Governor’s State of the State

PREPARED REMARKS OF GOVERNOR HALEY BARBOUR

2008 STATE OF THE STATE

January 21, 2008

Governor Bryant; Speaker McCoy; ladies and gentlemen of the
Legislature; and fellow Mississippians:

This is the fifth time you have allowed Marsha and me to join you in
this historic chamber to report on the State of our State. We’re
honored the people of Mississippi have allowed us this opportunity, and
I’m grateful and proud to have the best partner a man could have to
help meet this challenge, Marsha.

It is appropriate we are again together for this occasion on Dr. Martin
Luther King Day. Our state has the highest percentage African-American
population; and the issues, with which we will deal, affect all
Mississippians and should receive our best effort to serve the interests
of all.

I look out over this chamber and I see many new faces new
Representatives and Senators and new statewide elected officials such as
my old friend, Lieutenant Governor Phil Bryant.

And I am glad to see familiar faces such as our Speaker and my
friend, Billy McCoy.

We gather in this chamber, Republicans and Democrats, from different
regions, backgrounds and interests, but with a common bond: that we have
been sent to Jackson to do the people’s business, to keep our state
headed in the right direction, to continue moving forward together.

Each of us is here because we engaged in a political campaign, but
those campaigns are over. It is time to govern.

For the thirty-three of you who are newly elected and here for the
first time; my advice is, don’t believe everything you hear or read in
the paper about partisanship or the Legislature and the Governor
fighting. The news media likes to focus on fights, but you’re going
to find we can deal with contentious issues without being contentious
ourselves. You’ll learn that when I called Billy McCoy my friend, I
meant it. And you’ll find a lot can be . . .indeed, has been
accomplished by working together.

In these last four years consider the examples of tort reform,
reorganizing and emphasizing workforce development and job training,
Momentum Mississippi and other economic development projects, upgrading
education and replenishing the Rainy Day Fund. Some of those were very
tough issues, but working together we got them done.

I will say of you freshmen, you’ve come to the Legislature at a time
of great promise but also one that requires caution.

It is said that in the Chinese language the symbol for crisis is the
same as the symbol for opportunity. If that’s so, it’s an
appropriate symbol for this year. We have the wind at our backs, but
there are storm clouds on the horizon.

The State of our State is good; in some ways extremely good.

We have record employment . . . more people working than ever . . . a
net gain of more than 50,000 jobs in the last four years . . . and there
are thousands more jobs in the pipeline at Toyota, General Electric,
PACCAR, SeverCorr, ADP, PSL-North America, CCA and so on.

Nearly twenty billion dollars of capital investment is underway . . .
in permitting or on the drawing board in our energy sector alone.

Personal income increased by twenty percent these last four years. We
not only have more people working, but we have been replacing lower
skilled, lower paying jobs with higher skilled, higher paying jobs.

There is a can-do attitude in Mississippi. As I said last week at the
Inauguration, not only did the country and the world see the spirit and
character of our people after Katrina; we learned so much about
ourselves . . . about our strength and courage . . . about compassion
and community.

We have been moving forward together, and people recognize it. Most
people are very bullish on our state and our future.

Nevertheless, 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. Reduced
availability of credit will make economic development harder.

Nationally the housing industry, a huge employer and major producer of
wealth for average Americans, is in a tailspin after an extremely long
boom. Our state is already being affected.

Energy prices, while driving some large economic development projects
in the state, are placing a heavy financial burden on our citizens.

Inevitably these problems impact the state’s budget. Last Tuesday
the front page of the Wall Street Journal proclaimed, “States prepare
to tighten belts as growth in revenue slows.” The same week our State
Economist said Mississippi sales tax receipts for July through December,
2007, the first half of this fiscal year, had increased only one-tenth
of one percent!

There have been a spate of stories about the severe budget deficits
other states are facing. Four years ago our state was in the deepest
budget hole in history. It is our responsibility – yours and mine
– to make sure we don’t get back in that kind of shape again.

