Schools should be reopened at the normal time this August. If they can’t or won’t, parents should get their money back and be allowed to use it to find new educational options for their children.

Mississippi schools closed in March right after Spring Break, and students have been out of school since that time.

As we approach the traditional first days of school, various schools are reporting various return strategies for reopening. Some are offering a hybrid model where students come two or three days a week, some full time, and some offering full distance learning to students who would prefer that. Some schools are requiring kids to wear masks all day, some aren’t. Some are ending recess. Some are shutting down the cafeteria. 

Like most things with government education, it generally depends on where you live. 

The state Board of Education released an outline earlier this summer, which covered strategies for how schools should approach reopening, whichever path they followed. After all, it will be up to each district to decide on what reopening looks like.  

Federal money coming to schools

In response to the pandemic, various pots of federal money are coming to schools in Mississippi. 

As part of the CARES Act, schools are receiving about $170 million. This is money that can be used on various services, including training and professional development, cleaning supplies, technology, mental health services, etc.

Also, as part of the $1.25 billion in stimulus funds that went to the state, the legislature will be sending $150 million for schools to purchase computers for students. By this point, government schools should have money to ensure schools are clean and students have the necessary technology to learn. 

Health risks small for children

It is well established that children are much less likely than adults to become severely ill or require hospitalization because of coronavirus. Those under 20 are half as likely to contract the illness in the first place and they are likely to be either asymptomatic or have mild symptoms. 

The American Academy of Pediatrics issued a statement “strongly advocating that all policy considerations for the coming school year should start with a goal of having students physically present in school” and urging “policies to mitigate the spread of COVID-19 within schools must be balanced with the known harms to children, adolescents, families, and the community by keeping children at home.”

Further, in countries that reopened this spring, there has been no evidence of increase community spread of the virus. 

We can then make online learning, something the we have long advocated and something the state has long resisted, available to students with serious health conditions or who live in households where family members have health problems that put them in high-risk categories. 

All schools should be fully reopened

Homeschooling is a great option for families who want to homeschool. It is not a good option to try government-forced homeschooling and expect single-parents or those where both parents work to exit the workforce to educate their children. 

A June report found only one in three school districts required teachers to deliver instruction during the lockdown and other data suggests students have already lost ground academically.  

Given what we know about coronavirus and the subsequent failure of government schools to provide a credible distance education during the lockdown, all schools should be reopened for full-time, in-person instruction for the majority of Mississippi school children. 

If schools don’t reopen…

If schools are not reopened for full-time, in person instruction, money should be returned to the customer. After all, if a store closes because of the pandemic, they no longer receive money from customers they are no longer serving. 

This is how education should work. We fund students. By directing the tax dollars allocated for that student to the family, they would be able to pursue the best education option for their child. That may be a private school. Or it may be a series of tutors, online resources, or a combination of services. 

There is a group in Mississippi saying schools shouldn’t open until there are zero active cases in their specific county. While that would certainly be detrimental to children, if government schools aren’t providing a service, they shouldn’t get paid. 

An adult beverage is generally one of the easiest items for lawmakers to tax, and Mississippians pay for it every time they purchase beer, wine, or liquor. 

The same is true of virtually every state in the country, where excise taxes are paid on top of the traditional sales tax. 

When it comes to alcohol, Mississippians pay $8.11 per gallon in excise tax on their favorite wine or other beverage. That is 18th highest in the nation. Residents of Washington pay the most – $33.22 – per gallon. Among neighboring states, Alabama residents pay $19.11 per gallon, the highest in the south. Louisiana has one of the lowest rates at $3.03. Tennessee residents pay $4.46 while Arkansas pays $8.41. New Hampshire and Wyoming do not have an excise tax. 

These rates may include a wholesale tax rate converted to a gallonage excise tax rate; case and/or bottle fees, which can vary based on size of container; retail and distributor license fees, converted into a gallonage excise tax rate; as well as additional sales taxes.

When it comes to beer, the southeast generally pays higher tax rates than the rest of the country. And Mississippi moves up to the 12th highest excise tax rate in the country. We pay $0.43 per gallon. That’s not as bad as Tennessee, who has the highest rate in the country at $1.29 per gallon. I guess they want to make sure you're skipping beer and going straight to Jack Daniels. Alabama is third at $1.05. It’s $0.34 per gallon in Arkansas and $0.40 in Louisiana. Wyoming has the lowest rate at $0.02. 

Excise taxes are paid prior to the point of sale. But although you can’t see it in on your receipt, every vendor who is taxed passes these costs along to the consumer in the form of higher prices for their product. Taxes on beer are so high that it is estimated that 40 percent of the retail price goes toward taxes. 

