Tennessee records big budget surplus for July
Published 11:06 am Friday, August 19, 2022
The Center Square
Tennessee collected $4.6 billion more than budgeted in taxes and fees for the fiscal year that ended in July on an accrual basis.
The number was $4.3 billion after June.
Knowing that the state was ahead of its budget, the budgeted amount was adjusted by $2.94 billion with the budget that Gov. Bill Lee signed on June 1, but collections still far exceeded that number.
“Underestimating revenues creates unplanned surpluses which can be spent the following year or saved in the rainy day fund,” the Sycamore Institute explains in its monthly tax revenue tracker. “The tradeoff of a surplus is that policymakers may have preferred to either spend the money or reduce taxes in the current year.”
The largest factor in the overage is sales tax collection, which finished the fiscal year $2.5 billion more than estimated and was $244.7 million more than estimated in July.
Overall, Tennessee collected $1.6 billion in July, which is $303.6 million more than estimated. Sales tax collections were up 11.4% from July 2021.
“Total tax revenue for the month of July reflects unusual growth compared to this time last year,” Tennessee Department of Finance and Administration Commissioner Jim Bryson said. “Sales and use tax receipts, reflecting June taxable sales activity, outperformed expectations and were the largest contributor to our monthly year-over-year comparison.
“State corporate tax revenues, or franchise and excise taxes, together with realty transfer and realty mortgage tax collections, included in our privilege tax revenues, also greatly exceeded estimates. All other revenues combined posted moderate gains compared to July revenues one year ago.”
The second-largest category with overages were franchise and excise taxes, which were $1.7 billion above estimates for the year and $26.2 million above estimates for July. Those collections grew 31.8% from the year before.
As the state prepares for next fiscal year, Bryson said that “future growth remains a concern” in estimates.
“It should be noted that total annual tax growth at 16.95 percent was the highest since fiscal year 1992-1993, when growth was near 19 percent after several subsequent tax increases,” Bryson said. “Measured against last year’s collections, total state tax revenues grew by just over $3 billion.
“Furthermore, when comparing our total tax revenue collections against our revised revenue estimate total growth was $1.7 billion and general fund revenues outperformed the revised budget by $1.5 billion.”