In the upcoming 2027 session, the Mississippi Legislature will have an additional $266 million to spend, an increase of 3.5% from last year’s estimate partially driven by changes in tax collections, wage growth and inflation.
Wednesday’s Joint Legislative Budget Committee meeting was just the latest step in the state budget process. The committee, which consists of state House and Senate members, and Gov. Tate Reeves adopted a revenue estimate of $7.8 billion for the next fiscal year, which begins July 1. The bulk of the money comes from state taxes, such as sales and income taxes.
The revenue estimate, presented by Corey Miller, the state economist, is based on tax collections to date and state and national economic conditions. The estimate may be adjusted based on new data. Miller said the growth is good, given the inflation rate, which is about 3.4% this year.
Mississippi takes a conservative approach when it comes to budget estimates and in recent years has collected more than it estimated.
Ahead of the upcoming session, the Legislature and the governor will each develop a proposed budget based on the revenue estimate for how to divide the money between state agencies. The Legislature will then pass a final budget during the session.
During the COVID-19 pandemic, the state saw an increase in actual revenue collections of about 24% from 2020 to 2023. However, over the last few years revenue collections have barely changed, hovering around $7.6 billion, even as many agencies are requesting more funds.The approximately $5.65 billion collected in 2017 adjusted for inflation would be worth about $7.68 billion in 2026 dollars – a little more than last fiscal year’s revenue estimate of $7.53 billion.
The Legislature may need the additional revenue projected to be collected to offset budget pressures during the 2027 legislative session, which begins in January. The Division of Medicaid requested around $179 million more than last year, about a 15% increase year over year as it faces a budget deficit. The Mississippi Institutions of Higher Learning, which governs the state’s public universities, asked for an additional $93 million, although lawmakers discussed keeping the funding level at a recent budget meeting.
State revenue represents a portion of the state’s overall budget, which was about $28 billion last year. Mississippi is consistently one of the top 10 states most reliant on federal funding. Last year, over 40% of the state’s budget came from the federal government.
Miller said the revenue estimate was driven by expected growth in sales, corporate income and use tax revenues, as well as a slower than expected rate of decline in income tax collections. Historically, close to 70% of the state’s revenue comes from sales and income taxes.
Sales taxes generate the most revenue for the state and are expected to make up around 40% of all state revenue this year. The state expects to collect more in sales taxes next year due to inflation – higher prices means the state collects more in sales taxes and continued wage growth.
Personal income in Mississippi has grown by around 5% annually for the past three years, with a projected average of about a 3.8% annual increase over the next three years.
This wage growth and larger number of people working in the state have resulted in a slower than expected decline in income tax revenue. In 2025, Mississippi voted to gradually eliminate the income tax, which used to make up about a third of the state’s revenue. Gov. Tate Reeves cautioned that this trend will not continue but remained optimistic about the state’s financial future.
“As the individual income tax rate continues to decline, the total dollars collected in income revenue, at some point we’ll roll over and we will start seeing declines there. But the good news is we were $5.8 billion total revenue seven years ago, we’re $7.8 billion in total revenue now,” Reeves said.
Reeves said that, by allowing more people to “keep more of their own money,” the state’s economy has grown resulting in more jobs and higher wages.
“I think Mississippi’s future is bright, and I think we can continue this economic growth,” Reeves said.
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