Mississippi’s tax collections are below 2009 levels and well below projections for the 2010 fiscal year, which brought a first wave of cuts from Gov. Haley Barbour last week.
Our state is far from alone; all states are struggling with revenue declines. The Wall Street Journal reports state governments nationwide are already $28 billion in the red after the first two months of the fiscal year, which for most states – including Mississippi – began July 1.
Mississippi’s finances are in better shape than most, even with less than frugal practices during the flush economic times of the mid-to-late 1990s. Our state constitution requires a balanced budget, and state law triggers cuts of the sort Barbour made last week when revenues run below projections. There’s still $300 million in the state’s rainy day fund. Unlike some other states, Mississippi hasn’t put employees on furlough or shut down services on certain days.
That said, this state still finds itself in tough fiscal times, and they’re likely to get tougher when federal stimulus funds run out. But even when the economy gets back on track, there’s evidence that states, Mississippi included, aren’t likely to see the kind of revenues they experienced before this recession.
Indiana Republican Gov. Mitch Daniels, writing in The Wall Street Journal, notes that state governments depend on sales tax revenues, which probably won’t see pre-recession levels even when the economy improves for a couple of reasons:
– People are saving more, and will likely continue that pattern.
– Credit will be tighter than before the recession because of more prudent lending practices and less home equity to use as collateral.
Daniels’ take is that governments need not only to hunker down through the current storm but to be prepared for a more sustained period of sluggish revenues.
In Mississippi, local governments are also heavily dependent on sales tax revenues, so the long-term squeeze is likely to be felt at the local level as well.
Additionally, it’s a fair assumption that casino revenues – which were a main impetus of the state’s rosy revenue picture in the 1990s – aren’t going to rebound from their recent decline to former levels, possibly ever.
Economic recovery, in other words, won’t necessarily translate into cascading revenues for state and local governments.
The implications are obvious: Spending priorities must be set. Everything must be examined. In Mississippi, that’s tough, because once you get past education, health care, public safety and corrections, there’s not a whole lot left.
Prudent, fiscally responsible decisions must be made now, and when the economy rebounds potential new sources of revenue have to be on the table as well.
NEMS Daily Journal