The economic slowdown across Mississippi and the nation did not have a significant impact on state tax collections for the month of March.
Revenue collections for the month are $26.3 million or 6.5 percent above collections for the previous March, according to the report recently released by the staff of the Legislative Budget Committee. Through the first nine months of the current fiscal year, collections are $189.9 million or 5 percent above collections for the same period of the previous fiscal year.
April, May and June, the final quarter of the fiscal year, are expected to be much worse.
“Everything is going to be significantly downward in the fourth quarter,” Lt. Gov. Delbert Hosemann recently said.
While the economy has taken a major hit with record unemployment claims being made because of the coronavirus, state leaders were not expecting a major drop in revenue for the month of March.
“April will be bad and May, at least we are expecting them to be,” House Speaker Philip Gunn, R-Clinton, said recently.
The reason, at least in part, that March collections were not significantly impacted by the pandemic is that sales tax collections reflected on the March report actually were on retail sales made in February. The tax on retail items – 7 percent on most items – is collected by the retailers one month and transmitted to the state the next month.
Sales tax collections account for 37 percent of total state revenue. Sales tax collections for March were $159.4 million compared to $160.4 million for March 2019.
Another major source of state revenue – individual income tax collections – was down more than $14 million from $86.5 million in March 2019 compared to $72.3 million for this March. But other sources of revenue, such as the use tax on internet sales and the income tax on corporations, both were significantly up. Corporate tax collections were up $36.1 million. And, surprisingly, though the state’s casinos eventually shut down in mid-March, the state still collected $12 million in revenue – down almost $600,000 from March 2019.
While state officials are anticipating a drop in revenue during the final quarter of the current fiscal year, they are optimistic they will not be forced to make budget cuts or to dip into the rainy day fund. The reason is that before the coronavirus hit, state tax collections were strong. For the year, collections are up $217.7 million or 5.7 percent above the official estimate used during the 2019 legislative session to build the current budget. That $217 million provides a significant cushion that should prevent the need for cuts or the use of rainy day funds.
“My goal is to try to get through the fiscal year without going into the rainy day fund,” Hosemann said. “I want to have that for the next year and hope we make significant improvements.”
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