November 14, 2003

Tennessee Surplus Update

As usual, you get the news of the Tennessee's monthly revenue reports first here at HobbsOnline. After three months of tax collections for the current fiscal year, Tennessee state government has a surplus of $27.6 million, of which $24 million is in the state's general fund. That's down slightly from the $30.2 million accumulated surplus one month ago, but the decline can be attributed to the state refunding excess franchise-excise taxes from businesses last year.

According to the October revenue data just released at 11 a.m. today by the Tennessee Department of Finance & Administration, the Department of Revenue collected $643.4 million in taxes in October, which is just $2.6 million less than the budgeted estimates.

The much-maligned sales tax - blamed in recent years by income tax proponents for cause revenue shortfalls - turned in another surplus in October with collections totaling $4.1 million more than the estimate. October revenue is based on September retail sales. For the first three months of the fiscal year, the sales tax has produced $21.1 million in surplus revenue.

Data from F&A shows that sales tax revenue was up 6.58 percent in October compared to October 2002, and is up 7.85 for the first quarter of FY 2003-04 compared to the same three months at the start of FY 2002-03. The monthly increase is a pure apples-to-apples comparison, with the state's recent sales tax rate increase being in full effect in October 2002 same as in October 2003 - hence, the 6.58 percent growth in sales tax revenue reflects not only more sales tax revenue growth than the state's panel of economist advisers had anticipated, but also reflects a state economy that is growing faster than anticipated.

Total revenue from all taxes was up 7.21 percent in October compared to October 2002, and up 8.34 percent for the three-month period.

At its current rate of revenue growth, Tennessee could accumulate a $110 million surplus this fiscal year. Sadly, as I reported here Nov. 4, the governor and his administration are already planning to spend the surplus instead of save it in a "rainy day" reserve fund or rebate it to taxpayers. If Tennessee had a Colorado-style Taxpayers Bill of Rights, that kind of big-government fiscal irresponsibility couldn't happen.

UDPATE: Here's the press release from the Tennessee Department of Revenue. The F&A press release and accompanying Excel spreadsheet, which together provide detail not included in the Department of Revenue press release, is not posted online. It should be.

The Revenue press release does have more detail on the growth in sales tax revenue, indicating that sales tax revenue was up in all significant sectors of the economy including retail sales (up 7.4 percent) over October 2002, auto dealers and service stations (up 8.2 percent), building materials stores (up 21.3 percent), general merchandise stores (up 7 percent), miscellaneous retail stores (up 8.6 percent), eating and drinking places (up 6.6 percent), apparel and accessory stores (up 10.3 percent), and more. This, clearly, is a broad-based economic recovery under way in Tennessee.