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.
Sometimes it’s our job to say “No,” even to our friends and to our
favorite programs.

A review of current spending compared to the budget four years ago
should make it easier to maintain that budget discipline, because
spending on priority programs has increased dramatically in those four
years.

General fund revenue in Fiscal Year 2004 was $3.6 billion. General
fund revenue available for the budget you’ll consider this session is
estimated at $5.1 billion. That’s a 42% increase. And with other
revenue available for General Fund purposes, you will have $5.6 billion
to appropriate.

In the current year, FY ‘08, appropriated state spending is 31%
higher than in FY ‘04, and revenue is 38% more.

This year our K-12 schools are receiving more than $4.2 billion from
state, federal and local sources . . . more than $8,500 for every child
attending our public schools compared to $6,800 per child just four
years ago. The state appropriation of more than $2.2 billion has
increased $529 million in four years. That is an average increase of
more than $130 million per year for K-12 schools alone.

Education is our top priority, but we must recognize we won’t be able
to increase K-12 spending nearly that much this session, unless you’re
willing to gut other critical programs, which I’m not.

Higher education also received record increases in state funding these
last four years. Universities saw state funding go up by nearly
one-third, and it was greatly needed after a seven percent cut in
funding during the Musgrove administration.

Community colleges got cut even more when Musgrove was governor, and
I’m proud that in my first administration state appropriations for
community colleges went up fifty-two percent, including a more than
doubling of state spending on workforce development and job training . .
. a key to our job creation success.

I’m on record as favoring continued, large increases in funding
higher education . . . increases similar to my first term; but I’ll
tell you right now, we can’t afford that this year. The money won’t
be there.

Our duty is to live within our means . . . to pass an honest balanced
budget; and particularly this year to protect our strengthening Rainy
Day Fund.

When I stood here four years ago for my initial State of the State
address, the unallocated balance in the Rainy Day Fund was less than ten
million dollars, a tiny fraction of what it was supposed to be.

Today the Rainy Day Fund is nearly $270 million, the highest ever and
about three-fourths of its current statutory limit. As the name
implies, this fund is to protect our taxpayers and our program
beneficiaries if there is a revenue shortfall or economic slowdown.

Later this week I will present you a detailed balanced budget proposal.
It will strengthen our Rainy Day Fund because I realize this is
essential as we prepare for the possibility of a national economic
downturn.

My budget reflects the fact that public education is the number one
economic development issue in our state, and it is the number one
quality of life issue. My budget fully funds the Mississippi Adequate
Education Program.

Just as importantly, my budget funds education reforms so we can get
better results for the money we spend. And that is the test in
education. What are the results we demand and achieve for our
children?

I will continue to support the State Superintendent’s proposal to
redesign high school, to make it more rigorous and especially more
relevant to kids who are not on a path to college, as a way to attack
our unacceptably high dropout rate.

To keep our best teachers, we should increase the salaries of teachers
with more than 25 years experience. My budget will.

For our beginning teachers, we need to give them more support as they
learn to manage a classroom full of kids. We lose a third of our new
teachers within three years. As my Teacher Advisory Council has told
me, more young teachers leave teaching because of discipline issues than
over teacher pay. Every new teacher in our schools should have an
experienced teacher serving as a mentor, and we should pay that mentor
an extra $1000 for this valuable service. It is more than worth it.

To help kids at risk of not succeeding, our schools should screen every
first grader for dyslexia and other learning disabilities and get them
treatment. Children must first learn to read before they can then read
to learn, and that is so much harder if they are saddled with obstacles
like dyslexia.

To help get our kids ready to learn by age five, we need to better
utilize the existing early childhood programs that already serve 80% of
our four-year-olds…by providing financial incentives for them to expand
and improve their educational content.

The Legislature has already passed, and I have signed into law, these
common sense reforms: authorizing mentors, dyslexia screening, and early
childhood education. It is past time to put politics aside and fund
these programs for our teachers and our children.

