By Ted Carter
A $56.8 million mistake in calculating state revenues will put state finances further in the hole as budget writers begin work on a fiscal 2018 budget.
In a joint statement Tuesday, Lt. Gov. Tate Reeves and House Speaker Philip Gunn attributed the $56.8 million shortfall to a “staff error” that over-estimated revenues during the FY2017 budget negotiations.
It is about a 1 percent mistake in a $5.8 billion general fund.
Getting out of the hole in the fiscal 2018 budget year could be made more difficult by the start of a 10-year phase out of the state’s business franchise tax and lowest state income tax bracket. Those cuts are projected to cost the state $725 million by the end of the phase-out period.
Legislators strained to put together the fiscal 2017 budget after revenue shortfalls neared $100 million. The shortfalls have been running about $20 million monthly since January and follow four years of business tax cuts that have removed an estimated $350 million from Mississippi government’s revenue stream.
Using his executive authority, Gov. Phil Bryant has made two rounds of cuts during the current budget year because of lagging revenues
Reeves and Gunn said the Legislature could patch the newest budget hole with more budget cuts in the next legislative session or pull the money form reserves.
The two Republican leaders in their statement noted anticipated un-allocated balances of an approximate total of $490 million they could tap, including $347.7 million in the Rainy Day Fund known officially as the Working Cash Stabilization Reserve Fund, $32.8 million in the Capital Expense Fund, and $108.5 million in the Budget Contingency Fund.
Then again, the shortfall could disappear if tax collections exceed expectations the first half of fiscal 2017, from July through December, Reeves and Gunn say.
“Unless revenues outperform expectations during the first six months of the next fiscal year, this anticipated shortfall will be addressed during the 2017 legislative session,” the joint statement said.
More immediately, state budget writers must close a $32 million to $40 million shortfall in money available for debt service in the new fiscal year that beings July 1.
The $111.5 million in special funds legislators thought they could use to pay debts in fiscal 2017 is actually $73 million to $80 million, Treasurer Lynn Fitch said in an April 28 letter to Gov. Phil Bryant.
Fitch emphasized the debt-payment shortfall in a statement reacting to Tuesday’s bad budget news from Reeves and Gunn. “This latest news of a $56.8-million hole in the budget compounds the already noted $31-million shortfall in debt service funds, both of which appear to come from overestimating the availability of special funds,” Fitch said in an emailed statement.
“Like many Mississippians, I am deeply concerned that the State essentially begins the new fiscal year on July 1st with an unbalanced budget. And, I fully expect that the credit rating agencies will be just as concerned.”
Fitch pledged to do “whatever I can to protect the State’s good credit standing and shield Mississippi taxpayers from the negative consequences of this budget.”
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