Ten Months Into the Fiscal Year, Tennessee’s Revenues Exceed Estimates by $556.7 Million

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A press release issued Friday by Department of Finance and Administration Commissioner Stuart McWhorter announced that Tennessee’s May revenues were $46.3 million more than the state budgeted for the month. Also reported was that total tax collections by the state so far this year exceeded the estimates by more than a half billion dollars.

On an accrual basis, May is the tenth month of the 2018-2019 fiscal year, which runs from July 1 to June 30.

McWhorter said that the more-than-estimated May revenues demonstrated sound growth over the same period last year.

“Both sales tax and corporate tax revenues were the largest contributors to the month’s growth and taken together continued to outperform expectations, as they have for most of the year. All other tax revenues, taken as a group, were also more than the May estimates” reported McWhorter.

Despite cuts made in the IMPROVE Act, or 2017 Tax Cut Act, to the Franchise & Excise Tax and Hall Income Tax – which will be fully repealed beginning January 1, 2021 – as well as Sales & Use Tax on food, the highest revenue increases this year come from these taxes.

  • Sales & Use – $257 million or 3.41% over budget
  • Franchise & Excise – $183 million or 9.09% over budget
  • Income – $44 million or 28.08% over budget

Other tax collections contributing significantly to revenues exceeding the budget for the ten months this year include:

  • Business – $25 million or 15.32% over budget
  • Motor Vehicle Registration – $23 million or $8.92% over budget
  • Mixed Drink – $10 million or 10.32% over budget

The tax revenues for gasoline and diesel continue to grow, even after the passage of the fuel-tax increasing IMPROVE Act in 2017. Gas tax revenues are up $2 million or 0.3 percent and diesel is up $2.2 million or 1.03 percent in the current budget year.

Tax revenues for year-to-date 2018-2019 were down for the state in only a few categories:

  • Tobacco – down $6.2 million or -2.99%
  • Gross Receipts – down $1.3 million or -09.22%
  • Motor Vehicle Title – down $382,000 or -1.91%
  • Beer – down $160,000 or -1.08%
  • Severance – down $98,000 or -10.56%

The budget surplus of over a half billion dollars year-to-date represents 4.59 percent over the 2018-2019 budget.

The fiscal year 2018-2019 budget, Gov. Bill Haslam’s final budget, while increasing by $179.9 million in total funding, was reduced by $216.6 in the state funding elements reported in Commissioner McWhorter’s press release.

The budgeted revenue estimates for fiscal year 2018-2019 were based on the State Funding Board’s consensus recommendation in November 2017 and adopted in May 2018 by the second session of the 110th Tennessee General Assembly.

Governor Bill Lee, going into his first budget for fiscal year 2019-2020, recognized an additional $161 million in total revenue carried over from fiscal year 2018-2019, $36.1 million of which was allocated to a variety of state programs requiring supplemental appropriations.

The bulk of the supplemental appropriations, at $26.9 million, went to the Bureau of TennCare to fund increasing program costs in the Department of Children’s Services as well as additional costs pertaining to an increase in the number of children in state custody.

The balance of the additional revenues will go to the Revenue Fluctuation Reserve, otherwise known as the Rainy Day Fund, to meet the legislative intent of a level not less than $875 million by the end of June 2019.

By the end of Governor Lee’s first budget year on June 30, 2020, the Revenue Fluctuation Reserve will be at a record-setting $1.1 billion on a budget that includes $18.6 billion in state appropriations – up over a billion dollars from the 2018-2019 budget.

As the Sycamore Institute explains, the growth in the state portion of the 2019-2020 budget came, in part, by way of an amendment by Governor Lee to his original budget. The amendment increased state expenditures by another $208.7 million as compared to the initial budget recommendation.

With the budget amendment, spending from state revenue sources for fiscal year 2019-2020 is increasing by 5.6 percent over the current fiscal year.

The personal income of Tennesseans, according to the budget document, is estimated to increase by only 4.26 percent in 2019.

The significant increase in 2019-2020 appropriations from state revenues, especially when added to the current budget surplus of this year that will be allocated next year, may result in exceeding the Copeland Cap.

The Copeland Cap was approved by voters as an amendment to the state constitution in 1978 to prevent the state from excess spending.

Article II, Section 24 of the Tennessee Constitution states, “In no year shall the rate of growth of appropriations from state tax revenues exceed the estimated rate of growth of the state’s economy as determined by law.”

The amendment was named for its author, former Republican State Rep. David Copeland of Ooltewah, who passed away earlier this month.

While the Copeland Cap doesn’t actually prevent lawmakers from outspending taxpayers’ incomes, members of the General Assembly have to vote to specifically exceed the Copeland Cap. The Copeland Cap was last exceeded in 2017, as a result of the passage of the fuel-tax increasing IMPROVE Act.

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Laura Baigert is a senior reporter at The Tennessee Star.
Photo “Tennessee Capitol” by F McGady. CC BY-SA 4.0.

 

 

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3 Thoughts to “Ten Months Into the Fiscal Year, Tennessee’s Revenues Exceed Estimates by $556.7 Million”

  1. Mary

    Good. Now fix the roads or drop the gas tax.

    1. Cannoneer2

      Amen to that!

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