Ellington

Outgoing Gov. Haley Barbour gave his final address to a joint session of the Mississippi Legislature yesterday. For your consideration, here are his remarks, as prepared, from the governor's office:

I assure you, whether longtime veterans or rookies, you're in for an interesting experience, and hopefully, and experience that is rewarding for you and beneficial to our state and its citizens.

Usually at this podium I talk to the public, but today I'd like to talk to you, the Legislators – not so much the Legislature – but to you individually.

I'm not the one to tell you the Legislature is a magnificent institution, resplendent in its history and majestic in these hallowed halls. All that is true, but as I was never a member of the Legislature, someone else should tell you all that, and there are several in this chamber today who could do so.

But in the last eight years I've learned a lot about legislative behavior and conduct, about the tensions and time constraints, the pressure from special interests, including favorite constituents. The Governor is subject to the same currents and cross-currents.

You're part of a state government that faces the effects of a deep international, as well as national recession, followed by an unusually weak recovery, with economic growth less than 2 percent the first three quarters of last year.

On Main Street and among small businesses – Mississippi's economic backbone – many can't tell the difference between the recession and the so-called recovery.

Our state is not immune to the national economy, as evidenced by the Legislative Budget Committee's prediction that next year's state revenues for appropriation will be less than we expect this fiscal year.

In a minute I want to talk to you about the budgeting process, but first, let me remind you that much of government, at any level, is about collecting and spending money.

More importantly, since government has no money it doesn't take from some person or business, it's about how much money to take away from families and businesses who worked to earn that money, and so you could then spend it on the public good.

Don't ever forget that. Government doesn't have any money. Every dollar you vote to spend comes from the earnings of families and businesses, who often can do a lot more for themselves and their communities if government lets them keep a greater portion of what they worked for and earned.

Conversely, our citizens need government. They need public safety if they are to carry of the other functions of society – whether they be education, transportation, economic development and so on.

We need government regulation. Since I'm a conservative Republican, you may be surprised to hear me speak in favor of regulation; but good, rational regulation is critical to many facets of life in America and in our state.

I'm not against regulation; I'm against bad regulation. I oppose the federal government's concerted effort to use regulation to drive up the cost of energy in the name of protecting the environment, whether it's a moratorium on drilling in the Gulf or stopping the Keystone XL pipeline from bringing Canadian oil to the Gulf States that would increase our energy security and economic prosperity.

Too often regulators' attitudes amount to "no risk is too small and no cost is too high." Rational regulation is based on sound science and honest cost-benefit analysis.

It's not confrontational or driven by political agendas that can't stand the test of productive public policy.

I suggest to you – and to our friends in Washington – most often better, more appropriate regulation is conducted at the state level by folks like the Mississippi Department of Environmental Quality. DEQ understands their mission is job creation and economic growth in an environmentally appropriate manner. The same attitude exists at the Department of Marine Resources and at Wildlife, Fisheries and Parks.

This federal government could learn a lot about good regulation from our folks.

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Excuse my digression about regulation; but I don't want any of you to think government, even regulation done right, is not important to our families and our society. It is. It plays a crucial role, and government costs money.

Of course, here's where you come in. How much money – that is, taxes – must the State take from families and businesses to provide necessary government services to our people … and how do we best take the money?

Let me stop and make one observation from the last eight years: Some legislators come to Jackson and approach the budget from the perspective of how much do I want or think we need to spend on state programs? Others start from the perspective of how much do we have to spend, and only after seeing what's available do they focus on how it should appropriately be divided up among our various programs.

You won't be surprised to learn that the first group normally wants to spend more state money than the second group.

You have to have your own perspective; but I'm going to share mine with you … whether you like it or not.

Keep taxes and fees as low as possible because families and businesses can do more for their communities and their workers if they get to keep more of what they earn. Taxes are a cost to businesses, just like raw materials, wages, insurance and so on. What government takes in taxes can't be used to hire more employees, give raises, improve benefits or invest in better technology.

Another way to keep tax rates lower is to make sure everybody pays his or her fair share. In a democracy, which is our form of government, everybody should pay something, which is why I approve of the fact that almost half of state revenue comes from sales and use taxes … that is, taxes on consumption.

