As cities across the state announce social distancing measures to curtail the spread of the coronavirus, restrictions on restaurants, retail stores, movie theaters, casinos and other service and entertainment industries are more likely than not to result in a hit to sales tax collections.

The Mississippi Department of Revenue is closely monitoring the situation but has not been able to quantify what the financial impact of the economic slowdown this pandemic has caused.

“We are still working with the Secretary of Commerce to form an estimate,” Commissioner of Revenue Herb Frierson told Y’all Politics. “The Department of Revenue is in discussion with legislators and the Governor to mitigate damages caused by COVID-19.”

According to a February 2020 report from the Department of Revenue, sales tax collections were up nearly 3% in the fiscal year over the same period in 2019 with the state collecting roughly $264 million in February and just under $2.1 billion thus far in the fiscal year.

“The state is probably in the best fiscal shape it has been in in a long time thanks to conservative leadership,” Frierson said.  “If the same prudent practices are followed and applied to weathering this storm, Mississippi will come out of this crisis better than many other states.”

Frierson does not have any recommendations for the Legislature at this point as there are no projections currently in place, but he says, “We will help however possible.”

He would not be surprised to see the Legislature utilize the Rainy Day Fund as budget writers mull through what is likely to be a decline in state revenues.

“That is a policy decision for the Legislature,” Frierson said, “but to see the state use some cash reserves to help during this crisis would not be shocking.”

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While the State of Mississippi may be able to fill budget gaps thanks to a healthy Rainy Day Fund, most municipal budgets operate with very little room for error.

Any dip in sales tax could mean the layoff of local government employees or a reduction in services in Mississippi cities and counties absent federal assistance, which may be on the way. Impacts may not be immediate, but with their annual budget process beginning in earnest as summer approaches, budget cuts, tax increases or a combination thereof are likely to be on table.

Frierson says counties and cities should be considering, “whatever is necessary and legal to ensure that they have a functional budget.”

Municipal sales tax diversions in February 2020 was nearly $34 million with the state sending back some $300 million to cities and towns in the current fiscal year.  That total is up $3.4 million year over year.

The top 10 Mississippi cities for sales tax fiscal year to date are: Jackson ($18.4 million), Gulfport ($15.2 million), Hattiesburg ($15.1 million), Tupelo ($14.4 million), Southaven ($10 million), Meridian ($9.3 million), Ridgeland ($9.1 million), Biloxi ($8.3 million), Flowood ($8.3 million), and Olive Branch ($7.7 million).