Remember that next time you purchase a six-pack. 

Every wondered about the true status of Mississippi's pension system and what reforms we need to make to turn those numbers around?

Or do we? After all, most in elected office act as though everything is just fine.

The Pension Integrity Project team at Reason Foundation did the in-depth research into the program, and its future, and provided details on their work in this webinar for Mississippi Center for Public Policy:

Those hoping for a federal bailout for Mississippi’s ailing defined benefit pension system will be disappointed.

According to Senate Majority Leader Mitch McConnell, he doesn’t favor a federal bailout of pension funds in the wake of the coronavirus pandemic. McConnell said that he’d prefer the bankruptcy route for states with massive, unfunded pension liabilities, such as New Jersey, Illinois, and Connecticut. No state has declared bankruptcy since the Great Depression.

The Illinois pension funds have an astronomical unfunded liability of $137 billion, as of 2019. New Jersey’s state and local pension funds have $62 billion in unfunded liabilities as of fiscal 2018.  In 2019, Connecticut had a funding ratio (which is defined as the share of future obligations covered by current assets) of 38 percent and an unfunded liability of $21.2 billion.

While Mississippi is in better shape than those three states, just bailing out the state’s unfunded pension liability won’t be cheap. The Public Employees' Retirement System of Mississippi now has an unfunded liability of more than $17.6 billion or three years of all general fund tax revenues.

PERS serves most state, city and municipal employees in the state and is only 60.9 percent fully funded. 

When asked by radio host Hugh Hewitt about how those three states had given too much to public sector unions, McConnell said there was little appetite among Republicans for a bailout.

“You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs,” McConnell said to Hewitt. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”

Demographics and an unsustainable cost of living adjustment are two reasons why PERS is struggling. In 2005, there were 157,101 employees contributing into the system and 69,939 retirees.

By 2019, the number of employees contributing to PERS had shrunk to 150,651, while the number of retirees was up to 107,844. This represents a 54 percent increase in only 15 years.

With those numbers up, payments under the PERS’ cost of living plan are also eating a bigger chunk of the plan’s seed corn. PERS provides a cost of living adjustment that amounts to three percent of the annual retirement allowance for each full fiscal year of retirement until the retired member reaches age 60.

From that point, the three percent rate is compounded for each fiscal year. Since many retirees and beneficiaries choose to receive it as a lump sum at the end of the year, the benefit is known as the 13th check.

Last year, the plan paid $650 million in COLA to beneficiaries. This year, that amount grew 7.6 percent to nearly $700 million. As a percentage of benefits paid, the COLA grew from 24.9 percent of benefits paid in 2018 to 25.4 this year. 

Mississippi Center for Public Policy is part of a coalition of state-based organizations calling on Congress to provide state and local governments with greater flexibility to use money from the Coronavirus Relief Fund.

The letter reads:

The CARES Act established a $150 billion Coronavirus Relief Fund to assist state and local governments combat the Coronavirus Disease 2019 pandemic. Under the Act, each state will receive at least $1.25 billion plus an additional amount based on population, with a portion of the money allocated to local governments within the state.

As written, however, the fund provides little actual relief for state budgets but instead all but compels them to devise new spending that can be attributed to the Coronavirus Disease 2019 (COVID-19).

Congress needs to address this unintended outcome quickly by providing states and local governments the flexibility to use money from the Coronavirus Relief Fund 1) to offset lost tax and fee revenue that would otherwise have paid for ordinary operating expenses between March 1 and December 30, or 2) to provide one-time tax relief to individuals and businesses to revive the local economy.

Unlike the federal government, most states and local governments must balance their budgets. New costs associated with the Coronavirus outside of Medicaid (covered by the Families First Act) and education (covered in the Education Stabilization Fund) would not come close to the full amount appropriated except through budgetary gluttony. Billions of dollars in tax and fee revenue, however, have been lost and cannot be recovered. We ask Congress to allow states the ability to use their Relief assistance in the most prudent and least disruptive way possible.

The Joint Legislative Budget Committee released its March revenue report on Friday and total revenues slightly increased from pre-session estimates even though some tax collections were down in the wake of the coronavirus economic shutdown.

The report has sales tax collections down $6.6 million from estimates, income tax down $9.8 million, and gaming taxes down by $500,000, but collections as a total for March were $29.3 million above estimates. 

In a possible sign of things to come, gas tax revenues were down 20.59 percent from the same time last year. 

