Mississippi legislative leaders said tax collections are more than $500 million above the estimate used to set the current year’s budget and the state economy appears to be chugging along as lawmakers get down to setting a $6 billion budget for the coming year.
“We’re in great financial shape,” House Speaker Philip Gunn said after a Joint Legislative Budget Committee meeting on Friday. Lawmakers adopted “the big number,” the total amount of money they can spend as they haggle out a state budget over the next couple of weeks.
That big number is $5.93 billion — about $173 million, or 3%, more than lawmakers had estimated in November that they’d have to spend for fiscal 2022 that begins July 1.
“I want to be clear, this doesn’t mean (every agency) gets an across-the-board increase,” said Lt. Gov. Delbert Hosemann. “… But lots of the cuts we made last year were about 2.5%, so this should restore those … But we will be looking at each budget individually to make those decisions.”
As for the $500 million cash on hand from the current FY21 budget, Gunn and Hosemann said that number may be artificially high because of $230 million in income taxes that normally would have been collected in the previous year were collected in the current budget year after filing deadlines were pushed back because of COVID-19.
Hosemann said he suspects the state budget also saw a boon because of “a significant infusion of federal money” from coronavirus relief funds Congress approved.
The rosy financial projections adopted Friday come as lawmakers debate a massive overhaul of the state’s tax system being pushed by Gunn and the House GOP leadership. It would eliminate the state income tax over the next decade, and increase sales, “sin” and other user or consumption taxes to make up the difference. Hosemann and the Senate have been lukewarm on the idea and killed the original proposal, although the House has attempted to revive it for more debate.
State Economist Corey Miller told the legislative budget committee on Friday that revenue collections continue to be strong for the current fiscal year despite the COVID-19 pandemic. Through February, state tax collections are $500.3 million or 14.7% above the estimate used by legislators in the 2020 session when developing the current budget.
Those surplus funds could be used when developing a budget for the upcoming fiscal year, though in recent years legislators have tried to direct such surplus funds to the rainy day fund, capital expense fund and for other one-time expenses.
Gunn and Hosemann said they plan to sock about $30 million into the rainy day fund this session, which would bring it flush to $558 million.
In addition to the $5.9 billion in tax revenue, legislators will also have another $500 million in funds from other sources, such as tobacco lawsuit settlement funds, that are used in the state-support budget.
Mississippians are generally more open to getting a COVID-19 vaccination than they were in early January, according to a poll released Wednesday.
The poll from Millsaps College and Chism Strategies found that 63% of those polled said they will definitely or probably will get vaccinated. Another 13% reported already being vaccinated. Of the remaining people surveyed, 20% said they probably or definitely will not get vaccinated and 5% are unsure. Mississippians have reconsidered their stance on the vaccines since the same poll was conducted in January, when nearly half of survey takers said they may refuse to receive the vaccine or were unsure about it.
This change in public opinion is likely due to the dramatic increase in vaccine rollout over the past few months. People who may have been hesitant to receive a vaccine when they were first approved have seen friends, family and neighbors get vaccinated safely over the past few months.
“Voters are learning more about the necessity of the vaccines, how participation in vaccination will help the nation return to normal more quickly and receiving encouragement from medical and public health experts along with a noticeably different tone from federal officials. These things have truly helped move the needle for us,” said Dr. Nathan Shrader, chair of the Department of Government and Politics at Millsaps College.
The approval of the Johnson & Johnson vaccine, in particular, has helped. The J&J vaccine only requires one dose and it was produced through conventional methods instead of the newer and less familiar mRNA vaccine technology. Factors like these have helped soothe many people with reservations about getting a COVID-19 vaccine.
Mississippi became the second state to make immunization against COVID-19 available to all residents aged 16 and up on Tuesday. Last week, President Joseph R. Biden directed all U.S. states and territories to make all adults eligible for the COVID-19 vaccine no later than May 1st.
In Mississippi, 592,500 people — about 20% of the state’s total population — have received at least their first dose of COVID-19 vaccine. Nearly 330,000 people have been fully inoculated since the state began distributing vaccines in December.
