The Legislature's watchdog committee said a recently-passed bill designed to provide more oversight of line-item spending in appropriation bills is riddled with loopholes that exempt nearly all of outlays from its requirements.
The Joint Legislative Committee on Performance Evaluation and Expenditure Review found that of the more than $40 billion in state and federal funds appropriated by lawmakers, more than 14 percent of it ($6.5 billion) was in the form of so-called pass-through funding or line-item funding.
Pass through funding is defined as lawmakers writing language into the agency's appropriation bill that requires it to transfer funds to other state agencies, local governments, private organizations such as non-profits and or to recipients in the form of loans or grants.
The biggest example of this is the Mississippi Adequate Education Program, the funding formula that provides most of the funding for public school districts. It disbursed $2.82 billion in fiscal 2021 and $2.62 billion in fiscal 2022.
There are numerous examples of pass-through spending in nearly every appropriation bill. In House Bill 1387, which was the appropriation bill for education, there are numerous instances of this type of spending in addition to MAEP, including $1.25 million for Teach for America and $775,000 for Algebra Nation.
Other examples included $1 million was provided to the non-profit Delta Health Alliance for a community health project in the fiscal 2022 Medicaid appropriation bill and $400,000 for the Skills Foundation of Mississippi in the Mississippi Development Authority's appropriation.
The report also says the state doesn't have one entity responsible for exercising oversight of this spending and this hinders transparency and oversight.
PEER also says a bill passed in the last session, Senate Bill 2824, was designed to require annual reporting of these expenditures, but 99 percent of the pass-through funding analyzed wouldn't be subject to the monitoring requirements. Only $20.6 million out of the nearly $6 billion in pass-through expenditures is subject to its provisions.
According to the report, the reason for so much of these funds not being applicable to the requirements of SB 2824 is due to the large number of exemptions, outlays not meeting the definition in the bill of pass-through funding or existing control mechanisms at state agencies capable of monitoring these expenditures.
According to the PEER report, federal funds such as the Coronavirus Aid, Relief and Economic Security (CARES Act) aren't subject to SB 2824's requirements as are the Gulf of Mexico Security Energy Act (GOMESA) funds administered by the Department of Marine Resources. Also exempt is the state Education Scholarship Account program, which provides children with special needs money for private school tuition, tutoring or other educational aids.
The committee recommends the law be changed to require recipient entities to submit quarterly reports to state agencies detailing the actual or intended expenditures, changes to the disbursement schedule which would require the recipients to file quarterly reports and another requirement that state agencies submit itemized expenditure reports to the Department of Finance and Administration's Office of Budget and Fund Management, which allow closer examination by the Joint Legislative Budget Committee.
PEER analyzed spending for fiscal years 2021 and 2022 when the state spent $22.3 billion and $23.3 billion total (state and federal funds). Most of the pass-through spending went to local governments ($3.03 billion in fiscal 2021 and $2.96 billion in fiscal 2022), mostly for MAEP. Other state agencies received $121 million in fiscal 2021 and $98 million in fiscal 2022.
Private or non-profit organizations received $165 million in fiscal 2021 and $50 million in fiscal 2022.