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While we witness the unmatched terror of this health epidemic in our country, it appears as though we will also witness an unmatched economic fallout in America.

Last week’s surge in applications for first-time unemployment benefits was the fourth-biggest jump in jobless claims since 1967. A panel of economists surveyed by the Wall Street Journal project 875,000 new jobless claims for the week, exceeding the 1982 record of 695,000 filed in the first week of October of that year. Some economists are projecting our unemployment rate to go to between 10.5 and 11% by the end of April. The last time our national unemployment rate reached those numbers was in 1982, when it hit 10.8 percent. That’s the highest rate since we began keeping these numbers back in 1948.

Economists also expect us to enter into a national recession this spring, which will mark the end of the longest period of economic expansion in our nation’s history. Just a few short weeks ago, stocks hit record highs, extending an 11-year bull run. We’re now down more than 30 percent since then and likely going further. With crude oil prices down 50 percent for the month, analysts are worried about energy companies with heavy debt loads. This adds pressure to banks and other lenders who are already struggling after the Federal Reserve cut interest rates to near zero.

If there is any fortunate news to the economic catastrophe it is that this happened at a time when most states have been able to build large rainy-day cushions. According to Pew Charitable Trusts, the states collectively have about $75 billion saved. Mississippi presently has roughly $550 million in its rainy-day fund. But given the unknown length and severity of the pandemic, how long will these funds last?

The states need to use money for unemployment insurance and coronavirus-related actions, and to make up for the massive shortfall in tax revenue as a result of virtually all of us being forced to stay home and avoid social activities in a collective attempt to “flatten the curve.” If we were not already aware of how crucial small business is for employment and tax revenue, we are now.

We expected a massive federal stimulus plan to pass out of Congress by Monday, though that is not the case and its fate looks far less certain than it did over the weekend. The particulars of a bipartisan bill are still being negotiated. At minimum, we expect to see most Americans receive a check from the U.S. Treasury. The level of means testing is up for debate but it is likely to be tied to reported income from IRS filings from the 2018 year. If you’re a flight attendant or a hotel manager who made $87,000 then, but might be without a job today, that seems like a completely irrelevant method.

Personally, I’d rather see Congress give each American a check and leave it to each person to determine how to use it. You can buy food, give it to your church, put it in the bank, buy toilet paper, or even stock, if you are really brave. Beyond citizens, Congress will also set aside billions for specific industries, small business loans, and other targeted uses. In total, expect a stimulus in the range of $2 trillion. But if our economy remains shut down for another month, expect another trillion or more to get allocated each month. I’m not sure how long we can play this game? Our resources are not unlimited. At some point, sooner rather than later, we’ll need a pandemic strategy that allows our economy to function while we safeguard public health.

With all of the things our nation is doing today, from private industry’s participation in the healthcare efforts to personal sacrifices citizens are making to slow the spread, I’m confident we’ll defeat this pandemic. Our nation has a remarkable history of meeting its greatest challenges and emerging stronger as a result. When we do eventually wrestle this beast to the ground, we’ll need to plan our comeback strategy. Unlike the current situation, where our government is leading the way, the recovery must be led by private institutions. If we do that, I’m confident in a rebound and a re-emergence of American ingenuity and robust economic growth.

For example, the stock market sell-off has created huge opportunities to buy companies with good management, solid fundamentals, and strong balance sheets. A lot of wealth will be gained from owning equities as our economy comes back. And there will be new companies and categories that offer growth to the investor taking the long-term view. There is a long track record of the wisdom of free markets in the form or public equities.

No matter what calamity has knocked the value of stocks down over our nation’s history, we’ve always recovered and reached unprecedented growth again. It is why the world invests in the American economy. If we get back to trusting free enterprise once we get this crisis under control, we’ll reach new heights again. But, it’s vital that we learn the lessons from this pandemic and stay vigilant to free markets, limited government, and personal responsibility.

While we are all willing to consent to our government’s heavy involvement in the economy during this healthcare emergency, and to give up a certain level of personal liberty, we must make sure that none of these “temporary actions” become permanent. Our nation has a history of approving temporary government actions that later become permanent ones after the threat has passed. We live under the economic burden of much of that today, where more than 70 percent of our federal budget is consumed by entitlement programs and debt service. These programs have trapped generations of families into government dependence and contribute to an ever-growing national debt that our grandchildren will inherit.