No bill is currently alive in the Mississippi Legislature to continue the state’s Division of Medicaid past June 30.
The House and Senate have killed the other chamber’s bill that would re-authorize the program and make various changes to the agency that provides health care for about 800,000 poor children, disabled people, poor pregnant women and the elderly.
At this point, both chambers will have to by a two-thirds vote pass the same rules suspension resolution to revive a bill to re-authorize the Division of Medicaid and to make changes to the program. The process of passing that rules suspension resolution already has begun in both chambers.
“It is critical for the Legislature to come to agreement on language as the bill determines the cost and delivery of healthcare services provided to hundreds of thousands of Mississippians,” Lt. Gov. Delbert Hosemann, who presides over the Senate, said in a statement. “The Senate version contained important provisions related to increasing access to postpartum care up to 12 months, easing the process of becoming a healthcare provider, increasing transparency related to the participation of third parties in the state’s Medicaid program to ensure taxpayer dollars are well spent, and increasing reimbursement for community mental health centers.”
It is not unusual for Medicaid reauthorization bills to get caught up in conflict and have to be revived. In the past, issues that led to the impasse have included whether to impose additional taxes on hospitals to whether to expand Medicaid. While Democrats support expanding Medicaid, the issue does not appear to be among the reasons that the Republican leadership of both chambers killed the two Medicaid re-authorization bills this year. Thus far, Mississippi’s Republican political leadership has opposed efforts to expand Medicaid.
Senate Medicaid Chairman Kevin Blackwell, R-Southaven, has said the changes made in the Medicaid bill in the Senate re-authorization proposal would increase state costs for the Medicaid program by about $18 million annually. Those changes include extending postpartum coverage to 12 months instead of the current 60 days.
The House bill has language that establishes a commission to govern the Division of Medicaid. Currently, the governor appoints an executive director who must undergo Senate confirmation to lead the agency.
Rep. Robert Johnson, D-Natchez, the House Democratic leader, said the current demise of the bills should not be of too much concern.
“I think it is part of the legislative process,” he said for both sides to have strong positions “and not to capitulate for the sake of efficiency. We have time to work out everything.”
Each time there is an impasse in the program there is talk of the governor running the agency via executive order without legislative consent. But those talks have never materialized into an actual effort of a governor issuing such an executive order. Past official opinions from the attorney general have found that the governor could not run Medicaid without legislative authorization.
Johnson said he believes creating a commission to govern Medicaid is worth fighting for because it would bring autonomy and transparency to the health care agency.
“My Grandmother Morgan used to say people could become fractious,” said Sen. Hob Bryan, D-Amory. “That is what is happening here. The House and Senate have become fractious. Hopefully they will make up enough before the session ends to pass something…But this not that unusual and it has to run its course.”
In response to the ongoing water crisis in Jackson, U.S. Sen. Cindy Hyde-Smith introduced legislation Tuesday that would authorize federal funding for water infrastructure upgrades.
The Emergency Water Infrastructure Improvements Act taps three federal agencies to provide the city with a combination of loans, loan forgiveness and grants for water infrastructure projects. This federal response comes as state lawmakers weigh their options for addressing the crisis in the final weeks of the 2021 legislative session.
“Providing safe and reliable drinking water is a local responsibility, but there are federal programs and funds available that can be used to address these types of problems. I cannot sit back and watch Jackson schools, businesses and residents go without water,” Hyde-Smith said in a press release announcing the bill.
A historic winter storm in mid-February froze water plant equipment and burst many pipes in the capital city, and tens of thousands of residents — mostly Black — were without water for nearly three weeks. Today, city officials say “most” residents have had water service restored, though the entire city is still under a boil water notice.
Jxn’s water woes became a crisis with the Feb. ice storm, but the hard truth is that the crisis was just waiting to happen after decades of neglect. I’ve introduced legislation to authorize a federal approach to help the @CityOfJxnMS work toward fixing the problem…
— U.S. Senator Cindy Hyde-Smith (@SenHydeSmith) March 16, 2021
In her announcement, Hyde-Smith joined the chorus of elected officials misrepresenting the current crisis as solely a failure of local leadership.
