Here and There

Thursday, June 27, 2013

Budget surplus: Old “problem” in new economy

*First appeared in the Laurel Chronicle on June 27, 2013

About the same time the economy collapsed, I began working in earnest on the state’s budget as part of Gov. Barbour’s budget policy team. (Note: There was no correlation between my working on the budget & dwindling tax revenues.)

In 2007, Mississippi’s fiscal situation was beginning to crumble: After enjoying years of healthy revenue growth, Mississippi’s collections tanked alongside the rest of the states’.

To get a sense of the impending financial doom, read from Gov. Barbour’s executive budget recommendation for Fiscal Year 2009: “We have to recognize the national economy has been softening. Serious troubles in the financial markets have not only generated pessimism but also have caused a real credit crunch…This will require considerable budget discipline. It means we’ll have to tell some people ‘No;’ it means some good things won’t get funded or won’t get as much funding as some people would like.”

The week before the FY 2009 budget recommendation was published, the front page of the Wall Street Journal had proclaimed, “States prepare to tighten belts as growth in revenue slows.” And the State Economist at the time warned lawmakers that sales tax receipts for July through December 2007 (the first half of the FY 2008 fiscal year) had increased only one-tenth of one percent.

For comparison purposes, consider the following: Gov. Barbour had proposed to increase spending in FY 2008 (the year before the downturn) by 7.5 percent; in FY 2009, he proposed a cautionary 0.4 percent increase.

Although the Legislature and Governor approved a modest budget to prepare for the downturn, it wasn’t enough. Lower-than-expected revenues forced Gov. Barbour to trim spending by $200 million in FY 2009. The sluggish economy required the Governor to cut the following year’s budget five times, or a reduction of $466 million in FY 2010.

Since that time, budgetary caution has been the name of the spending game…until now, perhaps. Earlier this month, we learned the state was on its way to a budget surplus for the current fiscal year, which ends this weekend (June 30). The House Appropriations chairman told another newspaper the surplus would likely be a “substantial” amount around $300 million.

As a friend of mine would say, that’s a lot of skrilla (translation: money).

Just think – Gov. Barbour’s first round of cuts in FY 2010 was roughly $171.9 million. Fast-forward to FY 2013 when the state’s tax collections for May exceeded the estimate by the same amount.

We must remember that for the last five or so years, lawmakers have rightly weighed spending against anemic revenue growth to determine budgeting priorities. A budget surplus? Well, that’s a new one on the current class at the State Capitol.

Already, groups are laying claim to the money. The Parents’ Campaign, which lobbies for education funding, sent an email blast to its members asking them to contact their legislators: “Ask them to commit to using the surplus to fully fund the MAEP before it is spent on other things.” (MAEP is the formula used to determine how much money goes to schools.)

At their annual meeting two weeks ago, Mississippi supervisors talked about the need to find additional money for programs like healthcare implementation and homestead exemption. There’s a legislative task force aimed at finding additional revenue for our state’s highway infrastructure. No one can ignore the rising costs of programs like Medicaid and the state retirement system, both of which will gobble up additional revenue.

For a few years, the Capitol-types (lobbyists, state agencies, etc.) recognized they simply weren’t going to get as much money as they wanted – if they got any at all. Policymakers were open to considering cost-cutting reform measures because they had to be. Now, with a budget surplus on the horizon, that mindset will likely vanish. Legislators, especially those on the money committees, can expect a little extra attention during the coming session.

Legislators can use the surplus in three ways: 1) increase funding for priority areas, like education; 2) reduce taxes to spur growth; and 3) set aside money for a “rainy day.” A likely scenario includes some combination of these options.

Until a final budget is adopted, legislators should be prepared for an onslaught of new spending options. Emboldened by a revenue surplus, state agencies and lobbyists will fight tooth and nail for a larger piece of the budgetary pie. While some of the longer-serving lawmakers remember the pre-recessionary days when revenue wasn’t as tight, a large part of the current class isn’t used to this much money – or the pressures that come with it.

It’s an old problem, for sure, but the reality is that Mississippi isn’t in the clear yet. While our revenues may be higher than expected, our economic picture is still slow to brighten. According to the latest stats, the state’s unemployment rate was tied for the second-highest in the nation with close to 120,000 Mississippians unemployed. Getting people back to work will take time, and revenues won’t fully catch back up until the employment situation bounces back.