The coronavirus is showing us how our immense regulatory system, with extraordinaire levels of bureaucracy and gate-keeping, suppressed creativity, innovation, and service. The message should be heeded that we need to continue to examine all of our administrative regulations. Our government needs to get out of the way of the creative destructionists, the inventors, the entrepreneurs, the venture capitalists, the atypical workers, and the profit-seeking scientists. Trust markets. Trust people. Take the regulatory restrictor plates off of our economy and let competition and consumer choice happen as freely as is possible.

The economist Dan Mitchell shared David Harsanyi’s piece in National Review on his blog this weekend and I thought it perfectly summarized the lessons we should be learning. “...the coronavirus crisis has only strengthened my belief in limited-government conservatism — classical liberalism, libertarianism, whatever you want to call it. Years of government spending and expanding regulation have done nothing to make us safer during this emergency; in fact, our profligate spending during years of prosperity has probably constrained our ability to borrow now. Government does far too much of what it shouldn’t, and is far too incompetent at doing what it should. The CDC, an agency specifically created to prevent the spread of dangerous communicable diseases, has failed. Almost everyone would agree that its core mission should be under the bailiwick of government. Yet, for the past 40 years, its mission kept expanding as it spent billions of dollars and tons of manpower worrying about how much salt you put on your steaks and imploring you to do more jumping jacks. The CDC — and other federal agencies such as the FDA — haven’t just moved too slowly in tapping the expertise of our academic and private sectors to fight COVID-19; they’ve actively impeded such private efforts. The CDC didn’t merely botch the creation of a COVID-19 test, it failed to turn to private companies that could have created a test faster and better. I’d simply like government to do much less much better.”

When this healthcare catastrophe is over, let’s not prolong our economic catastrophe by continuing to rely on government for our solutions. Let’s insist government stay limited to the functions it does well and allow entrepreneurs, competition, and consumer choice to lead the way. We’ll need this leadership more than ever, and so will the rest of the world.

This is the first of a three-part series, Perspectives of a Pandemic.

The Mississippi Department of Revenue announced today that it will push back its tax filing deadline in the wake of the coronavirus pandemic.

The new deadline is May 15, a month after the traditional April 15 deadline and two months before the new federal deadline of July 15.

In a news release, the DOR said it couldn’t extend the deadline past the fiscal year’s end of June 30, because it would jeopardize the ability of state leadership to balance the fiscal year budget. According to state law, appropriations for state agencies for this fiscal year will last until August 30.

Taxpayer payments for the self-employed are also due on the date and the extension doesn’t apply to sales, use or any other tax types. 

Alabama was the most recent state to announce it pushed back its deadline to July 15, putting it in line with the federal government, which moved back its deadline to the same date two days ago. 

Thirteen states, according to the non-partisan Tax Foundation, have pushed back their filing deadlines to July 15 in lockstep with the federal deadline. All but Mississippi have put their deadlines on the federal schedule.

Alabama Gov. Kay Ivey said in a statement that “it is imperative we reduce the burden upon Alabamians and get folks back on their feet financially. The safety and wellbeing of Alabamians is the paramount priority as we do everything within our power to mitigate the spread of the coronavirus.”

The states that have pushed back their deadlines in addition to Alabama are:

In addition to the filing deadline, the U.S. Internal Revenue Service pushed back the date for the first payment for the self-employed who don’t have their taxes withheld by their employer. Like the filing deadline, this will be pushed back to July 15 as well.

Gov. Tate Reeves issued an executive order today to waive the waiting period for unemployment benefits and the work search requirement. He is also suspending collection activities.

Reports last week showed that the number of Americans filing for unemployment jumped 33 percent over the previous week to 281,000. This was the biggest weekly jump since 1992. Economists expect the numbers to surge to over 2 million next week.

Under this executive order, Mississippians filing unemployment claims will no longer have a one-week waiting period for benefits. Further, work search requirements that are required for benefits have also been temporarily suspended.

Also, all collection activities, including the interception of state tax refunds, payment agreements, enrollment of liens, tax garnishments, and claimant overpayment garnishments are suspended.

Each of these orders lasts through June 27.

The Mississippi legislature gaveled out of session for at least two weeks and probably more on Wednesday, with much of its business left unfinished. 