“The weeks of hardship on Jackson residents is upsetting and completely unacceptable. Jackson’s water woes became a crisis with the February ice storm, but the hard truth is that the crisis was just waiting to happen after decades of neglecting necessary repairs and maintenance,” Hyde-Smith said. “It’s time to put that neglect behind us and work toward fixing the problem.”
Under Hyde-Smith’s bill, different levels and types of funding would come through the U.S. Army Corps of Engineers, the Environmental Protection Agency (EPA), and the Economic Development Administration (EDA). Here’s what each of them would provide:
An additional $22 million in funding will be authorized for Jackson under the Army Corps of Engineers Section 219 program.
The Corps would be able to use these additional funds to assist in the design and construction of environmental infrastructure projects.
An additional $150 million in funding will be added to the EPA Drinking Water State Revolving Loan Fund (DWSRF). With these funds, the EPA makes grants to States, which in turn issues loans to municipalities for drinking water improvements.
It is unclear how much of this funding would be directed to Mississippi, much less Jackson. The entire state of Mississippi received just $26,315,000 of the $2.7 billion in DWSRF funding made available in 2020.
Public water systems deemed eligible for this additional funding will be designated as “disadvantaged communities,” which qualifies them for loan subsidization and principal forgiveness. Eligible systems are also required to be located within states that had at least five major disasters in 2020 and suffered damages to water systems in recent winter storms.
The bill also stipulates that a maximum of 15% of these DWSRF funds can be used to purchase and install new water meters and modernize water billing systems. The city is currently running at a deficit of around $2 million each month in water collections revenue after a failed contract with the company Siemens left the city with more faulty water meters and billing issues than the city had before hiring them to overhaul these systems.
The bill directs the Secretary of Commerce to direct no less than $25 million in EDA Economic Adjustment Assistance(EAA) grant funds to “eligible systems.”
This funding would come from EAA grant funding from the CARES Act that has yet to be appropriated.
Other Mississippi lawmakers on Capitol Hill have yet to sign on to Hyde-Smith’s proposal. In her announcement, Hyde-Smith emphasized a need for bipartisan support to get the legislation passed.
“It is a responsible and worthwhile plan that will require the support of the Democrats in Congress and the administration to get it done, and I look forward to their cooperation,” Hyde-Smith said.
The Senate killed Republican House Speaker Philip Gunn’s proposal to eliminate the state income tax and increase sales taxes without a vote on Tuesday, letting the measure die in committee under a deadline.
House GOP leaders, angered by the Senate move, late Tuesday inserted the tax overhaul language as an amendment into a “bond bill” that would borrow money for projects statewide.
“The Senate has punted the ball,” House Ways and Means Chairman Trey Lamar, R-Senatobia, told House members on Tuesday. “… They killed this bill. What has the Senate done? They stayed up until 1 a.m. talking about marijuana. They’ve spent endless hours trying to eliminate business incentives that have worked for years.”
“It’s time for bold action, time to continue to fight,” Lamar, a co-author of the tax swap plan, said before the House voted 89-22 to revive the tax measure.
But the tax plan’s eventual passage remains very doubtful as the Mississippi legislative session enters what is scheduled to be its final weeks. The House’s altering of the bond bill to include the tax overhaul could also make it subject to procedure and rules challenges in the Senate.
Senate Finance Chairman Josh Harkins, R-Flowood, declined to take the bill up in his committee on Tuesday, the deadline for it to pass the full Senate. He said the Senate will instead call for a study committee to examine the issue over the summer and make recommendations to the Legislature next year.
House Bill 1439 would phase out the state’s personal income tax, through exemptions, over 10 years. It would cut the sales tax on groceries from 7% to 3.5% within five years. To balance these losses, it would increase the state’s 7% sales tax to 9.5% and increase taxes on many other things, such as farm and manufacturing equipment, by 2.5 percentage points.
Senate leaders, including Lt. Gov. Delbert Hosemann, have questioned whether the bill — introduced by the House relatively late in the session with little heads up to the Senate — has been thoroughly vetted for “unintended consequences” to the economy and state revenue.
