State economist questions rosy tax revenue reports

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State economist Darrin Webb talks to the Joint Legislative Budget Committee. 

State Economist Darrin Webb warned legislative leaders Wednesday that revenue growth seen through the first quarter of the fiscal year is exaggerated by one-time events.

“On the surface, general fund transfers look better in fiscal year 2018,” Webb said. “But the strength of the first quarter is inflated.”

Webb explained the discrepancies to legislative leaders Thursday at a Joint Legislative Budget Committee meeting in which lawmakers adopted Webb’s recommended $5.6 billion revenue estimate for Fiscal Year 2019, which begins next July 1. Lawmakers will use that revenue estimate when crafting next fiscal year’s budget.

That $5.6 billion figure is slightly lower – $1.5 million – than the current fiscal year’s spending projection.

The Legislative Budget Office releases monthly revenue reports that update the public on revenue collections, which funnel into the general fund to help pay for state employee salaries and basic services such as public education, public safety and Medicaid reimbursements.

That monthly revenue report says the state has collected $39.3 million, or 3.5 percent, more in taxes than at this time last year. But Webb on Thursday said those numbers are padded with one-time money.

Actual year-over-year tax revenue collections are down -0.6 percent, he said.

“For example, individual income tax collections include $4.3 million from unclaimed property, as well as $10.5 million that was released from the refund account because refunds are below expectations. Insurance premiums include $11 million that was not transferred in June (last fiscal year) as it should have been.”

Webb, who heads the nonpartisan, state-funded University Research Center, meets with the committee several times each year, providing analytical updates on the state’s economy and its projected future.

He said the state’s economy continues to grow slightly, but considerably slower relative to the national average and all four neighboring states. One of the reasons for that slow growth, Webb said, is legislative action like tax cuts, with long term economic impacts that are impossible to measure but which negatively affect revenue collections.

Rogelio V. Solis, AP

Lt. Gov. Tate Reeves, center, smiles as Speaker Philip Gunn, R-Clinton, left, debates with a reporter about education funding legislation.

Lt. Gov. Tate Reeves, who has spearheaded more than 50 tax cuts since he took office in 2012, did not rebut any of Webb’s comments on Wednesday. Reeves said that he stands by substantial tax cuts passed during his tenure, including the largest tax cut in state history passed in 2016, a business franchise tax cut that most greatly benefits out-of-state corporations.

“I believe very strongly that individuals in Mississippi are better at spending their money than any governmental entity ever will be,” Reeves said. “There are those on the other sides of the aisle – a lot of Democrats in the Capitol – that believe government is entitled to 100 percent of everything you make, and that anything the government lets you keep you ought to be thankful for.”

When pressed by a reporter for names of Mississippi Democrats who have claimed they support 100 percent taxation, Reeves pointed to general “rhetoric of people – Democrats – in Jackson and Washington, D.C., who seem keen on taking as much money as they possibly can from the hardworking people of this country.”

Reeves and House Speaker Philip Gunn have focused on limiting government spending since they assumed their posts in 2012. Revenue collections have dipped below projections several times the past two fiscal years, prompting mid-year budget cuts and spurring new appropriations decreases, leaving several state agencies saying they are strapped to maintain services.

Gunn on Wednesday called next year’s revenue estimate “realistic,” highlighting his focus on ensuring that the state spends within its means.

Adam Ganucheau, Mississippi Today

House Speaker Philip Gunn, hands behind his back, and Gov. Phil Bryant, right with his back to the camera, speak with Lt. Gov. Tate Reeves.

Gov. Phil Bryant pointed out that the revenue estimate adopted Wednesday is about $1 billion higher than the year before he became governor in 2011.

“The idea that somehow there have been draconian cuts in the state budget, somehow that we have not brought in sufficient revenue to manage government, is just simply not true,” Bryant said. “When you look at the rate of inflation, rate of growth in government and the amount we’re spending on government, we outpace those numbers.”