Underperforming State Economy Thumps State Budget
Uh oh. Money to fund Mississippi government is below target this year and will be less than expected next year.
So much for fully funding MAEP next year, or big tax cuts, or big funding increases for colleges, universities or other state agencies.
And this is a surprise?
Given all the tax cuts, rebates, and credits passed by the Republican controlled Legislature in the past few years, economic growth would have had to soar to produce significant gains for state coffers.
Indeed, we were told these tax breaks would spur the economy, but that has not happened.
“Mississippi’s economy is not performing as well as other states,” State Economist Darrin Webb told the Legislative Budget Committee last week. “In fact, the state’s economy appears to have weakened in recent months.”
Jobs and wages drive the economy, but data shows neither has been going great guns.
The average number of Mississippians with jobs fell each year from 2011 through 2014 until rising slightly through September of this year. In comparison, the national average for employment increased every year.
While Mississippian’s average annual wage increased slightly every year, growth was slower than the national growth rate. For 2014 (wage data lags jobs data), Mississippi’s average wage of $37,111 was 28% below the national average of $51,364.
Because of below target tax collections, officials reduced projected General Fund revenue for the current fiscal year by $64.9 million. Governor Phil Bryant and legislative leaders will have to decide whether to cut current year budgets or take the shortfall out of the rainy day fund. Since revenues could perk up between now and fiscal year-end June 30, state officials will probably wait and watch.
Should tax collections, however, continue to tail off and fall 2% or more below this year’s budget target, the Governor will be forced to make mid-year cuts.
The revenue shortfall and lackluster economic outlook also caused officials to limit the General Fund revenue projection for next year’s budget. This is the target the Legislature will use to fund programs for the 2017 fiscal year. Based on Webb’s hopeful projection that the economy will gradually improve, they now project revenue will grow 1.9% next year or about $106.4 million
That’s pretty weak and will hardly sustain built-in increases in government spending, much less cover new spending for targeted programs or new tax breaks. The situation could get worse if any or all of this year’s shortfall has to be covered by next year’s growth.
The Governor and leaders in the Republican dominated Legislature should see this as a shot across the bow that actions over the past four years have not produced a strong economy. Hodge-podge tax breaks coupled with no actions taken to re-program funds by eliminating duplicative or unessential programs do not a pro-growth strategy make.
An effective pro-growth strategy is urgently needed for Mississippi’s economy, not more pro-politics stratagems.