Analysis: Tennessee, Other States Should Expect Significant Revenue Shortfalls in State Budgets

Tennessee Capital building

State governments, including Tennessee’s, should expect revenue shortfalls because of the economic impact of the COVID-19 pandemic, according to an analysis released by Pew.

Revenue forecast predictions that predate the COVID-19 pandemic are out of date because of skyrocketing unemployment, regulations on businesses and restrictions on people leaving their homes. This negatively will affect income-tax revenue, sales-tax revenue, business-tax revenue and likely other minor sources of revenue.

In Tennessee, nonessential businesses have been closed, restaurants have been forced to only carry-out and delivery services and people are not allowed to leave their homes for nonessential activities.

Gov. Bill Lee and the Tennessee General Assembly sought to get ahead of the crisis by altering the state budget proposal when the crisis began. The new budget removed some initiatives and diverted funding from education, teacher-salary increases and other public-employee salary increases to fund efforts to combat COVID-19 and the rainy day fund.

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