“What I want to see is a thorough examination — by people smarter than me — of what impact this will have on our economy, what it will mean for instance, for productivity,” Harkins said. “The decisions we make will have an impact in a lot of areas, and we don’t want to be back here in four or five years trying to redo our taxes because we got something wrong.”
For instance, Harkins said, most owners of limited liability corporations pay personal income taxes instead of corporate taxes. If the personal income tax is eliminated, many businesses would likely switch to LLC formation, which would skew the House’s projections of balancing loss of income tax revenue with other tax increases.
Harkins said that an initial analysis of the House plan that Hosemann requested from the state economist showed that in its first year, initial phaseout of income taxes would cost about $269 million in revenue, but increases in sales, “sin” and other taxes would bring in an additional $1 billion — a huge “net plus” for a measure that is supposed to be “revenue neutral.” He said the analysis showed it would be seven or eight years before the cuts and increases in taxes balance out.
“Apparently the economist is revising numbers he’s given us — might have left out some things that are in the bill — but that’s all the more reason to wait and examine this more closely,” Harkins said.
Rep. Omeria Scott, D-Laurel, also questioned whether the cuts in income taxes, which will be phased in only if revenue “growth triggers” are met, will really balance out with increases in other taxes or net most taxpayers any savings.
“It sounds more like a Ponzi scheme to me,” Scott said.
As the Senate was coming into session Tuesday morning, Speaker Gunn was leaving the lieutenant governor’s office, after apparently making an 11th-hour pitch for the measure.
“We feel very strongly in the House that elimination of the income tax is a good thing for Mississippi,” Gunn said. “I personally do not think there is a bigger policy issue that we’ve ever done or ever will do.
“(The Senate) has some questions,” Gunn said. “We have answers for every one of those. My wish is that they would move this bill along, keep it alive and let us answer questions and work on it.”
Hosemann in a statement on Tuesday said: “It is always important to consider how we as conservatives can leave more money in taxpayers’ pockets. We plan on having a thorough joint conversation about tax reform this summer. A study should focus on truly broadening the base, incentivizing and rewarding hard work, strengthening economic development and training, and right-sizing government.
“We should also realize a system of taxation drives economic decisions for individuals and for businesses, and plan accordingly.”
After Harkins said he would not take up the bill, Gunn told media that House leaders were looking for ways to revive the legislation before the session ends.
“That’s what we intended for (the Senate) to do, keep this alive,” Gunn said. “There were lots of things they could have done to keep it alive … so we could have sat down and worked through any concerns.”
Gunn and others point to economic booms in Texas, Florida, Tennessee and other states without income taxes. But Harkins on Monday said, “We’re not Tennessee, Florida or Texas — we’re Mississippi … We need to look at the data and most importantly do something responsibly to put the state in the best place competitively.”
The original measure would have been a tough sell on the Senate floor, facing opposition from many groups. While some conservative policy groups support the measure to phase out the state income tax while raising sales, sin and other taxes, many powerful lobbies — such as those representing farmers, small businesses, manufacturers and teachers — have voiced opposition.
Lamar said his amendment on Tuesday made some changes to address that. He removed the measure’s increases of 2.5 cents on the dollar for farming, logging and manufacturing equipment. As a result the amounts of the first round of income tax cuts would be reduced and the total phase-out of income taxes might take a year or two longer.
Gov. Tate Reeves, who himself advocates eliminating the income tax, said he opposes commensurate increases in other taxes in the House plan. He believes economic growth, and belt tightening by government, would cover any lost tax revenue.
Mississippi Today is pleased to announce that journalist Sara DiNatale has joined the newsroom as an economy and jobs reporter.
Sara DiNatale
DiNatale, a native of Buffalo, N.Y., will cover economic development and job creation in Mississippi. She will investigate the inner workings of Mississippi’s economic development initiatives and regional economic development organizations, with an eye toward racial justice and equity.
She will serve as the newsroom’s first reporter based on the Mississippi Gulf Coast.
