Budget pains Mississippi lawmakers as revenue outlook cut

JACKSON — It’s been obvious for months that Mississippi tax revenues have been lagging, and Friday was a day that legislative leaders and Gov. Phil Bryant faced up to the fact.

Lawmakers lowered their forecast for how much they expect to spend next year and Bryant cut this year’s state budget for the fourth time.

The $175 million decrease in the revenue forecast for the upcoming year came a day before lawmakers are supposed to agree on a $6 billion-plus budget for the year beginning July 1. Lawmakers now predict that regular tax collections, after falling in the 2016 and 2017 budget years, will stay flat in 2018.

That means lawmakers must either abandon their pledge to increase reserves to cushion against midyear budget cuts, or make even deeper cuts than previously forecast. The forecast makes it harder to avoid cutting K-12 school funding, and could frustrate attempts to spend more on roads and bridges.

“It’s going to be a very challenging budget this year for virtually every state agency,” said Lt. Gov. Tate Reeves, a Republican.

Tax collections have been lagging behind forecasts for two years, thanks to tax cuts and a barely growing state economy. Democrats have been trying to persuade majority Republicans to reverse or postpone tax cuts, with no success yet.

Bryant, a Republican, announced Friday afternoon that he was cutting $20 million from the state’s $6.3 billion budget and withdrawing another $39 million from the state’s savings account to cover shortfalls. Thus far, Bryant has cut $171 million from the current budget and taken $50 million out the rainy day fund. That’s the limit that Bryant can withdraw without additional legislative authority, and he wrote in his letter that he wants the Legislature to approve plans for him to pull more money out of savings to cover additional shortfalls before June 30.

Bryant wrote in a letter that he was cutting most agencies budgets by 0.46 percent, although a list provided by the Department of Finance and Administration showed he omitted a handful of budget items from cuts. Bryant spokesman Clay Chandler didn’t respond to questions about how much more spending authority the governor wants from the rainy day fund.

Changes to the current year’s budget don’t directly impact the crafting of next year’s budget. But there could be indirect impacts. For example, lawmakers have been trying to figure how to close a deficit that the state-federal Medicaid health insurance program is running in the current year. More budget trouble this year could mean the Medicaid agency will start next year further in the hole, straining that budget.

Earlier this year, top lawmakers had pledged to follow an oft-suspended law to set aside 2 percent of revenues and cushion against possible shortfalls next year. But Reeves and others said Friday they weren’t sure if lawmakers would reach that goal.

Lawmakers are probably looking at an overall 3 percent budget cut, but decreases to some agencies are likely to be deeper. Supporters of the Health Department and Mental Health Department continue to raise questions about the impacts of proposed cuts to those agencies.

“We try to shore up where there is a really critical need,” said House Appropriations Committee Chairman John Read, a Gautier Republican. “It’s going to be pretty nasty but I do believe every agency will be able to sustain.”