The federal tax system is overwhelmingly an income tax system, but most Mississippi households pay no federal income tax. Indeed, about half of all American households paid no federal income tax last year.

So, first, it is fair that we have a significant sales tax that produces almost half of state revenue since the Mississippians who do pay state income tax also pay far, far more in federal income tax. The state consumption taxes mean everybody pays something.

Let me remind you that since the days of the Founding Fathers it has been recognized that if people get the benefits of government but pay no taxes, those people will vote for unlimited benefits and thus unlimited government spending because it doesn't cost them anything.

Keep that in mind both as to your policy about taxes and your decisions about spending.

Broader taxes, where more people pay something, mean tax rates are lower. When everybody pays, it means those paying pay a lower percentage to the government.

Consider this when you review exemptions to sales taxes. And you should consider whether all the exemptions or lower rates are justified – still result in greater economic strength than if the full taxes were paid.

My friend and former Speaker, Billy McCoy, told me every time they reviewed sales tax exemptions, they'd end up with more exemptions instead of eliminating any. You have to be careful and remember that admonition; but if everybody is paying, the tax rate can be lower.

Recently, I wrote a letter on a related subject; the federal government prohibition on Mississippi's collecting the sales tax due us under existing laws for sales made over the Internet.

Since I've opposed raising taxes, some people expressed surprise to me over this.

That fact is, by existing Mississippi law these sales over the Internet are to be taxed at seven percent, like sales made at the Wal-Mart in Carthage.

Congress in 1995, with my encouragement, passed a law to prohibit states from collecting sales tax on Internet sales, for the public policy reason of helping the Internet grow and take root with average citizens like people buying over the Internet. I thought – and still think – that was good public policy, and it worked. More than 10 percent of sales in the United States last year were made over the Internet.

But, that was more than 15 years ago. This was supposed to be a moratorium, a temporary measure.

Well, it is time for the federal government to allow Mississippi and every other state to choose to enforce our laws and to collect these taxes. They are owed us today, and there is no longer any public policy reason to keep us from collecting.

Indeed, good public policy says it is past time that our bricks and mortar merchants on Main Street and in our shopping centers get a level playing field with Amazon and the Internet. That they get fair treatment for paying our taxes.

It has been estimated Mississippi is being prevented from collecting $300 million a year in sales taxes by the federal government. I suggest that number is probably inflated.

But whatever the right number is; if we collected it, we could increase our spending on education or public safety or economic development or we could reduce the sales tax rate or the income tax rate. So this is not about spending. This is about being allowed to collect the money that is already owed to us and our authority to collect is being usurped by the federal government.

So one huge part of your job is taxing, a gigantic responsibility.

It's companion responsibility is spending. It demands hard choices, too.

Every dollar appropriated has a constituency. It is the nature of governmental agencies to want to increase their spending levels.

But often cuts are required, particularly since we, unlike the federal government, are constitutionally required to maintain a balanced budget.

In recent years with revenue under pressure by the recession, many departments and agencies have been required to reduce expenditures. Even with the addition of hundreds of millions of dollars of non-recurring federal money there have been significant cuts, and there are going to have to be more.

Even though my budget would continue to spend down the Rainy Day Fund and other state reserves, most departments and agencies would have to save 2.9 percent compared to this year's spending if my budget were to be adopted. That's on top of reductions over the last few years.

Trust me: Departments and agencies can meet my budget; they can achieve further savings if you require it of them, and still provide services of the same quality and at the same level – 2.9 percent is something they can do.

Look at IHL, the Institutions of Higher Learning – our university system. Since FY 2009 their state budget has been cut more than 10 percent. While they may not like it, they have dealt with it, and dealt with it effectively.

Their state appropriations have gone down, while their enrollments have gone up … up to record levels almost every year since I've been governor. Tuition has gone up, though it is still a bargain, especially by national standards. Only 21 percent of our total university expenditures are covered by tuition. Now how good of a deal is that? That our students get to go to a university to get a chance to make economic gains beyond any of their peers, who don't go to university, and they only have to pay 21 percent of the cost. That's why tuition has never been a barrier to entry. That's why when tuition goes up, enrollment goes up.

I believe everybody can save, reduce costs compared to last year. Especially if you'll allow them the tools.

