May 6, 2004

Extra Revenue Means Extra Spending in Tennessee

NASHVILLE - Tax collections are rising so fast that Gov. Phil Bredesen expects to have $120 million more revenue next year than his original budget proposal was based on, according to Finance Commissioner Dave Goetz, who testified before the Senate Finance, Ways & Means Committee Thursday. (Here's the AP report.) Oddly, Goetz also testified the state will collect only $93 million more than was predicted for the current fiscal year, which ends June 30. I say "oddly," because the state's revenue surplus through the first eight months of revenue collection for the fiscal year stood at $141.7 million with a positive trend line for revenue growth. The official F&A press release from April 8 is here.

Surely, with revenue growth averaging nearly 7 percent for the fiscal year compared to the previous year, and with the economy continuing to strengthen,Goetz doesn't expect revenue to come in below estimates for the last four months of the fiscal year, does he?

/// UPDATE My fear - as yet unsubstantiated - is that Commissioner Goetz is repeating the practice of his predecessor in the job, Gov. Don Sundquist's last F&A Commissioner, Warren Neel, who habitually compared revenue growth to a "revised" estimate issued by the State Funding Board six months after the state budget was passed, rather than on the actual revenue forecast (a lower estimate) on which the budget was based. Neel did this to make the actual revenue growth look less impressive, but it was deceptive.

I have asked Commissioner' Goetz' spokesperson for an explanation of the $93 million figure but have not yet received one. END UPDATE ///

In related news, legislation that would enable the state of Tennessee to exceed its constitutional cap on the growth of state spending by $105.1 million more this fiscal year is still pending in the House and Senate finance committees. In the Senate Finance, Ways & Means Committee today, action on Senate Bill 3456 has been delayed until May 11. In the House Finance, Ways & Means Committee, action on House Bill 3549 was deferred to May 10 meeting.

Similar legislation filed to allow the legislature to also exceed the constitutional spending-growth cap in the next fiscal year by an as-yet undetermined millions of dollars also has been placed on the agendas of both committees for those same days.

You can read all about the cap-busting legislation, and why it makes a tax increase more likely in the future for Tennessee residents - and makes passing the proposed Taxpayers Bill of Rights more necessary than ever - by scrolling down to Monday's post, titled Tennessee Legislature Aims To Break Spending Cap - Again.

I'll do my best to keep you updated on the status of the state's surplus, and the legislature's plans to spend more of your tax dollars than the constitution permits, here at HobbsOnline. For previous coverage, visit my Tennessee Budget & Tax Policy archive.