JACKSON — 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 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 growth in the state’s non-farm employment declined by 55% in the second quarter of this year. He estimates unemployment will peak at 20% 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 that during the 2009 recession, Mississippi lost 78,000 jobs over a two-year period. More than that were lost during the COVID-19 economic shutdown. From the fourth quarter of 2019 to the second quarter of 2020, state gross domestic product declined 11.8%, 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% 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 issued 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% in March to 15.4% 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 Fund (known as the rainy day fund)
• $234.7 million, capital expense funds
• $119.3 million, 2% set-aside in general fund
• $105.2 million, general fund
• $87.4 million, Gulf Coast Restoration Fund
• $20 million, BP Settlement Fund
• $16 million, idle special fund cash balances
• $11 million, education enhancement funds
• $8.5 million, health care expendable funds
• $7.6 million, budget contingency funds
• $2.3 million, tobacco control funds
