Here and There

Wednesday, July 23, 2014

Budget Talk: Why saving for a rainy day matters

*First appeared in the July 23 edition of the Laurel Chronicle newspaper

When I play word association with the month of July, some things come to mind: Independence Day. Bastille Day. Neshoba County Fair. Start of a new fiscal year.

We’ve already celebrated the red, white, and blue (and le rouge, blanc, et bleu) with fireworks, picnics, and luckily, no guillotines. The Neshoba County Fair, with its red dirt and horse races and political overtones, comes but once a year, but the new state fiscal year lasts twelve months. Let’s talk about it, shall we?

Mississippi’s fiscal year runs July 1 through June 30. Last legislative session, the Legislature adopted a balanced budget for FY 2015 that increased funding for priorities such as public safety and education, reduced reliance on one-time money, and filled the rainy day fund to its statutory limit.

This budget decision was a joint effort by the state’s top Republicans: Governor Phil Bryant, Lt. Gov. Tate Reeves, and Speaker of the House Philip Gunn. These conservative leaders recognize that a full rainy day fund can stave off future budget cuts and stabilize the budgeting process.

Like so many long-term approaches to public policy, it wasn’t an easy decision to make. Setting aside funds for tomorrow’s uncertainties meant less funds for today’s projects.

A quick trip down memory lane reminds us of the value in having a budgetary umbrella for stormy weather – even if our umbrella isn’t as wide as it needs to be.

The Great Recession wreaked havoc on state finances, not only in Mississippi but across the nation. Collectively, states had about $60 billion in reserves to offset revenue losses, but they faced a combined shortfall nearly twice that amount ($117 billion), according to the Pew Charitable Trust’s “Building State Rainy Day Funds.”

While reserve accounts helped states weather this fiscal storm, the recession highlighted gaps in the saving practices employed by states which “could have set aside more in recent periods of growth if not for statutory limits on the total size of reserves and rules…that make saving a low budget priority.”

In Mississippi, our rainy day fund is officially known as the “Working Cash Stabilization Reserve Fund” and was created by the 1992 Budget Stabilization Act. The law defines a “full” rainy day fund as 7.5 percent of the state’s general fund budget to cover deficits that may occur as a result of revenue shortfalls.

When the recession hit Mississippi, it walloped state revenues. Over two fiscal years (2009 and 2010), Gov. Barbour was forced to cut budgets by more than $650 million. Fortunately, before state revenues tanked, lawmakers had filled the rainy day fund at about $380 million.

Most of these funds were used to stabilize the budgeting process during the recession and its aftermath, which lingered long after the recession’s official end.

The rainy day fund alone wasn’t enough to offset cuts, but it did provide a cushion that reduced the amount of cuts necessary to balance the budget without huge tax increases on Mississippians.

Those who criticize putting money aside for the future do so at the peril of risking funding for priority programs – whether it’s education, transportation, public safety, or other government services.

Mississippi’s experience is like that of other states: Our savings umbrella could have (and maybe should have) been larger, which would have more significantly reduced and/or eliminated the need for cuts in priority programs.

Because we statutorily cap our rainy day fund at 7.5 percent of spending, though, we didn’t have enough money to completely offset revenue shortfalls.

In fact, the idea of saving more – not less – is already underway. Standard & Poor’s and Moody’s gives top scores to states with savings equal to or greater than 8 to 10 percent of annual revenue or spending. The Government Finance Officers Association suggests balances of up to two months’ worth of operating revenue, and the National Conference on State Legislatures recently opined that the five-percent rule (setting aside five percent of revenue) is no longer a universally applicable safeguard measure.

While revenues appear to be on the rise, those who control the purse strings must consider lessons learned from leaner times. I applaud the Republican leadership for their political courage in this regard.

When certain Democrats decry saving, saying we ought to “spend, spend, spend,” Republicans need only to remind them of yesteryear when we were able to avoid larger cuts to programs by using reserve funds.

The Pew Charitable Trust has it right: “In a recession, adequate reserves can improve states’ ability to keep promises already made, whether those are in the form of spending commitments, tax policies, or both.”

