Thanks to a policy of ensuring the state’s rainy day fund is filled each year to the legal limit, Mississippi is better off than half of states when it comes to a fiscal cushion from the coronavirus pandemic and the associated downturn in tax revenues.
According to a study by the non-partisan Tax Foundation, Mississippi ranks 25th nationally in the amount of money in its rainy day fund. The study used figures from the start of fiscal 2020 to calculate how much states had in their rainy day funds.
According to the study by the Tax Foundation’s Director of State Tax Policy Jared Walczak, Mississippi lawmakers have 8.1 percent of the state’s general fund expenditures in the state’s savings account. Mississippi had $465 million at the start of fiscal 2020 in its rainy day fund, but that figure is up to $678 million now. The total amount that Mississippi lawmakers have in unallocated funds adds up to a $1.2 billion.
The Magnolia State’s savings account balance is better than all but one of its neighbors.
Alabama’s rainy day fund represents 10.1 percent of its general fund expenditures, ranking it 18th nationally.
Arkansas is the worst (2.7 percent cushion, 45th ranking) and Louisiana is second worst at 4.4 percent of its general fund expenditures in reserve(42nd worst). Tennessee has seven percent reserves (ranked 31st).
Wyoming was the best nationally, with 109 percent of its general fund expenditures in reserve. Alaska was second, with 52.6 percent of its expenditures in its rainy day fund. Illinois and Kansas were the worst, with both states having little (Illinois has a reserve of $4 million) or no money left in reserve.
The study recommended that states consider spending cuts, drawing down reserves, accounting adjustments and possible revenue enhancements to get their balance sheets in order. The study also said that delaying spending cuts until the next budget might force harsher cuts down the road.
Walczak said in the study that income taxes are more volatile than sales taxes and fall more sharply during a recession since layoffs and reduced wages result in less taxable income. The demand on government services, such as unemployment benefits and SNAP (Supplemental Nutrition Aid Program) will also increase during the COVID-19 recession.
Walzak recommended that states take care in drawing down their rainy day funds and save some for the fiscal 2021 budget. He also said in the study that there isn’t enough time left in the fiscal year in most states to generate revenue from new or increased taxes.
Every state, except Vermont, have a requirement to have a balanced budget.
According to analysis by the Mississippi Center for Public Policy, Mississippi’s budget hole for this fiscal year (which ends June 30) could be between $414 million and $1.1 billion.
The unallocated funds for Mississippi that could be used to shore up the state’s budget crisis include:
- $678.9 million Working Cash Stabilization Reserve Funds (known as the Rainy Day fund)
- $234.7 million Capital Expense Funds
- $119.3 million 2 percent set-aside in General Fund
- $105.2 million General Fund
- $87.4 million Gulf Coast Restoration Funds
- $20.0 million BP Settlement Funds
- $16.0 million Idle Special Fund Cash Balances
- $11.0 million Education Enhancement Funds
- $8.5 million Health Care Expendable Funds
- $7.6 million Budget Contingency Funds
- $2.3 million Tobacco Control Funds