Thursday, June 20, 2013

Ballooning student debt, taxpayer-backed loans lead to one question: Is college really worth it?

*First appeared in the June 20, 2013 edition of the Laurel Chronicle.

Start reading “Is College Worth It?” by David Wilezol and former U.S. Education Secretary Dr. William J. Bennett, and you’ll begin to wonder if attending college is the smart investment we’ve always assumed it is.

Consider the following: While college completion is considered an indicator of success, more than half of all college graduates in 2010-11 were unemployed or dramatically underemployed. Instead of a well-paying job, a college degree today is more likely to guarantee you a heavy debt load, as evidenced by the total student-loan debt in the U.S. recently surpassing $1 trillion (that's "trillion" with a capital T). The costs of college are skyrocketing at rates faster than inflation, thus increasing the gap between what the student or parent pays for college and their return on that investment.

The common thread among these issues is a long-held belief every child should attend college. I reject this theory since many students can learn skills that lead to good-paying jobs quicker and cheaper than getting a four-year degree.

"Is College Worth It?" details the struggles of many students who felt cheated after graduating college with massive amounts of debt. The Federal Reserve estimates the average debt load per student upon graduation is $23,300 – and it’s becoming problem for more than twenty-somethings. In fact, the same research shows the highest amount of per-borrower debt ($28,500) falls to individuals 30-39 years of age, followed closely by borrowers aged 40-49 ($26,000).

The price-tag to attend college has skyrocketed, with financial magazine Barron’s reporting last April that the cost of tuition at a four-year school had soared 300 percent – four times the rate of inflation – since 1990.

Twenty-five years ago, Dr. Bennett developed a theory that appears to hold true today: The “cost of college tuition will rise as long as the amount of money available in federal student-aid programs continues to increase with little or no accountability.”

As subsidies so often do, student aid has had the effect of shielding colleges from having to implement significant cost-cutting measures. Schools can raise tuition fees with a near assurance that federal financial aid will correspondingly increase. After all, the more students take out loans instead of paying out of their pocket, the less schools must be wary of rising costs. Under this model, there’s really no impetus for an institution to adopt transparency or accountability measures.

While the sluggish economy has necessarily resulted in state budget cuts to higher education, this reduction alone doesn’t account for the increased costs. Dr. Bennett would argue that states have realized colleges can afford to be less dependent on state funding, as they can capture student-loan dollars and become “self-funding entities.”

In Mississippi, we’ve seen tuition increases at both the community college and university level (even though state funding has been increased for both groups by nearly $54 million for the fiscal year beginning July 1). This week the Community and Junior College Board announced that 11 of its 15 institutions would raise tuition fees by an average of 6 percent, bringing tuition cost to roughly $2,377.

Supporting the Bennett hypothesis, the Associated Press reported the price of higher education tuition is rising faster than inflation - and people’s ability to pay. But most of the state’s community college students pay less than full price due to a combination of scholarships and, you guessed it, financial aid.

Dr. Bennett offers some innovative solutions to this growing problem. First, his mantra that “higher education is not underfunded; it is under-accountable” must factor into reforms. Colleges should have more skin in the game, an approach embraced by President Obama who “put colleges on notice” in a 2012 speech: “If [colleges] can’t stop tuition from going up, then the funding you get from taxpayers each year will go down.”

Dr. Bennett offers a sensible solution of tying more lending to academic persistence – meaning we’d recalibrate lending to students who are more likely to excel in the classroom and less likely to default on taxpayer-funded loans. He suggests making each college pay a fee for every one of its students who defaults on a student loan and limiting loans for living expenses.

His boldest idea is the development of private equity relationships between students and investors, in which an investor would receive a portion of the student’s future income in return for financing a portion of the student’s education. (I like this idea because it minimizes risks to taxpayers while incentivizing students to work hard.)

The co-authors cover countless other issues related to higher education in their work, and my column is a poor substitute for the book. I’ll close with this: If provoking serious thought on higher education was the goal of writing “Is College Worth It?,” I’d say the Bennett-Wilezol duo has accomplished what they set out to do.

