Mississippi finished the just completed fiscal year with nearly $700 million in surplus funds, according to a preliminary report compiled and recently released by the staff of the Legislative Budget Committee.
During the fiscal year ending June 30, Mississippi collected $7.69 billion, 10% above the official estimate.
The official estimate, developed by the legislative leadership with input from the governor and the state’s financial experts, represents the amount of money anticipated to be collected during the fiscal year to fund vital state services such as education, health care and law enforcement. The Legislature provides funding for those vital services based on the estimate.
The amount collected above the official estimate — $699.6 million — will go into surplus funds that can be appropriated by the 2024 Legislature. In recent years as the state revenue collections have grown by unprecedented amounts, the surplus funds have primarily been used for capital expense-related projects, such as to build or renovate governmental buildings and on public transportation and infrastructure needs.
Republican Gov. Tate Reeves, facing a reelection challenge this year from Democrat Brandon Presley, recently touted the revenue collections as a campaign issue.
The revenue collections “announcement is further proof of our state’s economic strength and the effectiveness of our conservative budgeting practices,” Reeves said in a news release. “This money is burning a hole in Democrats’ pockets. They want to blow through this money by expanding welfare and spending it on pet projects. I want to return it to Mississippians.”
Reeves has touted the elimination of the income tax as a key campaign issue. Presley has advocated for the elimination of the grocery tax and to expand Medicaid to provide health care for primarily the working poor. Various studies indicate that expanding Medicaid will not be a drain on state revenue.
The campaign debate about competing tax cuts is occurring as the state’s revenue collections appear to be slowing. For the previous three fiscal years, Mississippi has experienced revenue growth like most states have enjoyed. Mississippi’s revenue growth for the just completed fiscal year was $303.3 million ,or 4.1% above the amount collected the previous year. For the previous year, year over year growth was $643.3 million, or 9.5%, and for the year before that year over year growth was an unprecedented $934.5 million, or 15.9%.
Other states have enjoyed similar or better revenue growth. According to the National Association of State Budget Officers, “General fund spending is on track to grow 12.6% in fiscal 2023, following a record annual increase of 16.8% in fiscal 2022; spending growth in both years was affected in part by an uptick in one-time expenditures. Adjusted for inflation, spending grew 8.1 percent in fiscal 2022 and an estimated 4.4 percent in fiscal 2023.”
The National Association of State Budget Offices has projected a 0.7% decline in state revenue collections for the current fiscal year, which began earlier this month. Growth in recent years was fueled in part, experts say, from the federal funds pumped into states for the COVID-19 recovery effort. But now the impact of those federal funds is diminishing and many experts are anticipating an economic slowdown.
In Mississippi during the just completed fiscal year, revenue from the 7% sales tax levied on most retail items, which is the state’s largest single source of revenue, grew by $180.4 million, or 7%. But income tax collections, the second largest source of revenue, were down $111.2 million, or 4.5%.
Collections for selected other revenue sources include:
- The corporate income tax that grew $182.7 million, or 21.4%.
- The use tax (a sales tax collected on out of state purchases) that decreased $40 million, or 9.3%.
- The tax on insurance premiums that was up $21.6 million, or 6.3%.
- The tobacco tax that was down $6 million, or 4.4%.
- The casino gambling tax that declined $7 million, or 4.1%.
The state collected $8 million from medical marijuana, which became available for patients under a new law about midway through the just completed fiscal year.