So that we can afford to continue making investments in all levels of
education, including our universities and community colleges, we must
make tough choices and run government smarter and more efficiently.

One part of budget discipline is to get control of bonded indebtedness.
State debt exploded from the early 90’s to 2003 – soaring from $500
million to more than $3 billion.

Thanks in large part to State Treasurer Tate Reeves’ leadership, that
spike in state indebtedness flattened out these last four years.

As Dave Ramsey says, if we’re to balance our budget in challenging
economic times, the first thing we need to do is to cut up our credit
cards. That’s why I will oppose authorizing any new state debt during
this session of the Legislature unless it’s related to creating jobs.

We also must work to find ways to run government smarter. I have asked
Lieutenant Governor Phil Bryant to lead a taskforce to root out waste
and inefficiency in state government. I am confident we will not only
find savings for the taxpayers but also get better performance for our
people.

To that end my budget will propose more flexibility for state officials
and department and agency heads to achieve savings and greater
efficiencies and effectiveness.

It will be very difficult to have budget discipline and achieve
necessary savings unless everybody participates. There is no department
or agency that can’t find savings if we allow them to do so.

The biggest budget challenge we face is Medicaid.

In this past four years, we’ve made significant progress in saving
Medicaid for the nearly 600,000 Mississippians who rely on it. We have
enacted reforms because we know it is wrong for a family to work hard at
two or three jobs, to raise their kids and pay for their healthcare, and
then have to turn around and pay extra taxes so others who are able to
work and take care of themselves choose not to but instead get free
healthcare at taxpayers’ expense. That’s not right.

Under this Administration, the Division of Medicaid checks people’s
eligibility face-to-face, and the Medicaid rolls have decreased to fewer
than 600,000. This drop is what you should expect when the number of
people employed has increased by more than 50,000.

We’ve changed our prescription drug program to better utilize generic
drugs. That, along with Medicare Part D, is saving taxpayers tens of
millions of dollars on pharmaceuticals with no negative effect on
beneficiary health.

But even with these common-sense, successful savings efforts, the
Medicaid budget faces a large shortfall. This is primarily because the
federal government has forced us to stop using certain funds to cover
the state Medicaid match requirement.

For example, we have to replace the $90 million of state match that was
previously provided solely by public hospitals to generate $275 million
of federal Medicaid funds.

Sixteen years ago, the Legislature approved that plan, proposed by the
Mississippi Hospital Association, to use funds provided by public
hospitals to match both federal Disproportionate Share Hospital (DSH)
payments and other standard Medicaid claims payments. As far back as
the Clinton administration, the federal government had warned
Mississippi and almost every other state that it was closely examining
these types of financing schemes.

Finally, in the summer of 2005, the federal government disallowed this
part of Mississippi’s system. Since then, we have gotten through two
and a half years by using $225 million of one-time federal money, made
available through Katrina supplemental funds to pay this state match . .
. with the understanding that Medicaid would implement a new financing
program.

That federal money is gone. So now we have no choice but to put in
place a long-term solution.

For the last year and a half, I’ve proposed a plan to fill this gap
by conforming the program we used for 14 years to the new federal rules.
This would restore the payments by hospitals but would involve all
hospitals – not just public hospitals. This Gross Revenue Assessment
will again cover the state matching requirement so we will not lose $275
million of federal funds from which all hospitals benefit.

That’s not an easy decision, but it’s time for the Legislature to
act on this issue.

To fill the rest of the Medicaid hole, we will have to make some
savings, and my budget will reflect that.

We should also take action to improve the health care situation for the
tens of thousands of working Mississippians who aren’t eligible for
Medicaid but don’t have private health insurance.

Compared to the rest of the country, fewer Mississippi small businesses
offer health insurance to their employees. According to the Robert Wood
Johnson Foundation, only 24% of Mississippi’s businesses with fewer
than 50 employees offer health insurance to their workers. The Census
Bureau says 134,000 Mississippians work for small businesses that
don’t offer employer-sponsored health insurance.

