May 14, 2004

Tennessee Revenue Surplus Soars in April

NASHVILLE - Tennessee state government's tax revenue surplus grew by nearly $100 million in the month of April, raising the likelihood that the state will amass a surplus even larger than the quarter-billion-dollar surplus state finance officials were predicting only last week. You can read the press release from the Department of Finance & Administration here.

The Department of Revenue collected $1,093.8 million (more than $1 billion) in April, the ninth month of tax collections for the 2003-2004 fiscal year. That's $97.8 million more than the budgeted estimate for the month, pushing the state's revenue surplus to an astounding $239.5 million more than the budgeted estimates.

With three months of revenue still to be collected, the state is well positioned to eclipse the predicted $256 million surplus that F&A Commissioner David Goetz outlined last week in testimony before the state Senate Finance, Ways & Means Committee. (The administration has already made plans for spending $163 million of the excess tax collections.)

A $300 million revenue surplus is not out of the realm of possibility.

April's astonishing revenue growth was powered in part by strong growth in revenue from the much-maligned sales tax, which provided $28.8 million more revenue than the budgeted estimate in April and, through nine months, is running $117.1 million in surplus.

The fast-rising surplus is sure to give more momentum to those who believe it should be used to restore state-shared funds the Bredesen administration cut from city and county governments last year, causing dozens of cities and counties to raise property taxes. Others are calling for the surplus to be saved in the state's rainy day fund, or used to reduce taxes for Tennessee taxpayers who were hit with a billion-dollar tax increase two years ago.

UPDATE: In the post immediately before this one, I wondered why F&A had delayed releasing the revenue data this late in the month, and speculated they were holding the data because it was going to show another month of growth in the surplus, and that kind of information might spark taxpayers and lawmakers to push for tax relief or restoring funds cut from subsidies to city and county governments last year (cuts that caused property tax hikes in dozens of cities and counties.)

Reader and Memphis blogger Michael Roy Hollihan emailed to note that the department chose to release the data on a Friday afternoon, which is a traditional day to release information you don't want widely publicized.

"The story will break in papers on Saturday, the least-read day of the week," notes Hollihan. True, and if TV news covered the story, they'd likely have done so on Friday night, the least-watched night of the week for television.

Traditionally, newsmakers release bad news on Fridays, not good news. But in this case, the good fiscal news is bad, politically, for the Bredesen administration, which doesn't want to restore the state-shared funds for cities and counties, and doesn't want to give taxpayers any tax relief. The administration wants to save a bit in the rainy day fund and spend the rest. But the larger the surplus grows, the harder it will be to argue against tax relief and restoring the state-shared funds.

Right about now, I suspect the administration is working very hard to get a budget deal done and get the legislative session over with, before next month's revenue report shows yet another massive surge in the surplus.