September 10, 2018 9:59:13 AM
JACKSON -- Mississippi may be making its first big deposit into its savings account in several years, but state government is still lacks enough savings to ride out a substantial downtown in revenues.
The Department of Finance and Administration is still in the process of closing the books on the year ended June 30, but spokesman Chuck McIntosh said the department estimates the state will have about $55 million to put into the rainy day fund. Overall, McIntosh said estimates show state government finished the 2018 budget year $110 million in the black. That's higher than earlier estimates circulated among lawmakers. Most of the remaining surplus would go to financing improvements on state government buildings.
The deposit could come a year after lawmakers raised the legal limit on the savings account from 7.5 percent of the state's $5.5 billion General Fund to 10 percent of the fund. However, the state currently only has $290 million in what's properly known as the Working Cash Stabilization Fund, just over 5 percent of state revenue raised for the General Fund. The balance had been going the wrong way in recent years as Gov. Phil Bryant dipped into the fund to offset weak revenue. It had been above $400 million in the 2015 budget year.
Lawmakers in some years have intercepted money that would otherwise go to reserves, which might be an attractive proposition as the state considers a pay raise for teachers, demands for higher contributions to employee pension funds, and other election-year spending demands. However, House Appropriations Committee Chairman John Read, a Gautier Republican, said last week he thought such a diversion would be unlikely.
"I think it will go through," Read said. "The more you have, the better off you are."
Boosting reserves could improve Mississippi's ability to withstand the next recession without major cuts to services, and the last recession is a stark lesson in what can happen. General Fund spending fell 13.5 percent from its peak in the 2008 budget year to the trough in the 2010 budget year. Because of federal assistance to states, though, Mississippi didn't break open the piggy bank until 2012. The state spent nearly $800 million over three years, though, trying to forestall service cuts.
If revenue fell 11 percent in one year, as it did from 2009 to 2010, Mississippi would need more than $600 million to prevent cuts. The state presumably wouldn't have the money, since the rainy day fund is limited to 10 percent of the General Fund.
The Pew Charitable Trusts, which researches state financial issues, says rainy day fund balances rose nationwide in the 2017 budget year to enough to run a typical state government for 20.5 days, a new high. Right now, Mississippi could finance 19 days of General Fund spending, less than the typical state. If the $55 million deposit goes through, that would rise to 23 days.
The good news from Pew is that Mississippi's tax revenue is less volatile than an average state, meaning it moves up and down less. Of the three major Mississippi tax sources Pew examines, corporate income is the state's smallest and most volatile, followed by personal income taxes and then sales taxes. And improving state revenues got a vote of confidence last week when one of the three big credit rating agencies shifted its outlook for state government finances from negative to stable.
But Pew warned Aug. 29 that Mississippi and others have less money in the bank than before the last recession, saying reserves "could cover a smaller share of government spending than they could have heading into the 2007-09 recession."