Legislators face ‘tough’ chore of spending up to $2 billion in surplus state funds

by Bobby Harrison, Mississippi Today
November 14, 2021

Former House Speaker Tim Ford, a northeast Mississippi Democrat, used to say legislative sessions with large revenue surpluses were much more difficult than sessions where the state had revenue shortfalls.

When the state had surpluses, Ford would say, legislators were faced with difficult choices on how to divvy up the funds.

If that is true, the 2022 session of the Mississippi Legislature, beginning Jan. 4, will be one of the most difficult in state history.

State coffers are flush — perhaps an unprecedented flushness.

It gets complicated, but the bottom line is the state has the potential, if revenue collections hit the projections of the state’s financial experts, of having about $2 billion more for the 2022 session than the $6.6 billion that legislators appropriated during the 2021 session. A large portion of those funds are considered one-time revenue, meaning they should not be spent on recurring expenses. But there are infrastructure projects and other options for the use of the non-recurring revenue.

That $2 billion is derived from three years of surpluses and projected surpluses.

For starters, the Legislative Budget Committee and Gov. Tate Reeves recently approved a general fund revenue estimate for the upcoming fiscal year that is 9.6% or $566 million above the projection the Legislature used in the 2021 session earlier this year to budget for the current fiscal year. That in essence provides legislators in 2022 with about one-half billion more in funds to spend than they did in the 2021 session.

But wait, that’s not all. Stashed away in state coffers is $1.05 billion in revenue from the past fiscal year that ended on June 30. The $1.05 billion is the amount collected above what was appropriated by the 2020 Legislature.

And to top it off, collections for the current fiscal year are now projected to be $525.7 million or 8.8% above the estimate used by the 2021 Legislature to budget for the current fiscal year. If that projection holds, legislators will have another $500 million at their fingertips.

Totaling the surplus from the past fiscal year and projected surpluses for the current and next fiscal year gives legislators a cool $2 billion. Even if those official projections are not met, the state still has a surplus of at least $1 billion in the bank.

Lt. Gov. Delbert Hosemann, perhaps afraid to acknowledge the full scope of the state’s revenue bounty, recently said, “We have $1 billion in excess (state) revenue we have to figure out how to spend. We need to be talking about tax reform … I’ve got a list of about 99 differing things, and they are all really important.”

Besides those aforementioned state funds, the Legislature also has $1.8 billion in federal American Rescue Plan funds awarded to the state in response to the COVID-19 pandemic that must be appropriated by the end of 2024. Presumably during the 2022 session, legislators will begin figuring out how to spend those funds.

The deadly pandemic and the influx of federal funds have established unique circumstances resulting in the revenue surge. State leaders would like to point to their policies as the reason for the extra revenue.

Perhaps they deserve some credit. But the impact of COVID-19 and the federal funds cannot be neglected.

“Much of that growth was due to transfers from the federal government through the CARES Act (Coronavirus Aid, Relief and Economic Security Act) and other measures,” state Economist Corey Miller recently said.

Former Speaker Ford knew a little about dealing with the enviable problem of surging revenue. For much of the 1990s, the state experienced unprecedented growth as the casino industry boomed. The state benefited first from the casino construction as massive structures rose up on the Gulf Coast and in the flat cotton fields of the Delta. And then the state benefitted from a whole new source of revenue — taxes on casinos.

The Legislature also in the 1990s raised more revenue by increasing the sales tax on retail items from 6 cents to 7 cents.

With the surging revenue in the 1990s the state was able to among other things:

Provide what is still a record pay raise for teachers.

Air-condition classrooms.

Place teachers on the state health insurance plan.

Provide a $6,000 annual supplement for master teachers.

Enact a new school funding formula.

Invest heavily in a long-neglected state mental health system.

And yes, pass the largest, at the time, tax cut in the state’s history, which among other things eliminated the so-called marriage penalty where a married couple paid more in taxes than an unmarried couple.

In many ways the 1990s were historic in terms of actions taken by the Legislature.

Based on the available revenue, the 2022 session also could be historic.

This article first appeared on Mississippi Today and is republished here under a Creative Commons license.