tell you if it was successful. They cannot tell me how many patients it helped. We’re moving towards evidence-based budgeting, which is better for taxpayers in the long term. It ensures that our dollars are spent efficiently and achieves the legislative goals. There won’t be the same amount of programs. While there will be programs that are cut, we shouldn’t be able to determine if they’re working. Take, for example, the Department of Mental Health budget. They claim that they will lose $8 to $9 million. As chairman Buck Clarke stated in his editorial, the actual budget cuts they made were $4.2million. They will save $5.1 million on rent and IT services. They are now $900,000. They may want to spend the money on other things and have the legal authority. These budget cuts are not the only reason that some programs are being cut. It’s helpful to you to hear me speak about it and realize that I am very familiar with the situation. Although I can understand the whining, complaining and anger, I believe the majority of the whining is driven by the inability of some people to spend money as they wish with no accountability. That is unfair to taxpayers._x000D