Legislative leaders approved a starting budget proposal for the quickly approaching 2023 session that leaves the state with an unprecedented $3.9 billion in unencumbered money.

House Speaker Philip Gunn, who presides over the Legislative Budget Committee that approved the budget recommendation Tuesday, said a little more than $1 billion of the reserve funds are recurring. In other words, the funds will be available yearly for legislators to spend.

The overflowing state coffers are already spawning debate among legislative leaders about providing taxpayers with rebate checks or phasing out the personal income tax.

Overall, the state budget recommendation approved for the upcoming fiscal year, beginning July 1, is for $7 billion in state support funds or $2.04 billion less than what was appropriated for the current fiscal year.

The current budget includes one-time federal COVID-19 relief funds and other reserves. Most likely, the Legislature during the 2023 session will appropriate additional reserve funds for various building projects and for other primarily one-time expenses, significantly increasing the budget total for the upcoming fiscal year. The budget approved Tuesday by the 14-member Budget Committee, which includes both Gunn and Lt. Gov. Delbert Hosemann, is viewed as a starting point for the 174 members of the Legislature to use in developing a budget for the next fiscal year.

Despite the unprecedented revenue growth, though, legislative leaders continue to oppose expanding Medicaid, as 39 other states have done, to provide health care coverage for primarily the working poor. Or, on a lesser scale, to provide Medicaid coverage for mothers of newborns for one year instead of 60 days.

When asked about the state’s poor health outcomes, Gunn said, legislators are looking for solutions, but said, “I think we have to have some discussions about what role the government plays in that.”

Gunn reiterated his opposition to expanding Medicaid and said he would not consider proposals to extend postpartum care from 60 days to a year until the Division of Medicaid endorsed the plan. Medicaid Executive Director Drew Snyder has said the expansion of postpartum care would cost the state $7 million per year, but has refused to take a position on it.

The Senate voted last year to extend postpartum coverage, but it died in the House.

“I don’t see the advantage of doing the postpartum thing,” Gunn said.

The speaker did say he supported spending up to $70 million of the about $300 million the state has left in federal COVID-19 relief funds to help shore up the state’s rural hospitals that have been struggling financially with many in danger of closing.

Gunn said he doesn’t foresee lawmakers pumping more money into the Mississippi Adequate Education Program – the public school funding formula – beyond the money from the teacher pay raise passed last year that will transfer into MAEP. Gunn is critical of the MAEP formula as “unattainable,” and has in the past advocated scrapping it.

“Ask the teachers out there whether they would rather have $250 million in teacher pay raises, or $250 million just go into the formula,” Gunn said. “I think I know which they would rather see.”

The formula was more than $300 million short of full funding last year.

Gunn credited the large reserve to “conservative” budgeting.

“We have rejected the push to grow government over the last many years,” Gunn said.

Most states, whether conservative or liberal, are experiencing strong revenue growth thanks in large part to federal COVID-19 relief funds pumped into states. In addition, high inflation and wage growth also have contributed to increased tax collections.

Gunn said he continues to advocate for the complete elimination of the state income tax. Hosemann and many in the Senate have advocated for a large one-time rebate to taxpayers.

Gov. Tate Reeves, who released his budget proposal in November, also is advocating for the elimination of the income tax.

The proposal adopted Tuesday would fill the state’s “Rainy Day Fund” with $579 million.

Some other highlights of the proposal include:

Increased spending on:

• State employee health insurance: $32 million.

• Child Protection Services, foster care and adoption: $12.3 million.

• Department of Public Safety, salary increases and forensics lab: $3 million.

• Department of Revenue, full funding of homestead exemption: $1.4 million.

The budget proposal includes about $16.5 million in spending cuts, including deleting more than 2,000 vacant state government positions, reducing travel and contractual services, spending down agency cash balances and eliminating one-time expenditures.

The legislative session begins in early January.

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