May 8, 2004

More on Tennessee's Quarter-Billion-Dollar Surplus

NASHVILLE - Some Republican legislators in Tennessee are raising objections to the mad dash by the administration of Gov. Phil Bredesen to spend Tennessee's rapidly rising revenue surplus. Here's the story in today's Tennessean - which doesn't tell the whole story of the revenue surplus. The Tennessean reports:

State tax collectors expect about $93 million more this year and $120 million next year than was budgeted by Bredesen in February.

State finance officials estimate the state will collect $256 million more in taxes this year than the revenue estimate on which the current state budget was based and not one dime of it is needed to balance this year's budget. Any way you slice it, that's a surplus. (See Tennessee Surplus May Top Quarter-Billion Dollars, two posts prior to this one.)

The key part of the sentence I quoted above from The Tennessean is the last seven words: "than was budgeted by Bredesen in February." In February, state finance officials looked at the accumulated surplus at that point in the current fiscal year and projected it would reach $163 million. Bredesen included that $163 million in his proposed budget.

Bredesen's proposed budget for next fiscal year, which he released in February, includes spending part of this fiscal year's rapidly growing revenue surplus.

In April, the revenue surplus reached $141.7 million, and I projected that it would reach at least $212 million. Now, state finance officials are projecting the state will collect surplus will reach $256 million.

Subtract the $163 million that Bredesen has proposed spending (but which in fact has not yet been spent) and you get the $93 million surplus figure being used by state Finance & Administration Commissioner David Goetz and now by the Tennessean and other Tennessee news media.

It is a highly misleading figure, made worse by the failure of the news media to fully explain the true size of the state's huge and rapidly growing revenue surplus - and how rapidly the politicians are racing to spend it.

Here's how The Tennessean should have written it:

State tax collectors now expect to collect about $256 million more in tax revenue this fiscal year than was budgeted by the legislature for this fiscal year last May. Bredesen has already proposed plans to spend $163 million of it. Meanwhile, state finance officials have raised their estimate of revenue for the next fiscal year by $120 million since Bredesen released his proposed budget.