July Tax Revenues Decline

Wednesday, August 12, 2009

State tax revenues continued to decline in July, making it the first time in Tennessee history the state has experienced a full year of negative growth. Finance and Administration Commissioner Dave Goetz today reported July revenue collections, pointing to sales tax collections which have experienced negative growth for 17 out of the past 19 months when compared to the year before.

“Franchise and excise tax collections showed positive growth for July, but all the over collection resulted from significant one-time payments, not from an upswing in economic activity in Tennessee,” Goetz said. “We continue to strictly monitor revenue collections and our expenditures in order to maintain a balanced budget.”

Overall July revenues were $815.0 million or $61.8 million less than the state budgeted.

On an accrual basis, July is the twelfth month in the 2008-2009 fiscal year.

The general fund was under collected by $47.5 million, and the four other funds were under collected by $14.3 million.

Sales tax collections were $81.3 million less than the estimate for July. The July growth rate was negative 10.88%. For twelve months revenues are under collected by $687.9 million. The year-to-date growth rate for twelve months was negative 7.66%.

Franchise and excise taxes combined were $27.1 million over the budgeted estimate of $53.8 million. The growth rate for July was 52.25%. For twelve months revenues are under collected by $295.4 million and the year-to-date growth rate was negative 17.07%.

Inheritance and estate tax collections were $100,000 above the July estimate. For twelve months collections are $12.2 million below the budgeted estimate.

Privilege tax collections were $4.8 million below the July budgeted estimate. For twelve months collections are $61.7 million less than the budgeted estimate. The year-to date growth rate was negative 18.65%.

Tobacco tax collections were $1.5 million below the budgeted estimate of $25.0 million. For twelve months revenues are under collected by $25.8 million.

Gasoline and motor fuel tax collections for July increased by 2.85 %. For twelve months revenues are under collected by $46.0 million.

Year-to-date collections for twelve months were $1.2 billion less than the budgeted estimate. The general fund was under collected by $1.095 billion and the four other funds were under collected by $113.0 million.

The budgeted revenue estimates are based on the State Funding Board’s consensus recommendation adopted by the second session of the 105th General Assembly in May of 2008.

The revised estimates for this fiscal year as presented in the 2009-2010 Budget Document assume an under collection in total taxes in the amount of $1.10 billion. The general fund under collection is projected to be $1.06 billion.

By tax source the under collections are: Sales tax $544.2 million; F&E taxes $336.1 million; privilege taxes $80.6 million; hall income tax $58.0 million; highway fund road user taxes $48.6 million; and a net under collection of $40.0 million from all other tax sources.

On May 7, 2009 the State Funding Board met and adopted revised revenue growth ranges for the current fiscal year ranging from negative 9.00 percent to negative 8.50 percent for total taxes, and negative 10.20 percent to negative 9.70 percent in the general fund.

These revised ranges recognize a revenue shortfall in total taxes from the original budgeted estimates in the amount of $1.280 billion at the low end of the range to $1.224 billion at the high end. The ranges for the general fund recognize a shortfall of $1.222 billion at the low end to $1.176 billion at the high end.

Based on the May 7, 2009 recommendation of the funding board, the General Assembly adopted revised revenue estimates for 2008-2009. Year end collections of total taxes are $16.4 million more than the revised estimates, and $39.6 million above the revised general fund estimate.

Year-to-date collections for 2008-2009 are subject to final accrual adjustments.