“So many Mississippians are struggling because they either can’t find or aren’t qualified for good, family-sustaining jobs,” said Mississippi Today Editor-in-Chief Adam Ganucheau. “We’ve heard countless politicians say that economic development is key to a better life for those people and a better state. Sara is just the right person to help us determine how those officials are doing. She’s got sharp news judgment and a deep curiosity about how Mississippians are affected by job creation initiatives and economic policy, and she’s ready to sink her teeth into this undercovered but critical beat.”
DiNatale, a graduate of the University at Buffalo, was most recently a retail, tourism and workplace culture reporter at the Tampa Bay Times. Before that, she interned at The Boston Globe, The Oregonian, and The Buffalo News.
“I am excited to join the talented team at Mississippi Today,” DiNatale said. “I look forward to diving right into my new role and uncovering stories that matter to our readers. I’m passionate about local news and watchdog reporting and can’t wait to flex those skills in my new home state. There has probably never been a more vital period to keep a close watch on Mississippi’s economic development than right now in the onset of pandemic recovery. I plan to do just that while keeping the focus of my work on the Mississippians who have been affected most.”
Reach out to Sara DiNatale at sdinatale@mississippitoday.org. Follow her on Twitter @sara_dinatale.
Legislative leaders say they are still studying the American Rescue Plan, which provides $1.78 billion to the state, to see how it could impact the ongoing 2021 session.
The $1.9 trillion federal package signed into law by President Joe Biden last week could impact the Mississippi Legislature and state government in at least two ways:
• The new law prohibits states from using the federal funds they receive from the American Rescue Plan to offset lost revenue from tax cuts. House Speaker Philip Gunn has proposed a massive restructuring of the state’s tax law that he says is — at least in the first years — revenue neutral. But the conservative-leaning Tax Foundation says the language in the new federal law is broad and could have far-reaching impact for states considering tax legislation.
• The $1.78 billion the state is receiving could be incorporated into the budget that legislators are working on now for the fiscal year beginning July 1. But if legislators choose to use the funds in the upcoming budget year, they most likely will have to stay in session past the scheduled April 4 adjournment date to gather more details about the American Rescue Plan.
“We are going to have some discussions on that,” Gunn recently said when asked about the impact of the American Rescue Plan. Gunn said he is still trying to learn the particulars of the far-reaching federal legislation.
“I don’t know the answer to that,” said Lt. Gov. Delbert Hosemann, who presides over the Senate, when asked if the legislative session might need to be extended because of the American Rescue Plan. “I started reading the bill.” After that, Hosemann said he needs to meet with Gov. Tate Reeves and Gunn to “see what makes common sense.”
Last year the speaker and lieutenant governor agreed to extend the session to expend funds from another COVID-19 relief package. At that time, there was a disagreement between the legislative leadership and Reeves over who had authority to appropriate the funds. Eventually, Reeves acquiesced.
Those funds — in the Coronavirus Aid, Relief and Economics Security (CARES) Act — were designated solely to deal with costs from the pandemic and the funds had to be expended essentially by the end of 2020. The latest package provides more flexibility to allow funds to be used in a number of areas, including to plug budget holes caused by revenue shortfalls and even to help with water and sewer issues, such as those recently impacting the city of Jackson. Plus, the states have multiple years to spend the funds.
Hosemann called the amount in the package for state and local governments “a staggering amount of money.”
Besides $1.8 billion for state aid, the package also is sending $1.26 billion to the state for municipalities and counties. Hosemann cited Gulfport as receiving $18 million and Biloxi as getting $13 million. The city of Jackson is slated to receive about $45 million, and Hinds County is set to garner a similar amount.
Last week the governor criticized the size and scope of the federal legislation but offered few details of how he thought the state should use the funds.
The package also has other pots of money that governments can access. In addition, there are direct stimulus payments to individuals, the extension of federal unemployment benefits, tax relief for many parents, help for businesses, money for vaccinations and funds for other programs.
Passage of a bill to switch Mississippi’s taxation from income to “consumption” taxes pushed by Speaker Philip Gunn and House GOP leaders appeared unlikely Monday after a Senate panel failed to take it up before a Tuesday deadline.