Graphic from the Pew Center on the States

Thursday, June 13, 2013

Top political movers and playmakers have Jones County roots

*First appeared in Laurel Chronicle on June 13, 2013.

Growing up in Jones County, I often found myself cruising down Old Bay, watching plays at the Laurel Little Theatre, or enjoying a milkshake at the still-delicious P.D.I.’s. Early on in the Free State, I learned about how our neck of the woods contributed to a state, regional, and global impact – from companies like Sanderson Farms, the third largest poultry producer in the United States, to Howard Industries, one of the world’s largest manufacturers of distribution transformers.

What I didn’t realize, however, is that our county’s footprint went beyond these corporate giants. In fact, Jones Countians can also take pride in the Pine Belt’s impact on the state’s political class.

Rickey Cole, the head of the Mississippi Democratic Party, hails from Ovett. A candidate for state agriculture commissioner in 2007, Cole has been involved in more than 20 Democratic political campaigns since 1982. Splitting his time between Ovett, where he still helps manage the family farm, and Jackson, where he serves as a consultant with the Eaves law firm, Cole has a long history of Democratic activism across the state. His contributions to the Democratic Party haven’t gone unnoticed, as he is currently in his second term as chairman of the Democratic Party.

On the opposite end of the spectrum, Mississippi Republican Party chairman Joe Nosef has Laurel roots as his wife, former Amy Wallace, grew up here. (Heard of Wallace Drugs? Of course you have. That’s the same family.) Years ago, Joe and I worked together as part of Governor Haley Barbour’s Office. We’d often discuss Laurel – its charming downtown and oak-lined historic district – since he had spent considerable time here with Amy. Although Nosef is a Clarksdale native, he embraced the uniqueness of our city beautiful and our Free State.

Speaking of Jones County Republicans, one of the state’s most well-known political families is from within our borders: The Pickerings. Located in the West Jones area, this family has produced household names in Mississippi politics. Let’s start with retired federal judge Charles Pickering, whose record of involvement in public service is lengthy. He has served in virtually all levels of government – from municipal to federal. A former municipal judge, Pickering also served in the Mississippi State Senate. In the 1970s, Pickering was chairman of the Mississippi Republican Party and was later appointed by the first President Bush to a federal judgeship.

His appointment in 2001 by President George W. Bush to serve on the Fifth Circuit would not come without controversy. Senate Democrats made national headlines when they chose to filibuster this Bush appointee on the grounds of his stance on abortion, as well as unsubstantiated claims that Pickering sympathized with racists. I should note that Charles Evers, brother of slain civil rights activist Medgar Evers (whose slaying occurred 50 years ago this week), openly supported Pickering’s nomination, along with other notable civil rights leaders. Ultimately, Pickering chose to withdraw his nomination, thus ending the filibuster debacle.

(Speaking of Judge Pickering, let’s not forget one of his former law partners, Carrol Gartin. You’ll probably recognize that name from the widely-used road in the city known as Carrol Gartin Boulevard. A Democrat, Gartin is a Laurel native who served three terms as Mississippi’s Lieutenant Governor during the 1950s and early 1960s.)

Judge Pickering’s son has also played on the national stage as a former member of the United States House of Representatives. Congressman Chip Pickering graduated from R.H. Watkins High School and attended college at both Ole Miss and Baylor University. He served as a member of former Senate Majority Leader Trent Lott’s staff before staging his own successful congressional campaign in 1997. In 2008, the Laurel native opted to return to Mississippi to pursue a career in the private sector.

Nephew to Judge Pickering is Stacey Pickering, whom most of Laurel knows as “neighbor” and the rest of the state knows as State Auditor. Prior to his election as State Auditor, Pickering served in the state senate, like his uncle before him. Pickering graduated from West Jones High School and attended both Jones County Junior College as well as Samford University. He earned a Master’s Degree from New Orleans Baptist Theological Seminary. He and his wife, Whitney, still live in Laurel with their four children.

From political party leaders to state senators; from federal judges to congressmen, Jones County natives have made a big impact on the state of Mississippi politics. So the next time you’re thinking about all the great things our county has to offer - from its charm to its corporate giants – I encourage you to consider the political side of our Free State.

