Lawmakers on the Joint Legislative Budget Committee declined to accept the Revenue Estimating Group’s revenue projection for FY 2025, voting on a reduced figure. Governor Reeves indicated he wouldn’t approve the deviation, arguing it hurts efforts at providing further tax cuts.
Each fall, the Joint Legislative Budget Committee (JLBC) adopts a revenue estimate, typically proposed by a separate Revenue Estimating Group. That group includes officials from the Department of Revenue, the Department of Finance and Administration, the Legislative Budget Office and the State Economist.
The JLBC met on Wednesday to decide the revenue estimate for Fiscal Year (FY) 2025. The annual meeting resulted in a disagreement between lawmakers and Governor Tate Reeves regarding revenue projections for the next fiscal year.
Lt. Governor Delbert Hosemann is Chair of the JLBC this year. During the meeting, it was proposed that the JLBC decline the estimate produced by the Revenue Estimating Group and vote on a revenue estimate $113 million below that group’s recommendation. That number is $7,523,800,000, which is the same as the original FY 2024 estimate.
Governor Tate Reeves indicated that he was caught off guard by the new figure, questioning the basis for the downgrade and expressing concern that it could impact the Legislature’s ability to deliver income tax cuts this coming session. Reeves repeatedly contended that the JLBC could not approve the reduced figure without his approval.
Earlier in the meeting, State Economist Corey Miller provided a presentation to members of the JLBC regarding the original recommendation. Miller said that the Revenue Estimating Group recommends adjusting the FY 2024 budget estimate, which encompasses July 1, 2023 until June 30, 2024, to $7,641,600,000. This represents a decrease of seven-tenths of a percent over the actual FY 2023 General Fund and an increase of 1.6 percent, or $117,800,000 from the fiscal year 2024 Sine Die estimate.
Lawmakers then considered the recommendation for the FY 2025 revenue estimate of $7,637,100,000, which is a decrease of 0.1 percent or $4,500,000 below the revised fiscal 2024 estimate but $113,300,000 more than the initial FY 2024 estimate.
After Miller’s presentation, the second number, $7.5 billion, was proposed by the JLBC. Senate Appropriations Chairman Senator Briggs Hopson made a motion to approve the reduced revenue estimate.
“So, this number is not congruent with what the revenue estimating group recommended?” questioned Gov. Reeves. “And why is it not the same as what the revenue estimating group recommended?”
Lt. Gov. Delbert Hosemann explained that lawmakers on the committee were leery to assume an additional $113 million due to concerns that the economy would slow. Hosemann said there were two months in the current fiscal year where actual revenue did not meet estimates. Later in the exchange, House Ways & Means Chairman Rep. Trey Lamar pointed out that through the first four months of FY 2024, revenues cumulatively exceeded estimates by at least $50 million.
“The general discussion before you [Reeves] came was that we anticipated our state economist was correct in a slowing and we did not want to overestimate the amount of our money that was coming forward, so we have by general consensus discussed keeping the same amount we had last year as a projection for the 2025 year. As you know, that could change,” said Hosemann.
Governor Reeves said he was prepared to agree to the estimate as it was originally proposed by the Revenue Estimating Group.
“Arbitrarily lowering the number for no apparent reason hurts our ability to justify tax cuts,” said Governor Reeves. “I’m a very strong proponent of cutting taxes in this legislative session, regardless of what this number is.”
Governor Reeves went on to add that the only budget that is affected by the number is the Governor’s Executive Budget Recommendation (EBR). He said the executive branch has to budget off of that number.
“I’m not going to agree to the number as it’s currently written, because I don’t see any justification for doing so. If there was a reason to, if there was a reason to say the Department of Finance and Administration doesn’t know what they’re doing, if there was a reason to say that the Department of Revenue doesn’t know what they’re doing, if there was a reason to say that the Legislative Budget Office, which is one of five member of the Revenue Estimating Group, doesn’t know what they’re doing, then I’m willing and open to it,” Governor Reeves said. “But just to do it arbitrarily just to lower the number so as to minimize the likelihood of tax cuts in the session, in my opinion, the right approach, so I’m not going to agree to it.”
Speaker Pro Tempore Rep. Jason White, the presumptive Speaker when the House gavels in come January, said, “For what it is worth, most of the people around this table have shown an ability and fortitude to not only draft legislation but to corral the votes and get it passed for major tax cuts. I think that is the theme of the majority of the people around this table going forward.”
Rep. White said for his part, he is trying to work with those who want to preserve the $113 million in the estimate because he does anticipate the House will present an income tax relief bill during the 2024 session.
Speaker Philip Gunn echoed White’s comments that they hope to see aggressive tax cuts for Mississippi residents, adding that they want to ensure that those efforts continue. Gunn did not seek re-election and will not be returning to the House in 2024.
“We fought for that elimination two years ago and I think there is still room,” said Gunn. “To the extent that whatever we do here makes that possible, I’d like to do that.”
Lt. Governor Hosemann said the Senate joined in efforts to cut taxes, and plan to have efforts to address grocery sales taxes this year, but for him, the real issue is the budget number, not the projected number.
“It’s the budget we adopted and the gap in the amount of money that comes in. It is not necessarily this particular one. In my personal opinion, and I have to echo the Speaker and Jason, this does not preclude by any stretch of the imagination further taxpayer relief and, in fact, probably encourages it,” said Hosemann.
Governor Reeves offered a compromise to Lt. Gov. Hosemann, saying that if Hosemann would agree to an income tax cut coming out of the Senate in 2024, he would agree to the reduced revenue estimate. Hosemann did not commit to an income tax cut, but said he anticipated some sort of tax relief could be on the table. Hosemann indicated that he could not say specifically what it would be, noting that would be up to senators and reminding everyone that he does not vote in the Senate.
The effort to fully eliminate the income tax stalled in the state Senate in 2022, but resulted in a compromise that yielded the largest tax cut in Mississippi history.
The JLBC voted on its proposed reduction of the Revenue Estimating Group’s FY 2025 number, with only State Rep. Angela Cockerham voicing opposition to Hopson’s motion.
Governor Reeves reiterated his belief that the vote had no legal effect without his approval.
JLBC is set to meet again on December 6.
Report by the State Economist
In the original numbers proposed by the State Economist, Miller pointed out that data indicates economies are expected to slow in calendar years 2024 and 2025.
“As financial conditions tighten and labor markets loosen this slower economic growth combined with effects of additional decreases on individual income tax rates should also lead to a slow down in general fund revenue growth in the current and following fiscal years,” said Miller.
Miller said previous predictions have indicated the slow downs would begin in the fourth quarter of 2023.
Senator Joey Fillingane pointed out that the federal government has driven up interest rates, and questioned whether there was any indication if those rates would change going into 2024.
“The market always wants to see interest rates come down as soon as possible, but based on what Chairman Powell has said, I think the Fed is very leery of bringing down those rates too soon based on what has happened in the 1970’s,” said Miller.
Miller said it was more likely that they would hold the current interest rates for the time being rather than cutting them too quickly. However, Miller estimates that rates could come down mid-year of 2024 and it would take roughly a year or two to get to a rate closer to two percent.
Find Miller’s comments to the committee below:
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