Rather than cash-strapped, Tennessee is actually quite flush. The latest tax revenues from October show the state has already built up a $1 billion surplus in tax collections.
The state started the fiscal year in July expecting less revenue, and instead collections have grown substantially, with another $134 million more than budgeted in October.
But Finance Commissioner Butch Eley says federal stimulus money is still propping up household spending. From direct payments to families, grants to small businesses and coronavirus relief funds the state doles out, a total of $14.6 billion has poured into the state, according to a state stimulus dashboard.
It’s unclear whether any more stimulus is coming. So instead of restoring items cut from this year’s budget — like teacher raises — Eley is focused on potential cuts.
“It’s just something we feel like we’ve got to be very cautious and prudent about how we approach and make sure we don’t just go back to business as usual, thinking we’ll get the same kind of growth rates we’ve had in the past,” he says.
State finance officials have told departments to prepare for at least 2% cuts but also propose what they would cut if they had to make a 12% reduction to their agency’s budget.
The State Funding Board, made up of university economists, meets next week to predict how much revenue the state can count on.
According to the Urban Institute, eight states actually saw budget growth between March and August of this year, though that doesn’t include Tennessee, which experienced deep losses early in the pandemic. Revenues for April dropped nearly 40%, as the pandemic caused a sharp decline in sales tax and led many businesses to file for tax extensions.