JACKSON – After July’s dismal revenue collections, many are viewing August’s $5.5 million shortfall as positive.
“State officials are looking for signs that the grip of the economic recession might be loosening here like some say it is nationwide,” said Rep. Cecil Brown, D-Jackson, a member of the Legislative Budget Committee. “You can’t tell by one month.
“And we are still down a lot for the year, but August was encouraging.”
For the month of August, total collections for the general fund were $323.3 million, or 1.69 percent below the projection. The reason Brown saw encouragement in the August collections is that in July, revenue was $26.2 million, or 11.3 percent, below projections.
Gov. Haley Barbour had said last week that if collections were below projections for August, he would begin making budget cuts sometime this month. It was not clear whether August collections were close enough to break even to avoid cuts.
On Tuesday, Dan Turner, a spokesman for Barbour, said, “The governor is meeting with his staff, the Tax Commission chairman and the treasurer over the next several days, and he expects to make a decision (on cuts) after that.”
Under state law, the governor can start making budget cuts whenever he deems revenue collections will not meet the official estimate of the amount of revenue the state is expected to collect, which is the amount used to build the budget.
The governor is required to make cuts at the end of October if revenue collections are below 98 percent of the official estimate. The governor also can use $50 million from the rainy day fund in lieu of cuts.
Tax collections for August were actually 2.01 percent, or $6.5 million, below the estimate. But included in the revenue that goes to the general fund is a category called “other than Tax Commission collections.” This includes earnings on state investments, fees from the Insurance Department, fees from the Highway Patrol and some other similar categories. All of the items in the “other-than” category were up.
A positive sign, Brown said, is that for the month of August, income tax collections were 5.59 percent above the estimate, but sales tax collections were 3.65 percent below the estimate.
Both income tax collections and sales tax collections are viewed as economic indicators.
For the fiscal year, which includes July and August, collections are 5.25 percent, or $31.7 million, below the estimate.
During the last fiscal year, which ended on June 30, Barbour made budget cuts twice because revenue collections were not meeting the estimate. He said last week that if he has to cut this fiscal year, he might try to avoid agencies whose funds have not been restored.
Some people have surmised that education might be cut early because it received essentially full funding this year, thanks in large part to federal stimulus funds.
There are questions, though, about whether the governor could cut the Mississippi Adequate Education Program, which provides the basics of operating local school districts, because of federal stimulus fund regulations.
One of the primary functions of the stimulus program was to restore funding of core education programs, such as teacher salaries, transportation and other operational costs.
August revenue collections – $5.5 million, or 1.69 percent, below estimate
July revenue collections – $26.2 million, or 11.3 percent, below estimate
Year-to-date revenue collections – $31.7 million, or 5.25 percent, below estimate
Bobby Harrison/NEMS Daily Journal