The State of Tennessee has dug itself into a hole this budget year, and most indications are it’s only getting deeper.
For almost two years now, the state’s economic prognosticators and financial wizards have overestimated how the economy would perform. Those projections are used by Capitol Hill lawmakers to guess how much the state will collect in state revenues, which in turn is used to plan government’s spending.
Today the Tennessee State Funding Board will begin meeting to discuss the amount of revenue the state can expect in the next budget year that begins July 1.
The board, which includes the state treasurer, secretary of state, state comptroller, state finance director and the governor, will also consider again revising estimates it last revisited in December.
In the last 21 months, state revenue collections on taxes and fees have been lower than predicted.
Constitutionally, the state can’t really skip out on a payment and take care if it next year. Tennessee’s guiding document prohibits state government from carrying a deficit from one year to the next, which means lawmakers have to find a way to balance the books.
In an op-ed Gov. Phil Bredesen penned last month, he wrote: “My goal has been to remain true to the principle of the ‘family budget’ that I’ve talked about since first becoming governor. It’s nothing more than the common sense idea that we’re going to adjust expenses to match our income and be very careful about using money from our savings.
“It’s the way sensible families have to manage through these times, and while state government is much larger, the principle is the same,” he wrote.
Now, lawmakers who are already trying to figure out what cuts they can live with in next year’s budget may have to consider more reductions to government programs, pulling money out of the state’s rainy day reserves or increasing fees or taxes.
The State Funding Board, which reviews and adopts revenue estimates lawmakers base the budget on, originally predicted the state would collect $10.29 billion this fiscal year.
After months of revenues falling short of those monthly expectations, estimates were reduced to $10.12 billion when the board met again in December. That change reflected predictions of negative growth between negative 1.5 percent and negative .25 percent in total taxes.
But numbers continued to miss the new expectations. In February, the latest reporting period, revenues were $638.9 million — which is $47.1 million less than the state budgeted.
The board will meet through the end of the month to listen to a handful of economists who will predict revenues, including Dr. Arthur Laffer, the famous “supply-side” theorist who was a member of President Reagan’s Economic Policy Advisory Board.
“The economy has been through some extraordinary changes over the last couple of years,” Comptroller Justin Wilson, a member of the board, said in a press release this week. “In light of that, I think it is appropriate to get some new perspectives on what we can expect for the year ahead.”
Members of the board will also hear from the same group of economists that helped developed the last round revenue estimates, including professionals from Tennessee universities and government offices, like Dr. William Fox, an economics professor from the University of Tennessee Center for Business and Economic Research and Dr. Albert DePrince, who teaches economics and finance at Middle Tennessee State University.
Bredesen’s $12.4 billion FY2010-2011 budget plan released in February proposes spending reductions totaling $394 million from the current year’s budget.