ATLANTA -Tennessee's State Funding Board met yesterday to discuss revenue estimates for fiscal 2008 and 2009, and economists said the state's economy should begin to pick up in the second half of the year.
William Fox,professor of economics at the University of Tennessee's Center for Business and Economic Research, said that the first two quarters of this calendar year will have negative growth. He projected that during the second half the state's revenues should begin to pick up.
Tennessee's revenues already have come in lower that budgeted estimates. For example, March revenues were $866.7 million, $65 million below the estimate.
Finance and Administration commissioner Dave Goetz said the government had some difficult decisions to make in light of the falling revenues.
"The current year budget was based on sales tax growth of just over 4%, but the actual growth rate has been below 2%," Goetz said. "Given that, and a corporate tax shortfall of $86 million so far this fiscal year, we anticipate having to make some difficult decisions to keep state spending within the limits for the remainder of the current year and into next year."
The board provides revenue estimates that are used to make recommendations for the current and coming fiscal year as the state completes the budget. Tennessee's fiscal year begins on July 1.
The economists all agreed that the failing housing market is one reason for the revenue decline. Foreclosures in Tennessee climbed 72.21% in the first quarter of 2008 as compared to the first quarter of 2007, according to data released yesterday by RealtyTrac. Climbing gas prices were also noted as a problem for the local economy, as they are throughout the country. What makes matters worse for Tennessee is that it is very dependent on sales tax revenues, the economists said. The state does not have an income tax.
"People are not spending at restaurants, buying things, because they are facing higher prices at the pump," said James White, executive director of the fiscal review committee of the General Assembly.
The economists said that taxpayers spending what they receive from the federal economic stimulus package is expected to increase the state's sales tax revenue by as much as 1.8%. However, they warned, consumers may not spend their rebate checks in stores, but could instead use the money for savings or to pay for down their credit card bills, which will have little fiscal impact on the state.
If revenues from the stimulus package don't come in as hoped, the economists said revenues may come in 1.2% higher the rest of the calendar year.
