Tennessee is betting on growth next year: not a lot, but not quite as modest as some projections. The State Funding Board predicts tax revenues will increase by about 1% in the next fiscal year, and between 2.5% and 3% the year after that.
After a vote Tuesday, that’s the range the governor and General Assembly will use when crafting the next spending plan.
It’s still a somewhat conservative prediction, and University of Tennessee economics professor William Fox noted in a meeting that last week the revenue growth will hinge largely on sales taxes.
“And so the question is: Do consumers keep spending on goods and not on services? Because that’s what’s allowed our fiscal position to be much better than what’s happening around actually much of the rest of the U.S.,” he said.
Consumer spending is one of many factors influencing next year’s projection. Economists acknowledge another round of federal stimulus — or a big spike in coronavirus cases — could significantly affect how much money the state collects.
During last week’s funding board meeting, Secretary of State Tre Hargett tempered too much premature excitement about the revenue projections, reminding people that the growth falls close to flat when adjusting for inflation. Several economists and members of the funding board have voiced their support for planning cautiously with so much about the coming year still unknown.
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