State Revenues Continue to Come in Under Projections

State revenues for January stayed below the break-even mark. But officials speculate that the worst may be over.

State Finance Commissioner Dave Goetz says January revenues came in $16 million under budget estimates. But sales tax revenues weren’t as low as they have been. He says the income stream is coming back up.

“In efforts to find bright spots where one may, for the first time since all of this occured, in the last 20 months, we actually collected more dollars than the same month last year.”

January was the 20th month where taxes didn’t measure up to the state’s projections. But Goetz says business taxes are showing improvement and new car sales are up for the third straight month.

With six months of revenues in, the state is $150 million down for the year.

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Under Tennessee’s “accrual” system, the January revenues represent business activity in December. So the state now has six months of revenues under its belt for this fiscal year.

Goetz notes that the budget is down, but says some areas show promise:

“Franchise and excise taxes continue to do well. I think the only assumptions you can make about that are, that businesses have reduced their expenses to the point where they’re profitable.”

Franchise and excise taxes are like property and income taxes for businesses. Businesses pay quarterly, gauging whether they will be profitable for the year. When they pre-pay large amounts, they are “forecasting” that Tennessee businesses will do well for the year.

Economists do not use that figure for an early economic indicator. But they do treat it as a positive economic sign.

The finance commissioner must focus on sales taxes, the mainstay of state revenues. Within that stream, taxes on car sales stand out as a major current. Goetz says:

“Car sales are really kind of a key driver, along with home sales, but car sales being the first one. Positive growth… seems to have returned now for three straight months. November was 2.8 percent growth in car sales; December, 6.65 percent; January, 6.54 percent. That has led to the decline of losses, if you will, from a 9 percent loss in November, overall, in sales tax collections, to a 1.86 percent decline in sales tax collections for December activity.”

Still, Goetz says, that 1.86 percent is a decline, not a gain.

“Unfortunately, the continued loss in sales taxes has left us again in a deficit position over the budgeted estimate. We’re down $16 million [for the month of January] – This is the twentieth consecutive month that we’ve had declines in sales taxes.”

More information on the revenue collections is on the state’s website.