Friday, June 7, 2013

Teen pregnancy rates dip, but out-of-wedlock births lead to larger economic challenges

*First appeared in the Laurel Chronicle on June 6, 2013.

About two weeks ago, the Centers for Disease Control released another of its reports full of charts, numbers, and phrases like “data sources and methodology.” Got your attention? I didn’t think so, but stay with me.

This CDC report (“Declines in State Teen Birth Rates by Race and Hispanic Origin”) focused on teenage pregnancy, a topic all-too-familiar in this state. But the findings aren’t what you might think: Nationally, teenage births have seen a dramatic decline, with Mississippi following the trend. Over the five-year period (2007-2011), Mississippi’s teenage birth rate dropped from a whopping 70 percent (wow!) to 50 percent, or a decline of 28 percent. While 50 percent is still too high, the downward trend is encouraging. That’s the good news.

Although the 2011 data hasn’t been released yet, I thought it prudent to check on the trend of another measure: nonmarital, or out-of-wedlock, births. Over the past five years of available CDC data (2006-2010), out-of-wedlock births in this state have risen slightly, with more than one-half (54.8 percent) of all births falling in this category. That’s the bad news.

Why? Because the shift in the American family structure – specifically, the increase in out-of-wedlock births – has a dramatic and lasting impact on our economic growth. While I am most interested in monetary issues, I have come to realize it’s impossible (and impractical) to isolate economic policies from the over-arching issue of family structure. The two are inevitably linked. To put it simply: Families matter.

Illegitimacy typically leads to negative outcomes for both mother and child. This isn’t my opinion; it’s backed up by recent stats from the U.S. Census Bureau (yes, another government report). Out-of-wedlock births have increased since the 1940s, with dramatic upticks seen in recent years. According to the Census Bureau’s “Social and Economic Characteristics of Currently Unmarried Women with a Recent Birth,” individuals who have children outside of marriage are generally younger, have less education, and have lower income levels than married parents. Children born out of wedlock are more likely to be poor; even those kids who live in co-habiting households (where the mom and dad live together but are not married) have negative developmental and behavioral outcomes “due in part to family instability.”

In Mississippi, the out-of-wedlock birth rate is 54.8 percent according to the CDC. Broken down by race, we see that rate at 32.3 percent for whites; 56 percent for Hispanics; and 81.4 percent for blacks. Consider the known outcome of illegitimacy on poverty, income, and educational attainment. The African-American community is particularly hard hit.

Interestingly, the Census Bureau report notes that states with higher illegitimacy rates have, on average, correspondingly low levels of economic success: Lagging median incomes; elevated drop-out rates; low levels of higher educational attainment; and high levels of poverty. Mississippi checks the box in virtually every category.

Other considerations I’ve not mentioned include crime rates, which are closely linked to child rearing, and workforce development, including the readiness of an individual to join the workplace. Believe it or not, many employers today have problems finding workers with so-called “soft skills” – such as knowing what to wear in a work environment or punctuality. It makes sense, though, as these skills have traditionally been taught in the home setting.

So what do we do about it? First, we recognize we cannot legislate our way out of this complex problem. Lawmakers can pass laws that target dropout prevention; they can increase access to contraception or, contrarily, heavily regulate abortion clinics. Taxpayer funds can be used to teach “soft skills” to a modern labor force or to help impoverished communities attract economic development projects.

Given my background as a government policy wonk, I support innovative implementation of most of these ideas. But government is limited in that it can only target symptoms of a greater problem: A dramatically shifting American family structure.

Just as the problem of out-of-wedlock births begins in our communities, so should our response. Churches, civic groups, community organizations, parent-teacher associations, and others should take action. They should proactively target those within their reach, whether it’s high school students or a church youth group. Parents-to-be should be encouraged by their neighbors; honest dialogue should occur between friends who are considering marriage (or not). A special look should be given to those communities who are suffering most – such as the 80 percent of black children born outside of a marriage.

After all, when we fail to take personal responsibility, we fail as a community. In this failure, we create a void that is often filled by a government ill-equipped to impact real change. At the very least, we know the government will embrace its role as societal fixer – but usually through bureaucratic largesse that leads to increased spending and higher taxes…which brings us right back to economics, like I said.