The legislature, according to the state constitution, has an August 30 deadline to put together a new budget before the appropriations for fiscal year 2020 are exhausted. The fiscal year ends on June 30.

According to the state constitution and legislative rules, the only requirements on the session are that the state capitol be open to the public and that a session can last up to 125 day (post-election years) and 90 days in other years, unless extended by a resolution approved by both chambers. The governor also has the power to call a special session and set a limited agenda for that session. 

Before the legislature left the capitol, there were no appropriations bills filed for state agencies, which is the final step in the budgetary process. This isn’t unusual considering that the session’s adjournment for sine die (which means with no appointed date for resumption) was still a month and a half away.

One critical obligation is a budget or, in the least, a continuing resolution that allows funding to critical agencies to continue at what would likely be the same level as last year’s appropriations. In section 64 of the state constitution, appropriations run out two months after the end of the fiscal year. Normally, appropriations bills take effect on July 1 and supersede the previous appropriation before the deadline.

If the legislature decides to just hold appropriations at this year’s level, that would add up to $5.75 billion in general fund spending. Of course, we don’t know the effects of the coronavirus pandemic on state revenues. 

The way the budgetary process works in Mississippi is that agencies provide the Legislative Budget Office with their funding requests in August. The LBO, which is composed of members from both chambers, conducts hearings in September to hear from agency heads on their budgetary needs. The LBO then drafts a budget in November that provides a blueprint for the appropriations bills. The governor’s staff also drafts a budget during the same time that gives the legislature a sense of their budgetary priorities.

The appropriations bills are the primary task for legislators in the final month, along with finishing up work on general bills. The final weeks of the session are spent in conference committees as the two chambers attempt to compromise on appropriation and general bills.

If legislators are able to return to the capitol by April 1, the date for them to adjourn sine die under House Concurrent Resolution 65 would be June 9. If the legislature hasn’t returned, completed its business, and adjourned sine die by June 9, the final day of the session could be pushed back to July 9.

The Mississippi Department of Finance and Administration has given a contract to a firm owned by a Coast businessman who is paying back the government for defrauding Medicare.

The Focus Group received a $400,000 marketing and advertising contract on February 10 to encourage state residents, especially those in “hard-to-count” populations, to participate in the census. A copy of the Census marketing plan can be read here. 

The Mississippi legislature swiftly passed, with minimum debate, Senate Bill 2149 on January 30 as one of the first acts of the session. Gov. Tate Reeves signed it into law on February 10, the same day the contract went into effect. It expires on June 30.

The Focus Group is owned by Ted Cain, who will have to pay the government back more than $10 million after a jury ruled that he used his position at the Stone County Hospital to defraud Medicare. According to the most recent annual report filed on the secretary of state’s website, Cain is listed as the president and treasurer of the Focus Group.

A public service announcement put together by the Focus Group about the Census led viewers to an incorrect website. In the PSA, actor and Mississippi native Morgan Freeman held up a postcard with a QR code that can direct those who scan it with a cell phone to a website. None of the mail sent by the U.S. Census Bureau to residents has a QR code on it.

U.S. Attorney Mike Hurst, who represents the Southern District of Mississippi, said in a news release that the Cain case was one of the “most egregious cases of Medicare fraud we have litigated in the state of Mississippi.” 

Cain gave himself a $11.8 million salary, billed to Medicare through the hospital and another company he owns, Corporate Management Inc. CMI passed on the majority of his salary package through the hospital, which was reimbursed at 101 percent from 2004 to April 1, 2013 and 99 percent after April 1, 2013 to 2015 for critical access hospitals that operate in underserved areas in rural communities. 

According to the government’s case against Cain, he received compensation despite no evidence that he did any work for the hospital that qualified for reimbursement by Medicaid. The jury awarded the government nearly $9.62 million for Cain’s fraudulent and unreasonable compensation.

His wife Julie Cain also received a large salary, more than $704,454, and evidence showed that she rarely worked at the hospital. After she resigned from the hospital, she received compensation from her husband’s company CMI for alleged consulting work and director’s fees. The government was awarded $853,964 for her fraudulent and unreasonable compensation.

The Mississippi Senate voted Tuesday to create a new state agency to promote tourism.

