Legislative leaders on Monday said Mississippi’s state budget for the coming year should be able to limp along with cuts to agencies of less than 5 percent despite the pandemic-fueled recession.
Earlier projections had been more dire, with double-digit cuts to state agencies in the offing.
Budget experts told lawmakers Monday that the pandemic recession so far hasn’t been as bad as once feared, and retail sales, income and corporate taxes have not tanked as sharply as first projected.
“The bottom line is the national economy appears to be recovering … and the state economy is also improving,” said State Economist Darrin Webb.
For the current budget year that ends in two weeks, lawmakers said the governor could dip into the state’s “rainy day fund” to cover about a $47 million shortfall in the roughly $6 billion budget.
For the fiscal 2021 budget that starts in July, Lt. Gov. Delbert Hosemann noted that earlier projections had been for a massive shortfall of $800 million or more, which would have forced cuts around 12 percent. Cuts that steep could have crippled many state agencies and forced massive cuts in services.
Instead, the estimated shortfall for fiscal 2021 is about $275 million.
The shortfall for 2021 was reduced, in part, by lawmakers “pushing” about $275 million in income taxes that normally would have gone into the current budget into next year’s because the filing deadline was extended to July 15.
House Speaker Philip Gunn said he was “encouraged” that shortfalls appear to be less than earlier projections. He said lawmakers have been discussing cuts averaging 4.8 percent but, “We believe we can get by with cuts of not quite that much.”
Lawmakers are hoping to set a budget and end this year’s legislative session by next week. Monday’s meeting of the Joint Legislative Budget Committee was a major step in that process – determining how much money lawmakers have to spend.
Chris Howard, director of the state Department of Rehabilitation Services, said any cuts will be tough for his agency – which uses much of its state funding to draw federal funds at a 3-1 match, and spends most of its money on salaries and direct services for people with disabilities.
“But 10-12 percent – we’re definitely glad to hear the cuts aren’t looking that bad,” Howard said. “… Every dollar we lose in state funding, we stand to lose $3 in federal funding.”
Lawmakers said that the state’s rainy day fund is full at about $550 million, and that the governor has authority to use up to $50 million to fill the $47 million budget hole for the current year. Gov. Tate Reeves’ office on Monday did not immediately respond to a request for comment about lawmakers’ plan.
Webb warned lawmakers that while things are not as bad as once predicted, the state economy still faces “many unknowns,” including a potential “second wave” of the pandemic forcing more shutdowns of the economy.