State revenue drop explained

By Bobby Harrison/NEMS Daily Journal

JACKSON – Concerns expressed by some state leaders that revenue collections through the first quarter of the fiscal year were less than the same time period for the previous year apparently can be explained by a computer conversion by the Mississippi Department of Revenue.
A summary of revenue collections for the month of September by the staff of the Legislative Budget Committee revealed than between July 1 and Sept. 30, the state collected $22 million, or 2.2 percent, less than during the same time period in 2011.
For September, revenue collections were $37 million less than for the same month in 2011.
“Since revenues for the current fiscal year are lower than the state collected a year ago, agencies should prepare for additional budget cuts and look for more efficient ways to provide services,” Lt. Gov. Tate Reeves warned when asked about the revenue report.
Gov. Phil Bryant expressed similar concerns.
“The economy is still down,” Bryant said. “It is not growing in Mississippi. Unemployment continues to creep up.”
While unemployment has continued to be a problem in Mississippi, state leaders have been able to take some solace in a rebound in state revenue collections, such as the tax on income and the tax on retail sales. For the past fiscal year, revenue growth was 5.9 percent, though, still below the level reached in the 2008-09 fiscal year before the full impact of the national recession was felt in Mississippi.
After strong revenue collections for July and August – the first two months of the fiscal year – it appeared the state was poised to reach new heights in revenue collections.
But then the September report came in showing collections trailing where they were a year ago.
According to Kathy Waterbury, a spokeswoman for the Department of Revenue, that drop might have an explanation other than a slowdown in state tax collections.
“During the ‘time-out’ for conversion to our new system, tax returns were not posted to taxpayer accounts,” Waterbury explained. “Revenue is not recognized until the return posts, even though the money was in the treasury. All of the returns posted within the first few days of October and that revenue will be reflected in October collections.”
In other words, unless there is a real major drop in tax collections, October should be reflected as a strong month.
And unless there is a major downturn, the October report should show collections again exceeding what was collected during the same time period a year ago.
Interestingly, despite the slow September caused by the conversion, collections still were above the estimate by $9.2 million, or 2.4 percent, not counting $35.2 million deposited in the treasury by Attorney General Jim Hood as a result of settlements of lawsuits with pharmaceutical companies over allegations of overcharging the state for drugs for Medicaid recipients.
The estimate – developed by the legislative leadership upon advice from the state’s financial experts – is important because it represents the amount of money appropriated by the Legislature.
When the legislative leaders developed the estimate this past April, the slowdown in September collections caused by the conversion and the uptick in October were factored into the equation.
For the first quarter, collections are $22.6 million, or 2.3 percent, above the estimate – not counting the deposit by the attorney general.
Bryant will meet with legislative leaders and the lieutenant governor to adopt a revenue estimate on Nov. 12 to be used by the Legislature in developing a budget during the 2013 session. While the estimate is adopted in the fall in advance of the start of the session, the legislative leadership normally changes the estimate near the end of the session just before passing a final budget.

Click video to hear audio