State revenue collections are continuing to slow as legislative leaders and Gov. Tate Reeves, fresh off their election victories, prepare to release budget recommendations to be considered during the 2024 legislative session.
The state collected $638 million in revenue during October — down $33.7 million from October 2022. For the year, collections are down $52.6 million or 2.09% over the same time period in the previous year, according to information recently released by the staff of the Legislative Budget Committee.
While collections are slowing, the state is still collecting more revenue than the official estimate for the fiscal year. That is important because the official estimate determines the amount of money budgeted to run state agencies. If revenue collections fall below the official estimate, mid-year budget cuts must be made by legislators and/or the governor or reserves funds must be tapped to make up for the revenue shortfall.
Legislative leaders and Reeves set the official estimate last November for the current fiscal year, which began July 1.
For the fiscal year, collections are $75.4 million or 3.1% above the official estimate. But for the month of October, collections are $10.4 million or 1.6% below the estimate.
The governor, fresh off his reelection victory earlier in the week, will meet with legislative leaders next week to adopt an official estimate for the next fiscal year. And soon after that, both Reeves and the Legislative Budget Committee will release separate budget recommendations to be considered by the full Legislature when it meets, starting in early January to adopt a budget. The budget will fund state services ranging from education to health care to law enforcement.
The biggest drag on revenue collections continues to be income tax collections. Income tax collections are down $107 million or 12.1% for the year. The Legislature passed a $525 million income tax cut in 2022 that is being phased in over four years, starting in January of this year. When passing the tax cut, the largest in state history, legislative leaders and Reeves said growth in other areas would offset any loss revenue from the income tax cut. But thus far that is not occurring.
It is too early to determine whether the slowdown in revenue from the income tax is caused by the tax cut or a combination of the tax cut and slowdown in economic growth.
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