JACKSON &045; Gov. Haley Barbour acknowledged Wednesday southwest Mississippi is economically lagging behind the rest of the state, but he said a defense contractor may locate in Natchez.

&uot;We are working very hard with a major defense contractor to do something in Natchez,&uot; Barbour said to reporters. &uot;It’s not ripe yet because procurement has not been decided by the military. We’ve worked very hard on it.&uot;

Barbour did not elaborate on the possible contractor and local Economic Development Authority Chairman Woody Allen was unable to be reached for comment Wednesday night.

EDA Director Mike Ferdinand would not comment on the possibility of a defense contractor in the area.

&uot;Given the nature of all economic development projects, I can’t discuss anything ongoing,&uot; Ferdinand said. &uot;We are working with the governor’s office on more than one project.&uot;

Barbour also said the state was looking to locate an industry that works with wood products in southwest Mississippi.

&uot;We see growth and expansion all over Mississippi,&uot; Barbour said. &uot;Except for southwest Mississippi. &uot;Clearly it’s the one part of the state that I’m not satisfied with the progress being made.&uot;

Barbour referred to growth in Clarksdale, DeSoto County, Tupelo and Tishomingo County and said economic development was still a top priority of his.

The highlights of his 2005 budget plan released Tuesday include cost cutting in most state offices to avoid any tax increases.

Though he does not plan to fully fund the Mississippi Adequate Education Program as requested by the State Department of Education, he said he would increase MAEP funding by 4 percent. That 4 percent is to go straight to the classroom.

His plan includes fully funding the 8 percent teacher pay raise and adding $3.5 million to textbook funding.

K-12 education would receive more than half of the proposed increases, while community college funding would be cut.

The funding level for the University Medical Center, the Mississippi Bureau of Narcotics and homeland security would be maintained. All other departments would cut their budgets by 5 percent, saving money in order to balance the budget.

&uot;Starting in 2000 and going through the last few years we’ve been overspending,&uot; Barbour said. &uot;The goal is Š next year to be the last year we drop into the budget contingency fund.&uot;

Plans to streamline government include merging the Forestry Commission into the new Department of Agriculture, Forestry and Commerce, which will save $8 million, Barbour said.

&uot;We are not doing it because forestry is not important,&uot; Barbour said. &uot;We are doing it because it is so important. It hasn’t had the leadership.&uot;

In order to collect additional tax revenues Barbour proposed hiring additional auditors to collect an estimated $10 million in uncollected taxes, $2 million more than what is collected now.

Barbour said he was committed to avoiding a tax increase.

&uot;You see growth in most every area of the state, though not every single area,&uot; he said. &uot;A big tax increase would torpedo that growth.&uot;