Tornadoes, floods may spur state economy

By Bobby Harrison/NEMS Daily Journal Jackson Bureau

JACKSON – State economists are predicting that this spring’s natural disasters could provide a boost to state revenue.
Tornadoes killed at least 34 in the state in April, including 16 in Smithville where the town was almost completely destroyed. Later, flooding along the Mississippi River basin, unrelated to the tornadoes, caused $8 billion in estimated damage south of Memphis.
Marianne Hill, the state’s senior economist, said rebuilding after the natural disasters could help spur the still-struggling state economy.
“Although the immediate impact has been a drop in output and employment in the areas affected, reconstruction efforts will soon be increasing the state’s growth rate,” Hill said. “Recovery work, however, will also bring a shift in activity toward construction.”
Hill’s projection is part of the recently released June issue of the Mississippi Economic Review and Outlook that is published by the Center for Policy Research and Planning, which is part of the State Institutions of Higher Learning.
After Hurricane Katrina slammed the Gulf Coast in August 2005, state economists with the Center for Policy Research and Planning quickly projected the tragedy would benefit the state economy because of money, such as from the insurance industry and the federal government, pouring into the state for the rebuilding effort.
And in fiscal year 2006, which is when the storm hit, and the following year, the state experienced double-digit growths in revenue. The bulk of state revenue collections is derived from a tax on retail items and on income.
The only other year the state experienced double-digit revenue growth was fiscal year 1994 as the casino industry exploded in Mississippi.
House Education Chair Cecil Brown, D-Jackson, a key member of the Appropriations Committee, said he had heard rebuilding in the aftermath of the storms and flood could spur state revenue collections, but amp”I wouldn’t think it would be anywhere near the level after Katrina.amp”
Still, any increase in state revenue collections will be welcomed.
Since the national financial crisis hit in 2008, the Legislature and Gov. Haley Barbour have been struggling to fund state government because of a downturn in revenue collections. The slowdown has led to double-digit cuts in some agency budgets and to layoffs and furloughs of state employees, including teachers.
In fiscal years 2009-10, the state suffered two consecutive years in which revenue collections were less than the previous year. Only in one other year – 2002 – in recent memory have revenue collections been less than the previous year.
In 2002, revenue collections were 2.12 percent less than the previous year. In 2009, collections were 4.2 percent less than the previous year. And in 2010, collections were 4.9 percent less than 2009.
Revenue growth for the just-completed fiscal year is 2.2 percent. And growth of about 1.5 percent is projected for the current, just-started fiscal year.
Rebuilding after the natural disasters could improve collections, Hill predicted.
The Economic Review and Outlook said the state is making gradual economic improvements, though, a return to the 2007 level of employment is not expected until 2014.
The report said, “Most major industries in the private sector, with the exceptions of manufacturing and finance, have added jobs this year. A funding shortage has brought drops in government employment at all levels, however. Housing starts and residential building permits are up in the state, although the housing market has yet to emerge from its slump.”
The report said smaller companies are hiring workers at a faster rate than larger firms.