Senate Bill 2838, authored by Sen. John Polk (R-Hattiesburg), would create a Department of Tourism and remove responsibility for the tourism promotion from the existing Mississippi Development Authority.

The bill would create a new agency, with a seven-member governing board with four members appointed by the governor and three by the lieutenant governor. The salary of the executive director appointed by the board would be set by the board. 

It would also create a grant program for matching funds to finance, promote, and advertise local tourist attractions.

The bill was assigned by Senate leadership to the Senate Accountability, Efficiency and Transparency Committee, which is chaired by Polk. It bypassed the Tourism Committee chaired by Sen. Lydia Chassaniol (R-Winona) and she was one of six no votes when it passed the Senate.

The bill is now in the hands of the House, where it has yet to receive a committee assignment.

SB 2838 also has some unrelated components that include one dealing with providing sales tax revenue to the Capitol Complex Improvement District in Jackson and another would deal with a tax incremental financing of a $10 million redevelopment project on the coast in Jackson County.

The Mississippi Development Authority has asked for more than $6 million for tourism promotion in its budget request for fiscal 2021. 

That isn’t all taxpayers are doing for tourism promotion.

Last year, then-Gov. Phil Bryant signed into law SB 2193, which created a tourism advisory board and redirected three percent of the state’s sales tax revenues from hotels and restaurants into a special fund to help with tourism promotion.

Taxpayer-funded tourism promotion doesn’t always pay off. According to a 2016 study by the Mackinac Center for Public Policy in Michigan, researchers found only a small impact nationwide from taxpayer funded tourism promotion on the hotel industry, no impact on recreation and amusements, and a miniscule one on arts and entertainment. 

This was in marked contrast to the wildly optimistic numbers released by Michigan state officials on how taxpayer spending impacted tourism in the state.

They used data from 48 states over a 39-year period.

House Bill 989, authored by Rep. Charles Busby, would make several changes to the way school districts report their financial information to the Mississippi Department of Education and prohibit some districts from increasing their budgets.

The bill would add some guidelines for financial reporting for the state’s school districts.

They include:

MDE publishes an annual report on K-12 education with financial information, such as revenue reports and administrative costs and this would add more transparency to these reports.

This would also prevent any school district with a budget greater than 100 percent of the state funding formula for granting an automatic increase in the property tax rate. This would only happen if the millage rate (the amount per every $1,000 of a property’s assessed value) required to generate revenue for the school district’s budget request is equal to 55 mills or less and the amount requested doesn’t exceed the preceding year’s property tax revenue by more than four percent. 

Under current law, school districts have to contribute at least 28 mills worth of property tax revenue to operating revenue alongside state funds and can contribute up to 56 mills in additional tax revenues.

Understanding the state’s Mississippi Adequate Education Program funding formula is an exercise in futility for the average Mississippian. The formula calculates a base student cost which isn’t needs based and is rigged to increase every year. The legislature is not legally required by the state constitution, like in Louisiana, to appropriate the full MAEP budget request. 

The legislature has only done so a few times since the difference between the MDE request and what appropriators are willing to outlay is often hundreds of millions of dollars. 

While the amount of taxpayer funds appropriated under MAEP to school districts is a huge chunk of the state’s spending on K-12 education, it isn’t the only component, along with special state funds and local property taxes.

In fiscal 2020, Mississippi taxpayers will spend $2.246 billion in MAEP funds alone, which are provided to each school district via a base student cost calculated by the formula. Just the state funds for general education programs add up to an additional $233 million and vocational and technical education is an additional $81 million in state funds.

HB 989 would increase the transparency of financial reporting for each school district in the state and would also put limitations on the ability of school district boards to automatically raise property taxes.

MCPP has reviewed this legislation and finds that it is aligned with our principles and therefore should be supported. 

Read HB 989.

Track the status of this bill and all bills in our legislative tracker. 

In this episode of Unlicensed, MCPP's Steve Wilson interviews FGA Research Director Nic Horton about Medicaid expansion and what it would really mean for the state.

Medicaid expansion for the able-bodied in Mississippi will lead to more government dependence, much higher government spending, and won’t save rural hospitals, according to research from the Foundation for Government Accountability.

Mississippi is one of 14 states remaining that haven’t adopted the expansion of Medicaid under the Affordable Care Act, better known as Obamacare, for able-bodied, working adults up to 138 percent of the poverty level. 

