The national economy has been nose-diving the past year, with the effects manifesting themselves in Mississippi in the form of lost jobs and declining revenue.
But the drop in tax collections for December was the most telling sign yet that Mississippi could have a financially troubled 2009.Revenue for December came in 9 percent, or approximately $32 million, short of estimates.
Gov. Haley Barbour has already had to trim $40 million from the state’s 2009 budget, which the Legislature adopted last spring.
A Barbour spokesman said last week that more cuts affecting all state agencies would be handed down this week. The total amount of cuts remained unclear, but state law forbids any state agency from being cut more than 5 percent until all agencies and departments have been cut 5 percent.
“Frankly, we need to be honest,” Barbour said at the Stennis Capitol Press Corps luncheon last Monday. “We’re not immune to what’s happening to the national economy. We were reminded of that when we saw December’s state tax revenue.”
Legislators convened for the 2009 session last week, barely 24 hours after the grim December news.
Barbour said the state’s total revenue in 2008 was actually up from 2007, just not as much as expected. It was the first year of the Barbour administration where revenue collections did not exceed estimates.
“But it was very close,” Barbour said.
Mississippi still remains in better shape than most states, Barbour said, because from 2004-2008 the state enjoyed record employment rates, recorded the third-largest jump in the U.S. in per capita income and landed several major economic development projects such as the Toyota plant in Blue Springs, the General Electric plant in Batesville, the SeverCorr steel mill in Columbus and the Liquefied Natural Gas Terminal in Pascagoula.
“I think we just delayed the start of seeing the serious effects of this recession. It would better if I could say that I thought December was an anomaly,” Barbour said. “I don’t. I think December is going to be more like the next six months than the five months before December. We are in a serious recession. In Mississippi, we’ve been shedding jobs since the spring, probably about 20,000 net job loss after having had 60-something thousand net job gain the previous three years.”
The U.S. Department of Labor for December had Mississippi’s seasonally adjusted unemployment rate, usually a clearer picture of the unemployment situation, at 7.2 percent. Nationwide average was 6.8 percent.
The steady decline in revenue for FY09 will have a direct bearing on the budget for FY10. Corporate income taxes for those businesses affected by last summer’s hurricanes were not due until Jan. 5. The State Tax Commission should have a good idea this week how much revenue that will generate, said state economist Dr. Phil Pepper.
To provide as clear a picture as possible for legislators crafting FY10’s budget, Pepper said the revenue estimating group would meet “in all likelihood” soon after January’s revenue collections are counted and revise the FY09 revenue estimate.
Barbour reiterated his position that the state’s rainy day fund, which is currently maxed out at $360 million, would need to remain intact for four years, with the state spending no more than 25 percent of it in one fiscal year. The House Appropriations Committee has already sent a bill to the House floor that would take $17 million out of the fund to restore the 2 percent cut to the budgets of community colleges and universities in November.
The bill easily cleared the House but will likely face stiff opposition in the Senate. Barbour does not want to use any of the rainy day fund for FY09 “unless things get a lot worse,” he said.
Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .