Like 33 other states, Mississippi struggles with budget and revenues
Published 10:33 am Wednesday, February 22, 2017
By Sid Salter
Mississippi isn’t alone. About two-thirds of U.S. states are engaged in the same problems confronting Mississippi. Economic growth is stagnant. Revenue projections have been either overly optimistic or just flat wrong.
Economic influences that state legislators can’t really anticipate or change have strained state budgets. And those realities don’t begin to speak to the politics of taxing and spending.
Republican Arkansas Gov. Asa Hutchinson — the former GOP congressman, head of the U.S. Drug Enforcement Agency and nobody’s tax-and-spend liberal — made a wise observation late in 2016 in assessing his own state’s consideration of additional tax cut proposals.
“It does not take a Ph.D. in economics to know that we can’t say yes to every spending need, and we should also not say yes to every tax-cut idea,” said Hutchinson. Hutchinson won the governor’s office in Arkansas on the promise of additional state income tax cuts, but after taking office and assessing the impact of prior tax cuts, he scaled his proposal back to a much smaller $50 million cut for low income taxpayers.
Some Arkansas lawmakers are predicting that any additional tax cut in that state will plunge Arkansas into the same budget and revenue turmoil that now grips some 33 U.S. states, including Mississippi. And while Mississippi’s revenue stream issues are significant and impactful in virtually every facet of state government, the Magnolia State is far from the worst state in terms of fiscal issues and remains in far better shape than many despite our unrelenting status as the poorest state in the union.
But the latest round of state budget cuts enacted to absorb continuing revenue shortfalls has forced lawmakers in both parties to question — some loudly and publicly and other quietly and privately — whether Mississippi has cut taxes too deeply and whether any additional cuts should be shelved until the current revenue stream can be stabilized.
Even with revenue shortfalls nearing $120 million for the current fiscal year, the state’s Republican majority is being challenged by Libertarian and Tea Party conservatives who chide lawmakers for not cutting tax fast enough or deep enough.
Democrats argue that Mississippi should pay attention to the Kansas example, plus point to deficits in the state’s infrastructure, education, mental health, and other major government components as reasons to tap the brakes on additional cuts.
States like Kansas, Oklahoma, and Indiana enacted large, comprehensive tax cuts and are now forced to seriously consider undoing many of those cuts and enacting tax increases. In those states and others, tax cuts and the economic strategies behind them were impacted by things beyond the control of state lawmakers like oil and gas prices.
Mississippi’s high rate of Medicaid dependence and the unknown state budget impacts of the almost certain repeal of the Affordable Care Act (Obamacare) — perhaps as soon as the end of March — creates additional fiscal uncertainty.
Lost to some, but to virtually no one under the state Capitol Dome, is the fact that Gov. Phil Bryant in May 2016 signed the largest single tax cut in state history through a package of income and franchise tax phase-out reductions that will begin in 2018.
Bryant offered fellow Republicans his willingness to consider legislation to fully collect the state’s existing retail sales tax on online sales through use tax collection — and Bryant offered to consider a state lottery, noting the losses of state revenue across the borders of neighboring states in virtually every direction. But to date, both of those initiatives have met opposition from the right.
When Bryant made the fifth mid-year state budget cut in the last two years this week, he was again able to pull some money from the state’s rainy day fund.
Moving forward, all eyes will be on how close the state’s economy comes to meeting the revenue estimates between now and June 30. That performance has a great deal to do with the ability of the state to replenish the rainy day fund.
Sid Salter is a syndicated columnist. Contact him at email@example.com.