For state departments and agencies two critical tools are lump sum budgets and relief from State Personnel Board rules for two years to reorganize and right size.

The Senate used to pass these provisions every year when I was Governor but they wouldn't pass the House, except for one year.
In 2004 the Department of Corrections was allowed out from under State Personnel Board rules for one year. MDOC cut its spending 5 percent, reduced its bloated staff by more than 600, and it took about three years for spending to get back to previous levels. The state saved tens of millions of dollars.

The effects: Well, almost all the employees who wanted to keep working got jobs in LeFlore or Tallahatchie Counties at one of the private prisons; our penal system improved to the point that last year the American Corrections' Association named Mississippi as the model state for corrections' reform; and this year Commissioner Chris Epps was named the No. 1 corrections official in the country.

Please give all the departments and agencies this flexibility and they can both save money and improve performance.

But, for the sake of argument, let's say you don't believe education can save any money. I'll demur to that belief, though I disagree with it, and tell you this:

Just as the State has had reserves like the Rainy Day fund – by the way, the official name is the Working Cash Stabilization Fund, that's why we call it the Rainy Day Fund – our education systems have reserves that are today far larger than the State's.

Our 152 K-12 school districts have fund balance as their reserves are called that total $615 million as reported by the state Department of Education a few weeks ago. So the school districts reserve fund balances are about six times bigger than the state's Working Cash Stabilization or State Rainy Day fund will have at the end of this fiscal year.

As importantly, the balances in these school district reserve funds have increased by 78 percent since I became Governor eight years ago – from $345 million to $615 million this year all while the news media was saying you're shortchanging education, education's about to go under. Their reserves went up 78 percent while your reserves have gone down 62 percent and will have gone down 85 percent by the end of this year.

Now, why go into that? Because if K-12 schools cannot make the savings that you ask of them, and in my budget we ask them to save about 2 percent and to count some federal money against their spending like we did with the stimulus package, they can turn to their $615 million balances if they can't save the whole 2 percent.

By the way, that doesn't mention the $165 million in addition that our 152 school districts have in their 16th section land accounts. So, that's $780 million that they can spend without our permission. You don't have to appropriate any of it. If they can't make the savings, they have a whole lot more to fall back on than you do.

Our universities and community colleges also have significant unallocated reserves, for bigger than average cuts the Legislature might require.

Let me say, it is altogether appropriate for our schools to have reserves, as the State has. But, in though budget times, when we're drawing down state reserves, the schools should as well – if they can't make the needed savings.

Remember education in our number one priority. It consumes more than sixty percent of the budget you'll pass. But, education can save too. And the good news for them is if they can't save enough they have deep reserves to fall back on.

I've spent some time on policy – on taxing and spending – in hopes of encouraging you to learn the facts before voting … and before talking too much.

Legislating is complicated because government is huge, complex and extremely expensive.
Senator Thad Cochran always tells me, "You should never make a political decision before you have to." You see, you want to get all the facts you can.

Not only be patient in determining your policy positions and votes, I hope you'll be patient with your colleagues, including the new leadership.

I know Tate Reeves very well. I've gotten to serve with him on the Bond Commission. I can tell you he's going to be a great lieutenant governor. I know Phillip Gunn to be a fair and honorable man – very thoughtful and bright – but both of them are new at these jobs just as more than a fourth of you are. Be patient with all the new leaders – House and Senate and Phil Bryant, the Executive Branch.

I promise you I didn't what I didn't know eight years ago. And I didn't know a bunch.

But, I did understand we all had to work together … that we're all elected, you by the same people as I … that we could disagree agreeably, which would make it easier to get things done where we did find common ground … that no everybody was going to agree with me on everything … that I was going to work with you to get my job done because I owed it to the people who elected me.

I encourage you to understand these things, too. Whether you're a Republican or a Democrat, Hills or Delta, Coast or Piney Woods, Northeast Mississippi, a Southern Mississippi; black or white, veteran or freshman: You can't do diddly by yourself. 122 in the House and 52 in the Senate. And you have to be able to work together to get the toothpaste out of the tube.

Civility, comity, collegiality are all necessary if you're going to achieve your best, as an individual and as a body. And it will be a whole lot more fun that way. God Bless. Have great success.