For state lawmakers, the almost billion dollar shortfall is no surprise.
"We've known for at least two years that this was going to be the worst year so far," said state Rep. Greg Snowden, a Republican.
That's because this year, almost a half billion dollars in federal stimulus funding for Mississippi will end.
"We are going to have to make some changes," said state Rep. Wilbert Jones, a Democrat. "We cannot continue to do business as usual."
Those changes likely mean cuts. After first alerting state agencies that a 10 to 15 percent cut could be warranted, the most recent projection from the governor is that funding for the agencies could be reduced by about 8 percent.
Amid major budget constraints, a big concern for many Mississippians is healthcare and how what's happening in Washington will affect what happens here.
"That's kind of the wild card. Nobody knows what the Obama healthcare law does yet," said Snowden. "What we do know is that it's likely to increase the state's contribution in Medicaid and other parts, which is going to affect our budget."
When it comes to healthcare in Mississippi, there has been a great deal of discussion about the possible closure of Central Mississippi Residential Center in Newton to cut costs. Snowden and Jones are cautiously optimistic that this won't happen.
"I think it will not be as severe as projected. Don't think that the mental health facilities are sitting back waiting for the government to save them," said Jones. "They're out there finding other resources."
Even though the budget outlook is bleak, December marked the third consecutive month where Mississippi revenues met the target.
The total budget is projected at approximately $5.4 billion.