Wednesday, July 16, 2014

Obama uses “like it, keep it” logic on implementation of healthcare law

*First appeared in the July 16 edition of the Laurel Chronicle newspaper

Last week I listened to a rather intriguing presentation on the Affordable Care Act, a.k.a. “Obamacare” or “PPACA,” by law professor Jonathan Adler (not to be confused with the designer who shares the same name).

Adler has been described as one of the foremost minds in the country on legal challenges facing the healthcare law. He’s an outspoken critic of the law and has provided the framework for arguments being used in cases challenging the law that are pending before the U.S. Supreme Court (which is often referred to as “SCOTUS” in case you’re keeping track of this alphabet soup).

Healthcare policy isn’t sexy; the nuts and bolts of the law’s implementation even less so. Yet the administrative actions taken by the Obama administration raise concerns about the scope of the President’s power and the legality of an administration gone rogue.

When the President told Americans (and I’m paraphrasing) “if you like it, you can keep it,” I thought he meant health insurance. Turns out, he has applied this line of thinking to implementation of the healthcare law. Obama has kept what he liked, and delayed (or modified) what he didn’t.

That’s a pretty bold move for the executive branch, which is charged with administering, not modifying, laws passed by Congress. (Perhaps this administration may enjoy a few complimentary copies of Schoolhouse Rock?)

Here are a few examples of the wishy-washy implementation of Obamacare, as noted by Adler.

First, the healthcare law provides tax credits and subsidies for purchasing health insurance on state-run insurance exchanges, yet many states have refused to set up exchanges. This refusal creates a multitude of problems for implementation of the healthcare law, as the subsidies and credits were seen as tools to enforce both the employer and individual mandate. Obama’s solution to fixing this “problem” (read: miscalculation in Democrat strategy) was to have his Internal Revenue Service broaden the scope of the tax credits and subsidies beyond what the law allowed.

Then there’s the example of the IRS delaying the employer mandate to provide health insurance to employees. Adler alluded to congressional testimony in which the U.S. Secretary of the Treasury told lawmakers the administration had not sought legal counsel on whether such a delay met legal muster. (Why bother the lawyers on issues of law?)

The “if you like it, you can keep it” fixes allowed for grandfathering in certain plans that were in effect as of October 2013. The 3-page guidance letter issued by Obama’s Centers for Medicare and Medicaid Services (a.k.a. “CMS”) is inconsistent with the healthcare statutes, but it’s a good talking point. Forget legislative bills; now we’re making laws via “guidance letters.”

Another implementation trick included the sequester tax credit fix. Were tax credits on the chopping block during the sequester or not? The IRS couldn’t decide and actually published guidance favoring both sides of the issue. “They got it right at least once,” joked Professor Adler.

Time and again we’ve seen the Obama team keep what they like and change what they didn’t, carelessly abandoning the notion of constitutional restraints on the president’s authority.

Or so it would seem, based on the legal analysis offered by supporters of the President’s landmark legislation. Nicholas Bagley, a fellow law professor and supporter of the healthcare law (according to Adler), has written extensively on the subject of executive overreach.

Of Obama’s delays, he says that some administrative tweaks are necessary and acceptable, “yet the executive branch’s authority to decline to enforce statues is not limitless,” with recent delays of the law appearing to exceed the scope of the traditional enforcement discretion given to the executive office.

Moreover, these actions “set a troubling precedent” which, if left unchecked, “would mark a major shift of constitutional power away from Congress, which makes the laws, and toward the President, who is supposed to enforce them.”

Whether you support the law or not, you ought to pay attention to what’s happening in D.C. Obamacare may kill our economy, but the greater threat is a President who tilts our system of checks and balances in favor of a stronger executive branch.

Wednesday, July 9, 2014

On Freedom Riders, Haley Barbour, and Growing the GOP

*First appeared in the July 9 edition of the Laurel Chronicle newspaper

On Monday, civil rights leader and U.S. Representative John Lewis tweeted the following: “53 yrs ago today I was released from Parchman Penitentiary after being arrested in Jackson for using ‘white’ restroom.” His tweet was accompanied by a black and white mug shot taken at the Jackson police department.

