While Mississippi’s general fund budget will likely take $1.2 billion revenue hit for the remainder of this fiscal year and into the next, the state’s fiscal situation is much improved compared to the aftermath of the 2008 recession.
Despite the economic slowdown related to COVID-19, state economist Darren Webb projects the general fund to have $5.598 billion in fiscal 2021, the second highest amount since 2019, when the general fund held $5.774 billion.
Further improvements could happen in the last month of the fiscal year after Gov. Tate Reeves lifted the remaining restrictions on businesses on May 27. The reopening order took effect on June 1 and reopens ballparks, movie theaters, libraries and museums with social distancing and screening for the COVID-19 virus for patrons.
"We are facing two ongoing emergencies. One is the public health crisis that we have been up here every day to talk about. That threat is real, dangerous, and deadly. It is here, and we must face it," Reeves said during a daily news briefing. "We also face an economic crisis in this country, the likes of which we have not seen since the great depression.
“While we have never seen a spike of serious cases in Mississippi, we have seen economic catastrophe. We have to address both."
Fiscal 2021 starts on July 1. That amount is $367.1 million below the estimate from November, when the estimates for the remainder of 2020 and 2021 were revised upward. The reduced estimates will likely end a five-year stretch of consecutive economic growth.
The year before the 2008 recession, the state’s general fund (which is the funding source for most state agencies) tax revenue was $4.69 billion. In 2008, that figure increased to $4.83 billion.
Then in 2009, transfers to the general fund from taxes shrunk to $4.64 billion and bottomed out at $4.37 billion in 2010. From there, the uptick was steady, with tax receipts hitting a peak of $5.4 billion in 2015 before a couple of leaner years ($5.37 billion in 2016 and $5.35 billion in 2017).
Fiscal 2020 promises to be the worst year for tax revenues since 2013, when the Department of Revenue (DOR) transferred $5 billion into the general fund. The big hit from the economic shutdown adds up to a $864.4 million shortfall as compared to projections.
DOR Commissioner Herb Frierson told the Senate Appropriations Committee said last week that May’s tax receipts were $44.9 million below the pre-session estimates as of May 22, with the biggest part of that sales tax receipts. Those were down from the estimate by $16 million.
Frierson also said that applying $436 million from income tax revenue and extension payments that are in excess of pre-session revenue estimates would help 2020 revenues finish as forecast, but leaving a shortfall for 2021. The filing deadline was extended from April 15 to July 15 in the wake of the pandemic.
April was the worst month for state tax revenues, as collections were down $244 million below the estimate for the month and only $26.3 million down for the year.
The state’s economy was largely shut down on March 18 by Reeves’ executive order and March’s revenues still didn’t reflect the impact on collections. The state’s tax revenues were $29.3 million over estimates for the month and $217.7 million above for the year to date.
The state’s reserves are flush with $1.2 billion from the so-called rainy day fund and some other unallocated funds. The state ranks 25th nationally according to a study by the non-partisan Tax Foundation in terms of how much of each state’s general fund expenditures it has in reserve.
Mississippi’s ranking is higher than Arkansas (2.7 percent of expenditures in reserve, ranked 45th), Louisiana (4.4 percent, ranked 42nd) Tennessee (7 percent, ranked 31st) and Florida (4.6 percent, ranked 40th).
Wyoming is tops in the rankings, with 109 percent of its general fund expenditures in reserve. Illinois and Kansas are tied for last with little to no money in reserve.