Nic Horton is the research director of the FGA and has compiled some data on possible Medicaid expansion in the state. He says that Medicaid expansion is offensive to him because the program was originally intended to cover the health care needs of the disabled and elderly populations.

“Mississippi should really be proud that they’ve made the right decision on this for so long,” Horton said. “The states that have gone down this path have regretted it. When you go state by state, you find this is a program that can’t be controlled. There are no time limits. 

“No work requirements. It’s an unlimited, open-ended welfare program for able-bodied adults.”

There are two Democrat-sponsored bills in the Senate, SB 2499 and SB 2181 that would expand the state’s Medicaid program under Obamacare. Both have been double-referred to the Medicaid and Appropriations committees.

Listen Now: Talking Medicaid expansion with Nic Horton, research director at FGA

The price tag to expand Medicaid won’t be cheap. The FGA estimates that the part of expansion paid by Mississippi taxpayers would add up to $28 billion over the first decade. That’s a much higher cost than predicted by a 2012 study by the Institutes for Higher Learning. 

This study said Medicaid expansion would cost state taxpayers $148.7 million in 2021 in a high enrollment scenario (95 percent participation by eligible residents.

For comparison, the state’s general fund appropriations in 2020 added up to $5.746 billion.

As for claims that Medicaid expansion is the salve for the closure of struggling rural hospitals, Horton said this isn’t the case. According to FGA research of 1,700 hospitals with six years of financial data, the effects of expansion on the net finances of hospitals was close to zero. 

Expansion was also found by the FGA to be associated with higher hospital shortfalls, a fact confirmed by the Moody’s Investor Service, a bond rating firm that issues credit ratings for hospitals nationwide.

“Medicaid was never intended to be a slush fund for hospitals,” Horton said. “We have Medicaid as a safety net for people who have nowhere else to turn. Even if it were a cure-all for every hospital in the country, I don’t think it’d be worth the human cost to the safety net for the people who need it.”

Horton says the expansion will also crowd out private insurance. In Mississippi, the FGA says that 48 percent of those eligible for potential Medicaid expansion already have private coverage and 14 percent qualify for plans on the exchange.

Nationally, 13 million able-bodied adults are now on Medicaid because of Obamacare expansion and states that have expanded Medicaid have enrolled 110 percent more adults than expected.

This is one of the reasons why Medicaid’s finances are taking on water. According to a 2017 report from the actuaries at the Centers for Medicare and Medicaid Services, expenditures for Medicaid will grow by 5.7 percent each year and will expand from $370 billion in 2017 to more than $1 trillion. 

This means one out of every five dollars spent in the U.S. will be on health care. Just the cost of expanding Medicaid to able-bodied adults under Obama Care were expected to amount to $855 billion in new federal spending between 2017 and 2026.

Louisiana is an excellent example of the phenomena of massive growth in excess of predictions of both enrollees and spending. The Pelican State expanded Medicaid in 2016 and projections said that 306,000 new people would enroll. Those numbers have grown exponentially to 468,415 this year, a 53 percent increase.

In October 2014, Louisiana’s Medicaid program served 1,051,248 residents, including those on theChildren's Health Insurance Program. By October 2018, the program was serving 1,462,452 residents.

Indiana is another good example of the effects of Medicaid expansion. General fund spending on Medicaid in the Hoosier State increased by 26.9 percent, growing from $1.98 billion in 2014 to $2.7 billion in the 2021 budget. 

Medicaid went from 13.7 percent of the state’s general fund budget in the 2014 and 2014 budget cycles to 14.8 percent in the 2020 and 2021 budgets.

In 2013, the Hoosier State had 1,120,674 enrolled in Medicaid and CHIP programs. By July 2019, that number swelled to 1,421,594, an increase of 26.85 percent or a difference of more than 300,000.

Expanding Medicaid would also will have fraud issues. According to the FGA, state legislative auditors in Louisiana found that 19,226 expansion enrollees did not qualify for benefits, but were still enrolled in the program, receiving between $61.6 million and $85.5 million in benefits.

In Minnesota, 15 percent of the able-bodied adults sampled earned money in excess of eligibility limits.

Numbers from the FGA show that 45 percent of potentially eligible able-bodied adults already have private insurance coverage and states that have expanded Medicaid have experienced a shift from private coverage to Medicaid.

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