Lewis was part of the Freedom Riders who traveled the South to protest segregation. In 2011, Mississippi joined with the riders to commemorate the 50th anniversary of their Freedom Rides. At Gov. Barbour’s request, the state played a large role in coordinating many of the memorials and activities planned for that week. As the staff member responsible for this project, I gained new perspective on an age-old issue.

Seeing the Governor of Mississippi, on behalf of the state, welcome the Freedom Riders, apologize for their mistreatment in 1961, and thank them for the chance to atone and reconcile was powerful.

That’s just one of the many reasons I can’t stomach it when I read accusations that Haley Barbour is responsible for “race-baiting” in the recently concluded U.S. Senate campaign.

The narrative that Haley Barbour drummed up black votes in some desperate scheme to re-elect Thad Cochran is bogus. Indeed, he’s been trying to increase black participation in Republican politics for decades – not out of desperation, mind you, but out of a sincere desire to grow the conservative movement.

In a 1997 column that appeared in the Washington Post, then-outgoing Republican National Committee chairman Haley Barbour had some parting advice on growing the GOP.

“We are failing to communicate effectively to many women and minorities why our proposals are the right policies…Look at the issue of education…Too many never heard us say our goal is to have education money spent in local schools instead of on the Washington bureaucracy. [Minorities and women] never heard us say we want to give parents, teachers, and local school boards more control than the unions and federal bureaucrats. They never heard us say of school choice: Bill Clinton and Albert Gore should not be the only parents living in ‘public housing’ able to send their children to private schools.”

Haley Barbour thinks the GOP’s message on education policy ought to resonate with black and women voters.

Scandalous!

In 2003, Barbour had the opportunity to heed his own advice when he challenged former Gov. Ronnie Musgrove for the state’s top job. WLBT, the NBC-affiliate in Jackson, covered his efforts to court black voters: “[Barbour] has been traveling around the state…meeting with black community leaders” to better understand their concerns for Mississippi’s future.

Outrageous!

In 2007, when Barbour ran for re-election, his campaign focused on job growth, educational opportunities, and rebuilding from Hurricane Katrina – issues that resonated with a cross-section of Mississippi voters. According to a 2007 Associated Press article, Barbour strived “to win 20 percent of the black vote, and blacks figure prominently in his ads and campaign literature.” He even received the endorsement of the former president of the historically black Jackson State University and had a campaign staff member assigned to minority outreach.

Despicable!

When the election rolled around, Barbour enjoyed somewhere between 20-25 percent of the African American vote. He’d be the first to tell you that he worked hard to get those votes, and that many of his black supporters were the same folks who cast a vote for Thad on June 24.

Conspiracy!

You get the point. Haley Barbour has consistently tried to grow the Republican Party, not by abandoning conservative principles but by messaging them in a way that gets the attention of prospective voters, whether they’re black, female, or Hispanic.

A product of the Reagan White House (and we’ve heard a lot about Reagan lately), Barbour has always applied a “big tent” philosophy to growing Republican ranks. Instead of some litmus test to determine party eligibility, Barbour adheres to that old Gipper quip: “The person who agrees with you 80 percent of the time is a friend and ally, not some 20 percent traitor.”

In order to push forward conservative principles, we must win elections. To win elections, we must continue growing the GOP, which means all of us – from liberty-lovers to freedom-fighters – must get serious about outreach to minority and women voters.

To borrow some more parting advice from that 1990s outgoing RNC Chairman: We’ve got to “communicate not only what we’re for, but why we’re for it and how it will improve the lives of everyday Americans...[We’ve got to] reach out to those who agree with us on the issues but do not yet vote for us.”

Wednesday, July 2, 2014

Sports investments in the Magnolia State

*First appeared in the July 2 edition of the Laurel Chronicle

While the eyes of Mississippi have been watching the bloodsport known as politics, the rest of America has been watching the sport known domestically as soccer and internationally as futbol.

