Tennessee: State tax revenues continued falling in June

NASHVILLE — Tennessee tax collections fell another $62.5 million below original estimates in June, with weaker-than-expected consumer spending and flagging corporate growth largely responsible for the decline, officials said Monday.

Sales tax revenues in June, which reflect May sales, were $31.7 million off the originally budgeted target and 1.45 percent less than they were in June 2007, according to figures.

Meanwhile, franchise and excise taxes on businesses were $28 million below the original budgeted amount, state figures show.

Year-to-date collections of all revenues are now an estimated $433.6 million below original projections through June, which under the state’s accounting system is the 11th month of the fiscal year.

The general fund, which funds government operations such as K-12 education and higher education, had a shortfall of $444.7 million, while four other funds, such as the road fund, were $11.1 million above estimates, according to figures.

But state Finance Commissioner Dave Goetz said the situation remains under control as a result of budget-cutting measures approved this spring by lawmakers.

“While we may continue to experience flat or negative growth rates this summer and into the fall or longer, we’ve taken the steps necessary to keep our budget in balance and guard against a state fiscal crisis,” Commissioner Goetz said in a news release.

“By reducing recurring expenditures, maintaining our record savings, and adjusting the budget to reflect revenue expectations, we’re in a good position to make it through predicted economic conditions,” Commissioner Goetz said.

University of Tennessee economist William Fox said that, although revenues “definitely are not improving,” they are not worsening at this juncture.

“They’re basically in line with the revised forecast,” said Dr. Fox, who advises the State Funding Board, which set new revenue projections in early May for the 2008 and 2009 fiscal years. “The shortfalls are pretty consistent with the budget as it was enacted by the General Assembly.”

Tobacco tax collections continued to lag behind original projections — $6.3 million below the budgeted estimated of $34.6 million for the month. Year-to-date, tobacco revenues are $68.6 million below what originally had been estimated.

Taxes on gas, diesel and other motor fuels for June fell by 0.53 percent, figures show. Despite soaring gas prices at the pump, which some economists think might reduce consumption, Tennessee revenues are $11.9 million above projections for the 11-month period.

In late April and early May, the State Funding Board met and adopted new revenue-growth ranges for fiscal year 2008 that range from 0.25 percent to 1 percent for total taxes and -0.50 percent to 0.25 percent in the general fund.

The resulting shortfall was estimated at between $479.9 million and $562.8 million. Ranges for the general fund recognized a shortfall of between $494.5 million and $564 million.

The projected shortfalls for fiscal year 2008 were accounted for through a combination of budget cuts and use of reserve funds.

In addition, Gov. Phil Bredesen and state lawmakers cut $468 million out of his proposed 2008-2009 budget, which took effect July 1. The cuts include slashing nearly 2,300 jobs through voluntary buyouts.