This is mostly because of the high cost of health insurance to small
businesses. I propose helping people get health insurance through a
voluntary Mississippi Health Insurance Exchange, and legislation will be
offered this session to create this exchange and fund its small, initial
operational cost. Let’s help more Mississippians who work for small
businesses have private health insurance.

Beyond the issues to come before this legislative session, we’ll
continue to focus on two main goals: To continue and expand the surge
of job creation that has taken place these last couple of years; and to
complete the recovery from Katrina and get every area on the Coast well
into rebuilding and renewal.

With the legitimate concerns about the national economy, it is far from
certain our job creation surge will continue. At best, we have our work
cut out for us, but I’m an optimist when it comes to Mississippi.

MDA is doing a great job, and the energy sector, as I mentioned
earlier, is expanding in the state at a terrific pace. Gulf LNG’s $1
billion terminal and Chevron’s newest $500 million upgrade at
Pascagoula, Rentech’s $3.4 billion coal-to-liquids project at Natchez
and Mississippi Power’s proposed coal-gasification plant in Kemper
County at $1.8 billion; the $3 billion Strategic Petroleum Reserve
facility at Richton and Entergy’s second Grand Gulf nuclear station at
more than $5 billion; all these are announced and either underway or in
permitting. The Ergon-Bunge ethanol plant at Vicksburg is under
construction, and Scott’s bio-diesel plant in Greenville is operating.
Denbury Resources is increasing oil production through sophisticated
tertiary recovery in these areas of the state.

These and other energy projects will help our country become more
energy independent. They also will give our state a significant
advantage years from now, when industries will ask not what does the
energy cost but instead will ask, “Can we get it” Being known as an
energy reliable state will be a major economic development advantage in
the future.

Another economic bright spot is our defense industry. Navistar’s new
IMG facility at West Point employs some 800, building mine-resistant,
ambush-protected vehicles for the military. Northrup Grumman’s
shipyards at Pascagoula and Gulfport have just won new multi-billion
dollar ship contracts from the Navy. General Dynamics, Lockheed Martin,
Rolls Royce: our traditional defense contractors are strong. And
we’ve added some new defense industries, such as EAD’s American
Eurocopter at Columbus, which received a $3.3 billion contract to build
light utility helicopters for the Army, and RTI International Metals,
which will make titanium sponges for the aerospace industry at Amory.
Then there are Aurora Flight Systems and Stark Aviation, both affiliated
with the Raspet Flight Center at Mississippi State and General
Electric’s new composite jet engine fan blade and assembly plant being
built in Batesville.

The defense industry, like energy, is not subject to the same economic
variables as most other sectors.

In other industries caution will prevail and make job creation more
difficult. Generally there will be fewer new plants and fewer
expansions.

This fact requires us to put special emphasis and effort on the best
opportunities for success, and, of course, the best example is
recruiting Toyota suppliers to locate facilities in Mississippi now.
The state and numerous communities are deeply involved in bringing more
such suppliers, and more will be announced this year.

Those of you who were in the Legislature last year know that recruiting
suppliers was a critical goal in our Toyota effort. We included
incentives for suppliers in the package you passed, something previously
unheard of.

We recognized only one community could host the main assembly plant,
but many communities could have supplier facilities . . . and they can
be spread over a large area of the state. All of north and east
Mississippi can compete for suppliers, and we know suppliers have looked
at communities from Interstate 20 to the Tennessee line. Towns in
central Mississippi, particularly those near I-55, I-20, I-59 and
Highways 45 and 49, can serve Nissan and Toyota as well as Alabama auto
assembly plants.

A serious job creation issue is highway infrastructure. Toyota is a
“just in time” manufacturer, so logistics are crucial to success.
We have some gaps in our highway system that need to be addressed if we
are to garner the number of supplier jobs that are available to us.

I will ask you to expand the Economic Development Highway Program not
only to provide funding for key links but also to materially expedite
the construction process.