I note with irony some similarities between the two “sports.” Soccer is the only sport (besides elections) in which a tie is an acceptable outcome, at least until the next round (er, runoff). You can’t touch the ball with your hands (in politics, the smart athletes never get their hands dirty). Age – be it youthful vigor or maturity on the field – is always an issue. And apparently hairstyles matter, too (see: Trent Lott, Cristiano Ronaldo).

But let’s get beyond soccer, the sport no one really cares about until the World Cup. Mississippians love football – I’m talking shoulder pads, helmets, testosterone, and college jingles that bond generations of fraternity brothers.

We love basketball and baseball to a lesser extent, and I think there’s maybe one or two of us that even watch hockey. Because these sports are so woven into the fabric of our day-to-day lives, it makes sense, then, that policymakers would consider sports-related investments as part of comprehensive economic development efforts.

But, what do such investments get us? Regional Economic Models, Inc. (REMI) recently presented its findings on “the economic impact of professional sports.” They looked at the Big Four – NFL, NBA, MLB, and NHL. (Sorry, futbol fans; no soccer stats here.)

Total payroll for these leagues is astounding: NFL came in at $3.4 billion; followed by MLB at $3.39 billion. The NBA surprised me, coming in at $2 billion, and the National Hockey League came in at $1.6 billion.

Not so surprising is the professional football league (NFL) is the most lucrative in the world. Its most valuable franchises are, in descending order, the Dallas Cowboys ($2.3 billion), New England Patriots ($1.8 billion), and Washington Redskins ($1.7 billion).

Major League Baseball franchises have an average value of $744 million, a more than twenty percent increase from 2012 to 2013. That’s good news – or, you might say, a home run? – for baseball fans. Its most valuable franchises include the New York Yankees (at $2.3 billion) and the Boston Red Sox (at $1.3 billion).

On the courts, the National Basketball Association franchises raked in a 25 percent increase in value over the year, with the average around $634 million. Most valuable franchises are the New York Knicks at $1.4 billion, the Los Angeles Lakers at $1.35 billion, and the Chicago Bulls right at $1 billion.

Since my frame of reference for all things basketball centers around Michael Jordan, I’m thrilled to learn the Bulls have retained their hoops prestige.

The National Hockey League isn’t as weighty. I won’t go into details because Southerners don’t care about ice games (although I hear the Bandits, a hockey team formerly based in Jackson, were entertaining to watch).

More to the point, REMI looked at stadiums to determine their economic impact on cities and regions. Interestingly, taxpayers have absorbed 70 percent of the capital costs of stadiums, and at least 12 teams have turned profits on subsidies alone.

The core industries driven by professional sports (including stadiums) are retail trade, transportation, accommodations, food services and drinking places, and amusement, gambling, and recreation. While these industries typically see an uptick, it’s not clear whether this is new business or simply reallocation of existing patrons from one area to another.

The breadth of major league sports can generate a positive impact on communities and regions, but I assume the impact of minor league is murkier. Coincidentally, Mississippi must be careful when weighing fiscal responsibility with athletic expansions.

Mississippi assisted the Mississippi Braves Stadium through about $8 million in tax incentives in 2005. To date, the stadium seems to have had a positive economic impact on the area, which now includes a Sam’s Club, an outlet mall (which also received tax incentives from the state, by the way), and many restaurants.

Earlier this year, the Huntsville Stars announced they are relocating to a yet-to-be-built stadium in Biloxi. The cost of construction will include local bond funding as well as $15 million in money from the state, according to media reports.

On top of these professional venues, public institutions like Jackson State University continue to make plays at the State Capitol for taxpayer dollars to build a domed stadium in Jackson.

It’s easy to get excited about sports, and even easier to assume sports-related projects are smart investments. But the economic impact of these investments is a mixed bag and varies heavily by community, region, and state. The safest play is to let the private sector – not taxpayer funds – dictate who scores in the sports arena.