State economist Darren Webb told the Legislature Tuesday that the state’s economy might not return to its pre-COVID-19 recession levels until 2023.
Webb briefed the Senate Appropriations Committee as they start the task of crafting a budget for fiscal 2021, which starts July 1. Also providing testimony was state Revenue Commissioner Herb Frierson.
Frierson said the state’s tax receipts for the month of May, as of May 22, were $44.9 million were below the Legislature’s revenue estimate that was last updated in November. A big part of the shortfall was the sales tax, which was more than $16 million below estimates.
Webb said that the state’s non-farm employment declined by 55 percent in the second quarter of this year. He estimates unemployment will peak at 20 percent by the third quarter of this year.
“We’re in uncharted waters and that is an apt description,” Webb said. “I don’t think we’ve ever had this kind of a global response to a pandemic like this one.”
He also said during the 2009 recession that Mississippi lost 78,000 jobs over a two-year period, while more were lost during the economic shutdown related to COVID-19. From the fourth quarter of 2019 to the second quarter of 2020, state gross domestic product declined 11.8 percent, triple the amount of decline during the 2009 recession.
As for comparisons, Webb said the COVID-19 economic shutdown has been far worse than the 2009 recession, but that it won’t be as bad as the Great Depression since at that time there was a 12.9 percent decline in economic activity that lasted for multiple years.
The revenue commissioner also said that the state revenue estimate for fiscal 2020 could be met, depending on when legislators decide to use the additional income tax revenue and extension payments that are in excess of pre-session revenue estimates.
Applying these funds to the remainder of fiscal 2020 would prevent appropriators from having to dig into the state’s rainy day fund and other unallocated funds (about $1.2 billion), but could lead to a shortfall in revenues for the next fiscal year.
State income taxpayers received an extension until July 15 to file their taxes.
On April 1, Gov. Tate Reeves issued a shelter in place order that forced the closure of many businesses such as retail outlets, restaurants and health clubs and another, updated one on April 24 that extended the original order.
Unemployment statewide, according to April data from the Mississippi Department of Employment Security, soared from 5.1 percent in March from 15.4 percent in April.
Tax revenues were down $108.6 million in April as compared to the same time last year.
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