For fiscal year 2020 that ends on June 30, revenue collections are up to $217 million or 5.74 percent above the revenue estimate. Compared with last year, collections added up to 4.97 percent more than last year’s collections at the same time ($189 million).

In March 2019, the state had collected $3.821 billion in tax revenues. Despite the coronavirus economic downturn that started in mid-March, the state has collected $4.01 billion in tax revenue toward its goal of $5.996 billion.

In November, the JLBC revised its revenue estimate upward by $137.8 million.

Despite being down for the month of March, sales tax receipts for fiscal year 2020 are up $35.6 million over last year’s collections, income taxes are up $71.2 million more than last year, and corporate tax revenues are up $48.5 million from last year.

Use tax is a 7 percent tax assessed on all out-of-state purchases and revenues were up, both for the month of March over estimates ($4.7 million), the year to date ($28.5 million) and $4.8 million over the same time last year. With more people statewide shopping online due to COVID-19, it’s likely that these numbers might increase in the months to come.

Oil and natural gas tax revenues are down from fiscal year 2020 estimates, as oil is down $4.799 million for the year to date (19.81 percent drop) and natural gas is down $1.285 million (45.07 percent shortfall from estimates).

Mississippi’s already troubled defined benefit pension system could be facing an even larger fiscal hole as the economic effects of the coronavirus pandemic continue to manifest.

The Public Employees' Retirement System of Mississippi serves most state, city, and municipal employees in the state. The pension fund’s finances were already in trouble before the COVID-19-related economic downturn, as it is only 60.9 percent fully funded and now has an unfunded liability of more than $17.6 billion.

Two recessions — the first after the 9/11 terrorist attacks and the second after the great mortgage meltdown — could portend what might be ahead for PERS. Both times the plan’s investments lost money and a key metric known as the funding ratio, which is defined as the share of future obligations covered by current assets, suffered as a result.

Losses on the investment front for PERS could be considerable. According to a report by the Mercatus Center at George Mason University, the U.S. gross domestic growth rate will decline 5 percent for every month of economic shutdown. 

Since August 1980, PERS has been investing in the stock market, which promised larger returns than the bonds that represented most pension fund investments up to that point. The plan’s investment assets have grown from $15.4 billion in 2009 to $28.6 billion in 2019, an 85.7 percent increase. 

The downside for PERS and other defined benefit pension plans is the increased volatility. 

In 2001, PERS’ investments lost 7.1 percent and 6.6 percent in 2002 before rebounding in 2003 with a 3.5 percent rate of return. 

In 2001, the plan was 87.5 percent fully funded, but that slipped to 79 percent by 2003. The plan’s funding ratio never caught up despite several years of strong returns and by 2008, the plan was only 72.9 percent funded.

In 2008, PERS lost 8.2 percent on its investments and a ruinous 19.4 percent in 2009 before a rebound to 14.1 percent in 2010. Despite bounce-back years from the market in the following years, PERS bottomed out in 2012 with a 58 percent funding ratio that has only ticked up slightly since then despite investment returns of 13.4 percent (2013), 18.6 percent (2014), 14.96 percent (2017) and 9.48 percent (2018). 

The PERS staff uses an expected annual rate of return for 7.75 percent for planning purposes. The PERS board lowered the expectation from an unrealistic 8 percent in 2015.

The reason why the plan loses ground even when investment returns are above expectation is primarily demographic. In 2005, there were 157,101 employees contributing into the system and 69,939 retirees.

By 2019, the number of employees contributing to PERS had shrunk to 150,651, while the number of retirees was up to 107,844. This represents a 54 percent increase in 15 years.

The economic shutdown and related stay at home orders to slow the spread of the coronavirus pandemic will impact the budgets of every city in Mississippi, as sales and gaming taxes are often a big chunk of tax revenues. 

According to analysis of data by the Mississippi Center for Public Policy, Tunica will likely feel the effects the most from the revenue downturn, as 84 percent of the revenue in the small city in north Mississippi comes from gaming. 

Among the cities without gaming, Tupelo’s budget will take the biggest hit since the sales tax accounts for nearly 60 percent of its tax revenues.

Last year, the Department of Revenue transferred $448 million in sales tax revenues to cities and $87 million in gaming fees and taxes to municipalities and counties with casinos. Any reduction in those revenues, even for a month, could put municipal budgets in a serious squeeze.

Four other cities with casinos —Biloxi, D’Iberville, Greenville, Gulfport, Vicksburg and Natchez — will feel the effects of the casino closures to varying degrees. 

Casinos in Mississippi were closed on March 16 by the order of the Mississippi Gaming Commission, which regulates the state’s casino industry.

