State budget likely to fall short for the year

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Mississippi needs to take in a record revenue total in June in order to balance this year’s budget.

Lt. Gov. Tate Reeves told Mississippi Today on Thursday that the state needs between $725 million and $750 million this month to break even for the fiscal year, which ends June 30.

That revenue total would be the single highest month of revenue in at least the past 13 years, according to Department of Revenue documents, which are archived on the department’s website to 2003.

Lt. Gov. Tate Reeves

Lt. Gov. Tate Reeves

“When you’re attempting to determine if we’re going to make it in June, I can tell you with certainty that I have no idea if we’re going to make it or not,” Reeves said in an interview. “You can ask 100 other people in state government, and if they tell you if we’re going to make it or not, they’re not telling you the truth.

“We don’t know,” said the Republican from Florence. “We’ll know more as we get toward the end of the month.”

State law mandates that the budget at any point during the fiscal year remain balanced, including at the end of a fiscal year. If total revenue is lower than total expected expenditures, the governor is required to cut the budget or pull from contingency funds like the “Rainy Day Fund.”

Low revenue totals have presented a challenge for state leaders this fiscal year.

Gov. Phil Bryant implemented two separate mid-year budget cuts to counter the lower revenue totals. The first cut in January totaled $39.8 million, while the second cut in April was $35 million. Bryant also pulled $45.2 million from the state’s Rainy Day Fund, which now has about $350 million, to offset the low revenue.

Fiscal concerns came early as the Revenue Estimating Group, made up of the state’s five top financial officials, trimmed revenue projections twice in a six-month span – once in October 2015 and again in April 2016.

The lofty June revenue goal, if met, would be unprecedented for this year. In April, the most recent numbers available from the Department of Revenue, the state collected $543.4 million in revenue, which was $85.9 million less than officials expected to gain that month. In March, the state collected $564.8 million, which was $20.9 million less than expected.

“Well we don’t know what June’s going to be yet, but obviously there’s been a trend,” said Pete Walley, an economist for the University Research Center who works with State Economist Darren Webb. “So you have to assume that unless (April and May) were outliers, there’s probably being a signal sent to us that June’s not going to be up to the estimate either.”

Last June, the month which typically produces the highest revenue total of any month in a fiscal year, Mississippi garnered $695.8 million in revenue, which was the highest June revenue amount in the same 13-year span. That total would not meet the required total to balance this year’s budget.

As Mississippi flips to the new fiscal year on July 1, the state would not immediately be impacted by a potential shortfall of the previous year’s budget.

Reeves, who served on the Revenue Estimating Group for eight years when he was State Treasurer between 2004-2012, said there is a two-month “lapse period” through the month of August in which the previous fiscal year’s business is completed.

Agency and departmental transactions that were made this month, for example, may not be processed by July 1 but can be reconciled and added to budget calculations during that lapse period, Reeves said. Additionally, some state agencies may not have spent all of the funds appropriated by the legislature for the previous fiscal year, which would then be returned to the General Fund balance and aid the effort to close the anticipated budget shortfall, he said.

Should the state not meet the June goal, state officials have several options. Another dip into the Rainy Day Fund could be a solution, Reeves said. The remaining $350 million in the Rainy Day Fund and the existence of around $150 million in other reserve accounts, Reeves said, could ensure that “Mississippi is well positioned to deal with closing out Fiscal Year 2016 either way.”

“The governor and legislative leadership is in constant communication in determining how that will be dealt with if it were to happen,” Reeves said.

“Our motto is to pray for the best, prepare for the worst and expect somewhere in between,” he said. “So we are preparing for the worst case scenario, we’re looking at our options, and ultimately, the legislative leadership and governor’s office and other fiscal offices in the state will come together and make the final determination should it arise.”

State revenue by month (most recent numbers available):

April 2016           $543.4 million

March 2016        $564.8 million

Feb. 2016            $300.6 million

Jan. 2016             $378.2 million

Dec. 2015            $454.8 million

Nov. 2015            $379.1 million

Oct. 2015             $456.2 million

Sept. 2015           $479.5 million

Aug. 2015            $390.2 million

July 2015             $287.9 million

June 2015            $695.8 million (highest in at least 13 years)

May 2015            $381.9 million

Mississippi Today reporter Larrison Campbell contributed to this report.