By TED CARTER
A sustained drop off in tax collections has led Gov. Phil Bryant to pull more than $35 million from the state’s rainy day fund and order cuts of 1.5 percent to most agencies.
Bryant said the goal is to shave $75 million from the current fiscal year budget. Cuts to state agencies and department are expected to save $39 million of the total.
A fall off in December revenues brought a realization that tax collections were on a downward trend that Bryant called “real and significant” and prompted Wednesday’s order.
The shortfall followed a November recommendation from State Economist Darren Webb to the Joint Legislative Budget Committee to reduce tax collections estimates by $64.9 million for fiscal 2016.
The cuts to state agencies could sting even more coming in mid fiscal year, Bryant acknowledged, explaining the 1.5 percent will have an impact of a 3 percent cut because agencies have less than a half year to make the reduction.
Bryant’s order received endorsements from Lt. Gov. Tate Reeves and Souse Speaker Phil Gunn. “While reducing agency budgets mid-year is not an easy decision, we appreciate Gov. Bryant’s actions today because, as Republicans, we all agree that we are not going to spend money that we do not have,” Reeves and Gunn said in a joint statement.
“We plan to lead by example and cut the Legislature’s budget by the same amount as the across-the-board cuts announced today for agencies,” they said.
Neither Bryant nor Reeves and Gunn said whether the fiscal crunch would force them to back off calls for phasing out the state’s franchise tax on business and cutting other taxes on businesses and individuals.
The franchise tax, a levy of $2.50 on every $1,000 of a business’ capital assets, brought the state more than $260 million in the fiscal year that ended in June 30. By contrast, the state’s business income tax generated $360 million in fiscal 2015. Bryant and legislative leaders say they want to phase out the tax over 10 years, though some projections have put the loss to the state treasury at $500 million in the first three years of the phase out.
The failure of tax collections to meet projections follows a series of tax cuts Bryant pushed through the Legislature in his first term, including $100 million in yearly losses from changes in the way income taxes are calculated for multi-state businesses and an additional $126 million annually from reductions in the state’s business inventory tax.
Those tax cuts were accompanied during Bryant’s first term by more than $100 million in sales tax rebates given several developers of shopping centers under a now-discarded law that designated qualifying retail centers as visitor destinations. Sales tax holidays on hunting and fishing gear pushed through by Bryant also took a bite out of collections.
Bryant and Republican leaders in the House and Senate had promised that the series of tax cuts would lighten the load on businesses and lead them to expand and create more jobs. As a result, collections from the increased business spending and job growth would offset the cuts, state GOP leaders said. There’s been no evidence that has occurred or will occur, however.
Bryant’s order said he has excluded cuts to the state’s Adequate Education Program “at this time.”
“If additional cuts are necessary later, we will have to consider cutting these budgets as well,” he said.
The rainy day fund, known officially as the Working Cash Stabilization Reserve Fund, stands at about $400 million. Bryant said he has authority to transfer up to $50 million of the money into Mississippi’s general fund.
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