Earlier this month, Gov. Tate Reeves and leaders of the Mississippi Legislature agreed that the overall estimate of the fund’s budget for the upcoming 2024 fiscal year would be $7.52 billion — an increase of about $500 million over spending of the current year.
This is a sign that the Mississippi government is cash-strapped, largely due to two years of state support during the Covid-19 pandemic. Aid to businesses and individuals also resulted in increased spending, which in turn increased the state’s sales tax revenue.
According to many reports, the state received $2 billion more in taxes than expected in the last two years. It is reasonable to allocate a quarter of this surplus to next year’s general fund. And up to a point it is necessary.
Remember that all the extra spending has increased the demand for many commodities, and therefore the prices. In recent months, federal price measurements show that inflation is at an annual rate of 8%. Mississippi’s $500 million budget expansion for next year is a 7% increase, so state leaders are basically keeping pace with inflation, but no more.
If the governor and lawmakers had kept the revenue estimate at $7 billion for this year, without the extra money, lawmakers would have had to make some significant cuts during their 2023 budget negotiations. If inflation continues at its current pace, that $7 billion just won’t buy what it used to do.
A story about the budget on Mississippi Today’s website made another valuable point: Officials prepared this revenue estimate based on a consensus of five state finance experts, including the state economist. They believe government revenue growth will slow; The revenue estimate of $7.52 billion is roughly in line with projections for taxes paid to the state this year.
Lower earnings shouldn’t come as a surprise for at least two reasons. First, a small state like Mississippi isn’t increasing its revenue by $1 billion a year as it has over the past two years. Profits that big just aren’t sustainable, especially now that government Covid aid has ended.
There are also many predictions that the country is on the brink of recession if economic growth slows for a period of time. Interest rates are rising and that should discourage borrowing. The goal is to cool the economy, but if the Federal Reserve gets too cool, things could get worse.
Estimating government revenue is only step 1 in the budget process. Now Reeves and lawmakers must decide how the money will be spent.
Perhaps the most interesting political battle of 2023 will have Governor and House Speaker Philip Gunn on one side, both of whom support eliminating the state income tax; and on the other side Lt. gov. Delbert Hosemann, who wants to use part of the surplus for a one-off refund to taxpayers.
Reeves and Gunn plan to be aggressive on income taxes. Hosemann wants to be careful. The fact that the revenue estimate for next year is cautious sends a good signal for the best way forward in the battle between the income tax and the rebate.
— Jack Ryan, McComb Enterprise Journal