JACKSON – Gov. Haley Barbour might be making budget cuts, including to local school districts, as soon as early September.
“If we see a revenue shortfall in August, the issue will be how much, not whether there will be cuts,” Barbour said recently.
The fear is that state revenue collections for August will be as dismal as they were in July – the first month of the fiscal year. The numbers will be released next week.
In July, state tax collections were $26.2 million, or 11.3 percent, below projections. Tax collections for the month were $56 million, or 21 percent, below the amount collected during the same time period last year.
Under state law, the governor can start cutting the budget whenever he deems revenue collections will not meet the official estimate, 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.
While the national economy has seen some signs of improvement, it is not certain yet whether that trend will be reflected in state tax collections.
“The national recession has affected the entire state,” Barbour said.
The question, Barbour said, is whether the July tax collections were an anomaly. He pointed out that half of the popular sales tax holiday weekend, which exempted the sales tax on certain items, fell on July 31.
“We will know more after we see August numbers,” Barbour said.
But Barbour said he will not hesitate to make cuts in September if tax collections are as bad as in July. By making the cuts early in the budget year, the agencies will have more time to adjust.
If he waits until December to make a 5 percent cut, he said, it would be equivalent to a 10 percent reduction since the agencies would have to absorb the cut during one-half of the budget year.
The governor has discretion on which agencies to cut. But state law prevents him from cutting any agency more than 5 percent until he cuts all agencies that much.
During the last fiscal year, the governor made cuts twice – the first time in November and the second in January. During the first round of cuts, he was able to spare reductions to local school districts, but they later absorbed cuts of about $80 million.
During the 2009 session, the state House tried to restore the funds cut from education, but their efforts were killed in the Senate. Then federal stimulus funds were provided to make up for the cuts, but Barbour opted to use those funds in the current budget year.
The use of those stimulus funds helped to plug budget holes caused by a slowdown in state tax collections. But it appears that even with the additional stimulus funds, Barbour might be forced to make cuts.
If revenue collections continue on the path set in July, it would be hard for the governor to exempt large agencies, such as education, from the cuts.
Contact Bobby Harrison at (601) 353-3119 or email@example.com.
Bobby Harrison/NEMS Daily Journal