Currently this Economic Development Highway Act, which Speaker McCoy
authored some years ago, is the only vehicle that considers job creation
and private capital investment effects on highway construction or
improvement priorities. Thank goodness we have it, but it requires
special funding, over and above MDOT’s $1 billion annual budget.

I will ask you to consider other ways we can involve MDA and job
creators in setting transportation priorities. In economic times like
those approaching our state, we must be able to respond quickly and
effectively if we are to keep winning the race to help Mississippians
have better, higher paying jobs.

Further and in the future, we need more options for funding key
transportation infrastructure. I applaud the Legislature for passing a
law last year allowing toll roads to be built when non-toll alternatives
are available. We need creative thinking if we are to meet our
transportation needs, especially for job creation.

As you know, I have appointed a blue ribbon commission to study
Mississippi’s tax code on a comprehensive basis, including how the
federal and local tax structures affect our citizens and businesses.
Leland Speed, one of our state’s long-time business leaders and a
terrifically successful director of the Mississippi Development
Authority, has agreed to chair the group. The commission’s work will
give you in the Legislature, the public and me a much more accurate and
clearer picture of the tax system under which our taxpayers labor than
we’ve had in the past. We’ll get this report by the end of August.

I’ve told Leland and his commission members that they are authorized
to look at everything. Nothing is off the table; though I hasten to
add, my goal is to put a net tax cut in place during my term. Overall,
the commission will help us give Mississippi a tax system that insures
everyone pays his or her fair share and that is pro-economic growth and
pro-job creation, while funding state government at necessary,
appropriate levels.

There is no question this is an ambitious agenda, loaded with
significant opportunities and formidable challenges. Successfully
achieving it is made more difficult because, after 38% revenue growth
these last four years, we will have revenue growth of less than 3% for
this budget. That’s difficult but hardly impossible.

Everyone in this room knows savings can be achieved in every state
government department and agency, except those like Medicaid and Human
Services which have large cost increases caused by litigation or federal
rule changes. Even education, where we’ll have important new
initiatives and 100% funding for MAEP, can find ways to be more
efficient and save money.

It won’t be easy, but we’ll work through our budget issues. We’ll
maximize our job creation opportunities despite uncertainty about the
national economy. We’ll find answers, get results, make progress for
our people and for Mississippi.

I believe that because I believe the folks we represent expect it, will
demand it, and, most of all, deserve it. Despite any differences we may
have, we must work together and get to positive results.

Having watched our people after Katrina, I know they are entitled to no
less: those courageous, strong people on the Coast who overcame
obliteration and bounced back in the face of the devastation, but also
the compassionate people in the rest of the state who opened their
pocketbooks, their homes and their hearts to those in South Mississippi
and on the Coast who needed help so much.

Make no mistake! Much remains to be done about Katrina rebuilding and
getting the Coast back, bigger and better than ever. Insurance problems
must be better addressed at both the state and federal levels, and the
private sector has a huge role there.

Rebuilding, especially of affordable housing, must be sped up. Extra
state resources, paid for with federal funds, are being brought to bear
on the reconstruction and workforce housing fronts.

We are making progress. The number of families in travel trailers on
the Coast has been reduced eighty percent, and employment on the Gulf
Coast is growing faster than any other place in the nation. But as much
progress as has been made, it is still way too slow to suit me, and
there remains much to do.

I want to say how much I appreciate the way the Legislature has
responded when federal assistance needed to be supplemented: like
important reforms and the $80 million you appropriated to keep wind pool
insurance rates from skyrocketing even more, and the $18 million you
provided to keep struggling local governments afloat.

But again, how can you not do whatever it takes for those people – our
people – the people who sent us here to get results – to spend their tax
dollars wisely – to take as few of their dollars in taxes as possible.

I pledge to you and to all the constituents I share with you, which is
every Mississippian, that I will work with you to get the best results
for our citizens and to stay focused on the future of Mississippi, and
make it the brightest future we’ve ever had. May Mississippi’s next
four years, be our best four years.

God Bless you and your work here. And God Bless the state of
Mississippi and our country.