March 15, 2005

Tennessee Continues Surplus Revenue Collections

It appears that Tennessee Gov. Phil Bredesen's Department of Finance & Administration is playing the same game that Bredesen's predecessor in the governor's office did with the monthly revenue figures - crafting the press release to fit the political agenda.

During the second term of Gov. Don Sundquist, the monthly revenue press release from F&A would be carefully crafted to fit Sundquist's agenda - raising taxes and imposing an income tax. One month, for example, sluggish car sales resulted in Dr. Bill Fox, the University of Tennessee economist and reliable shill for the Sundquist tax agenda, claiming it proved that the sales tax was obsolete and unable to generate sufficient revenue growth. But a few months later, surging car sales put the lie to that claim, so Fox and Sundquist's F&A folks pushed the alternate story, that sales tax from car sales shouldn't be considered when evaluating the health of the sales tax because, well, because if you ignored them, revenue growth was sluggish.

I had hoped for more honesty from Bredesen's F&A, but I forgot that they, too, work for a governor with a political agenda. Bredesen's agenda is maintaining the fiction of a tight budget so that he can, A) pose as a fiscal conservative by balancing it without raising taxes, and, B) continue to play opponents of TennCare reform against supporters of other government spending priorities such as education.

The latest press release talks endlessly about actual revenue compared to the "budgeted estimates," but works hard to obscure the fact that year-over-year revenue growth is up a solid 5.2 percent - which is very healthy revenue growth.

But here is the actual data. Revenue collections in January were up 8.59 percent over January 2004 - $73.4 million more dollars. Sales tax revenue was up 6 percent - $35.3 million dollars more than in January 2004.

For the first six months of tax collections for the current fiscal year, total revenue is up 5.1 percent, or $226.6 million. Sales tax revenue is up 3.9 percent, or $115.8 million.

Total tax collections halfway through the fiscal year are $34.7 million ahead of budgeted estimates. The state, therefore, is running a $34. million surplus.

The Bredesen administration would prefer you not focus on that. Hence, F&A is pushing the spin that the $120.6 million overcollection (compared to the estimates) of franchise & excise taxes, the second-state's largest source of tax revenue, should be excluded from an analysis of the state's financial picture. Because, you see, without it, revenue collection is $85.9 million in deficit.

F&A says:

For six months revenues [from F&E taxes} are $120.6 million overcollected, which may be overstated. An alternative estimating model indicates year-to-date overcollections of $63.6 million. The two models come together in April and that will be a more accurate indicator of overcollections.

There is no revenue crisis.