Press Release from the Office of Gov. Bill Haslam, April 1, 2014:
Amended budget reflects continued decline in revenue collections
NASHVILLE – Tennessee Gov. Bill Haslam today announced details of his proposed amendment to the FY 2014-2015 budget, identifying $160 million in reductions due to an ongoing decline in revenue collections and an additional $150 million to close the funding gap in the current budget for FY 2013-14.
While the budget amendment includes reductions, it keeps funding increases intact for key areas such as the Department of Children’s Services and the Department of Intellectual and Developmental Disabilities. The amendment proposal also preserves funding for the Basic Education Program’s (BEP) salary equity fund.
“Tennessee’s economy continues to be strong even as revenue collections have come in under estimates,” Haslam said. “Tennessee businesses are performing well and continue to make decisions to create more jobs here. What we’re seeing is a drop in business tax collections, which is a result of the reconciliation of overpayments that were made in the past.
“Our state also depends heavily on sales tax, and because so much commerce has shifted online without us being able to collect a majority of the taxes owed, that continues to have a negative impact on our budget year in and year out.”
The revenue collection decreases reflected in the budget amendment include a dip in sales tax collections after a modest holiday season, followed by a long, cold winter that has kept shoppers indoors.
In addition, Tennessee is currently not able to collect the entire amount of sales tax owed to the state from purchases made online. In FY 2012-2013, the state had an estimated revenue loss of nearly $332 million due to online commerce.
Franchise and excise taxes, a type of business tax, are often volatile and are down $215 million due to overpayments by businesses last year that are now resulting in credits and refunds.
Revisions to the governor’s budget proposal include:
- Savings from automating TennCare’s eligibility system – $6.5 million
- Contract reductions to Families First vendors – $4.75 million
- TennCare provider rate reduction – $18.5 million
- Eliminating pay increases for state employees and teachers – $72 million
- Reducing next year’s funding for Higher Education to the current funding level, eliminating proposed increase – $12.9 million
- Reduction of the BEP Growth Fund – $5 million
- Recognizing savings in the Career Ladder program – $4 million
- Reducing proposed funding for the Rainy Day Fund by $4.8 million, which preserves an investment of $35.5 million bringing the state’s savings account to $491.5 million on June 30, 2015.
The governor’s amendment eliminates a proposed increase to health insurance premiums for state employees and teachers to provide them some compensation.
Haslam presented his original budget proposal, SB 2596/HB 2501, on February 3. It was based on revenue collections from November 2013 and was put together in mid-December when Tennessee budgets are historically done.
The $150 million gap in the current FY 2013-14 budget will be closed by capitalizing on efficiencies departments have been making throughout the year and by right-sizing several reserve funds. Rainy Day Fund dollars will not be used.
The budget amendment will be filed this week. Finance and Administration Commissioner Larry Martin will begin presentations to both finance committees today.