According to data from the state auditor’s office, Tunica had $2.4 million in total revenues in 2018 (the latest data available), with only $402,462 coming from sales tax (16.75 percent) and the majority (more than $2 million) from gaming revenues.

Biloxi received about 32 percent of its tax revenues from gaming, while 21.65 percent came from sales tax receipts. Vicksburg received about 22 percent of its revenues from gaming fees and taxes, while the sales tax accounted for 36 percent of the city’s revenue.

For those cities without casino gaming, the COVID-19 economic shutdown will hit Tupelo hardest as 58 percent of its tax revenues came from the sales tax. Businesses considered non-essential, such as most clothing stores, were shut down earlier than most in the state by the city.

Hattiesburg will also be hit hard by the shutdown, as 48 percent of its tax proceeds came from sales tax. Pearl will also be severely affected, as 46 percent of its revenues come from sales tax receipts.

Mississippi levies a 7 percent sales tax statewide and 18 percent of those proceeds are sent by the state Department of Revenue back to the municipality where the sale was performed.

Cities that are more dependent on property tax revenues, such as Southaven (more than 60 percent of total tax revenues) and Jackson (47 percent), will weather the economic storm in much better shape.

The longer the shutdown continues, the worse it will be, both for state revenues and cities. A study from the Mercatus Center at George Mason University estimates that real growth in the U.S. gross domestic product will decline 5 percent for each month of partial economic shutdown.

Data from city websites and the Office of State Auditor’s reports.

Thanks to a policy of ensuring the state’s rainy day fund is filled each year to the legal limit, Mississippi is better off than half of states when it comes to a fiscal cushion from the coronavirus pandemic and the associated downturn in tax revenues. 

According to a study by the non-partisan Tax Foundation, Mississippi ranks 25th nationally in the amount of money in its rainy day fund. The study used figures from the start of fiscal 2020 to calculate how much states had in their rainy day funds.

According to the study by the Tax Foundation’s Director of State Tax Policy Jared Walczak, Mississippi lawmakers have 8.1 percent of the state’s general fund expenditures in the state’s savings account. Mississippi had $465 million at the start of fiscal 2020 in its rainy day fund, but that figure is up to $678 million now. The total amount that Mississippi lawmakers have in unallocated funds adds up to a $1.2 billion.

The Magnolia State’s savings account balance is better than all but one of its neighbors.

Alabama’s rainy day fund represents 10.1 percent of its general fund expenditures, ranking it 18th nationally.

Arkansas is the worst (2.7 percent cushion, 45th ranking) and Louisiana is second worst at 4.4 percent of its general fund expenditures in reserve(42nd worst). Tennessee has seven percent reserves (ranked 31st).

Wyoming was the best nationally, with 109 percent of its general fund expenditures in reserve. Alaska was second, with 52.6 percent of its expenditures in its rainy day fund. Illinois and Kansas were the worst, with both states having little (Illinois has a reserve of $4 million) or no money left in reserve. 

The study recommended that states consider spending cuts, drawing down reserves, accounting adjustments and possible revenue enhancements to get their balance sheets in order. The study also said that delaying spending cuts until the next budget might force harsher cuts down the road.

Walczak said in the study that income taxes are more volatile than sales taxes and fall more sharply during a recession since layoffs and reduced wages result in less taxable income. The demand on government services, such as unemployment benefits and SNAP (Supplemental Nutrition Aid Program) will also increase during the COVID-19 recession.

Walzak recommended that states take care in drawing down their rainy day funds and save some for the fiscal 2021 budget. He also said in the study that there isn’t enough time left in the fiscal year in most states to generate revenue from new or increased taxes.

Every state, except Vermont, have a requirement to have a balanced budget. 

According to analysis by the Mississippi Center for Public Policy, Mississippi’s budget hole for this fiscal year (which ends June 30) could be between $414 million and $1.1 billion. 

The unallocated funds for Mississippi that could be used to shore up the state’s budget crisis include:

• $678.9 million Working Cash Stabilization Reserve Funds (known as the Rainy Day fund)
• $234.7 million Capital Expense Funds 
• $119.3 million 2 percent set-aside in General Fund 
• $105.2 million General Fund 
• $87.4 million Gulf Coast Restoration Funds 
• $20.0 million BP Settlement Funds 
• $16.0 million Idle Special Fund Cash Balances 
• $11.0 million Education Enhancement Funds 
• $8.5 million Health Care Expendable Funds 
• $7.6 million Budget Contingency Funds 
• $2.3 million Tobacco Control Funds