Gov. Phil Bryant, facing the state’s $89 million revenue shortfall through the first six months of the fiscal year, ordered cuts for most state agencies Thursday.
The $50.9 million cut, which is the second cut of the current fiscal year, will affect most agencies by about 1.45 percent. Bryant also ordered a transfer of $4.06 million from the Rainy Day Fund to the general fund to help balance the budget as he is required to do by law.
Programs exempt from cuts are Mississippi Adequate Education Program, Military department, Veterans’ Affairs Board, Highway Patrol, Bureau of Narcotics, State Crime Lab, District Attorneys, Supreme Court Services, IHL student financial aid, and Schools for Blind and Deaf.
“I am hopeful these two actions, totaling a $55 million modification to the FY 2017 budget, will be enough to get state government through the current fiscal year,” Bryant wrote to the Department of Finance and Administration Executive Director Laura Jackson. “However, additional cuts or transfers from our Rainy Day Fund may be required later.”
“My actions today will leave $45.9 million that could be drawn from the Rainy Day Fund at my discretion to offset any subsequent revenue shortfalls,” the statement continued.
“This is one more example of a flaw in how we do budgeting,” said House Speaker Philip Gunn in a statement. “Revenues aren’t coming in like we projected. This is why we have brought performance-based budgeting in and why we are looking at different ways to fund education. Basing budgets on projections is something we need to try and get away from to the best of our ability. That is why we released our Legislative Budget Recommendation based on zero growth.”
Lt. Gov. Tate Reeves and DFA Director Jackson were not immediately available for comment Thursday.
State Economist Darrin Webb told Mississippi Today on Monday that the mid-year cuts appeared likely, despite upcoming months like April and June which typically produce high revenues.
“I am convinced that year-over-year growth in collections will improve in the second half of the year,” Webb said. “However, it may not be enough to avoid another round of cuts. I think by statute the governor will be forced to cut budgets given the collections to date.”
Tax revenues feed the state’s general fund, which finances state agencies and their daily operations. When revenues run below projections, the governor and Jackson must compensate by cutting state agencies’ budgets or transferring reserve fund money to the general fund.
In September, Bryant ordered a cut for all but four state agencies to compensate for a $56.8 million “accounting error” made during the budget writing process last spring.
In addition to the two cuts this fiscal year, Bryant cut the budget two times last fiscal year and pulled around $110 million from the state’s Rainy Day Fund to deal with lower-than-projected tax revenue collections.
Last January, facing a $59 million revenue shortfall, the governor ordered a $75 million mid-year Fiscal 2016 cut and pulled $35 million from the state’s largest reserve, the Rainy Day Fund. In April, Bryant ordered an additional $35 million in cuts and pulled another $10 million from the Rainy Day Fund.
Then in June, Bryant was forced to call the Legislature into special session to grant him permission to borrow from the reserve fund again. Legislative permission was needed because to balance the Fiscal Year 2016 budget, Bryant had no more cuts at his disposal and was forced to exceed the $50 million annual statutory limit on withdrawals from the reserve fund.
Revenue estimates are fluid, which makes budgeting and deciding how much state agencies will receive in future fiscal years difficult.
The system in place is designed to alert state fiscal officials in real time to any revenue shortfalls, but also to give lawmakers a sense of how much money will be available to distribute to state agencies and departments next fiscal year.
The failure to meet revenue projections is not new. The last month the state met revenue projections was May 2016, just one month before the end of last fiscal year. The last month before that was August 2015.
“I have to say that I have been disappointed in the revenue,” Webb said this week. “I think we were fairly conservative with our estimate and yet revenues continue to underperform. I am especially troubled by sales and income taxes, which make up the largest shortfall relative to the sine die estimate. We have seen some improvement in both of these in the December collections.”
“We do still have a significant part of our fiscal year to go,” Webb continued. “Our largest collection month is usually June and the second largest is generally April.”
Entering this session legislative leaders had expressed their intent to cut budgets for most state agencies next fiscal year.
The Legislative Budget Recommendation issued last month proposed a 3 percent cut in most state spending for next fiscal year, including a halt to new vehicle purchases, eliminating 1,999 vacant state jobs and limiting travel by state employees, among other recommendations.
It is unclear how the revenue shortcomings for the current fiscal year might affect those plans for Fiscal Year 2018.
Laura Hipp, spokeswoman for Lt. Gov. Tate Reeves, issued this statement last Friday after lagging December revenue figures were released: “The revenue challenges in individual income and sales tax receipts that appear to be occurring this year highlight the necessity of adopting many of the cost savings proposals recommended by the Legislative Budget Recommendation due to the work of the budget working groups this summer.”
“The original estimate that the fiscal year 2018 budget is based upon will be reviewed by the Revenue Estimating Group sometime in the next few months and they will report to the Legislature if any changes need to be made,” Hipp said in her statement Friday.