“When reforming major tax policy, you need to get it right,” said Senate Finance Chairman Josh Harkins, R-Flowood. “… I believe (the House and Senate) want the same thing, and we’ll ultimately get there. It’s just a question of whether it’s this year or next year … We’ve still got another day, and we’re looking at a lot of differing things.”
Under legislative rules, Harkins not passing House Bill 1439 out of Finance on Monday means allowing a Senate vote to take it up Tuesday — its deadline to pass the full Senate — would require a two-thirds vote to suspend rules.
After that, the bill itself would require a three-fifths vote in a Senate where the measure’s reception by Lt. Gov. Delbert Hosemann and other leaders has been lukewarm. And while some conservative policy groups support the measure to phase out the state income tax while raising sales, sin and other taxes, many powerful lobbies — such as those representing farmers, small businesses, manufacturers and teachers — have voiced opposition.
Gov. Tate Reeves, who himself advocates eliminating the income tax, said he opposes commensurate increases in other taxes in the House plan. He believes economic growth, and belt tightening by government, would cover any lost tax revenue.
“At this point, I can’t find any votes for it (in the Senate) the way it’s written,” said Senate President Pro Tem Dean Kirby, R-Pearl.
Hosemann has questioned whether the bill — introduced by the House relatively late in the session with little heads up to the Senate — has been thoroughly vetted for “unintended consequences” to the economy and state revenue.
The House measure would phase out the state income tax, through expanding exemptions, over 10 years while raising the state’s 7-cent sales tax and other use taxes by 2.5 cents on the dollar. It would also cut the state’s sale tax on groceries in half within five years. Economic experts and thinks tanks have offered mixed analysis on the impact of the tax overhaul. Some predict it would spur the economy, taking away a “tax on productivity.” Others say it would tank it by increasing taxes on business “inputs” and cause tax pyramiding with its increased sales and other taxes. Still others say it would unfairly place more of the tax burden on the state’s poorest people in shifting to consumption taxes.
Gunn and others point to economic booms in Texas, Florida, Tennessee and other states without income taxes. But Harkins on Monday said, “We’re not Tennessee, Florida or Texas — we’re Mississippi … We need to look at the data and most importantly do something responsibly to put the state in the best place competitively.”
House Speaker Pro Tem Jason White, R-West, a co-author of the measure, said there is still time for the House and Senate to negotiate and repeated the old legislative adage that “noting is dead until it’s dead, dead, dead” and the session is over. He noted this session, set to end by the beginning of April, could go into extra innings because of the federal government’s COVID-19 state spending bill coming in.
White said the chiefs of staff for the speaker and lieutenant governor were meeting late Monday on the issue, and he still holds out hope.
“I think that when an issue gets a unanimous Republican vote, except for one, and nine Democrats including the chairman of their party’s caucus, that makes it a House position,” White said. “It is the number-one priority for us for this four-year term. We would have done it last year except for the pandemic … This process started years ago, it wasn’t something that was just thrown together … It’s a policy whose time has come.”
Sen. Chris McDaniel, R-Ellisville, one of the state’s most conservative lawmakers, said he disagrees with the House plan’s tax increases to cover income tax cuts, but believes that could be remedied and hopes the measure lives.
“(Gunn) is correct, this is a once-in-a-generation opportunity,” McDaniel said, “but the House plan raises 32 other taxes, and we don’t have to do that.”
McDaniel said if the measure does come before the Senate, he wants to offer an amendment to eliminate the states 4% income tax bracket, then phase out the remaining 5% bracket over 10 years, with the phaseout tied to revenue growth.
“We have about 30% more revenue in this state right now than we did 10 years ago,” McDaniel said. “We are about $500 million over our revenue estimate year-to-date and projected to be over by about $800 million by the end of the fiscal year. Eliminating the 4% bracket would cost an estimated $176 million up to the mid-$200 millions. We can do this $176-million tax cut at the perfect time in our state’s budget to do so, while we are flush with cash … Then we can phase out the 5% bracket, and still have roughly $1 billion more in revenue in 10 years than we have right now.”
