How Big Is Tennessee’s Revenue Drop Going to Be?

Early Projections of Coronavirus’ Effect on State Tax Collections

This week, we got a first glimpse of what it may take for state lawmakers to balance Tennessee’s budget when they meet in June. On Wednesday, four economists gave state officials their best estimates of how the coronavirus pandemic may affect tax revenues in FYs 2020 and 2021.

All four economists agreed Tennessee should brace for falling or stagnant revenues, but the pictures they painted look quite different (Figure 1). Compared to the budget passed in March, the most optimistic estimates project shortfalls of about $260 million for the year ending June 30th (FY ‘20) and $580 million for the year that starts July 1st (FY ’21) (Figure 2). Meanwhile, the most pessimistic estimates anticipate a $780 million shortfall in FY ‘20 and $1.7 billion in FY ‘21. (1)

Policymakers will use these estimates to revise the preliminary budget they approved in March. In the coming weeks, expect Gov. Lee and his staff to ask the General Assembly for specific changes and more flexibility to manage the budget and keep it balanced over the next 13 months. (2)

Figure 1

After Years of Growth, Economists Expect Tennessee’s Tax Revenues to Stagnate or Fall But by How Much

Figure 2

Projections for Tennessee’s Budget Shortfall Range from $1 Billion to $2.5 Billion over Two Years

How to Prep for the June Legislative Session

Recommended reading as the legislature reconvenes to tackle the budget:

References

Click to Open/Close

  1. Tennessee State Funding Board. Meeting Presentations and Materials. [Online] May 27, 2020. https://comptroller.tn.gov/content/dam/cot/tsfb/documents/meeting-packets/2020/2020.05.27SFBPacket.pdf.
  2. Senate Finance, Ways, and Means Committee. Testimony from Butch Eley, TN Commissioner of Finance and Adminstration. [Online] May 28, 2020. Recorded video available at http://tnga.granicus.com/MediaPlayer.php?view_id=431&clip_id=23017.
More from The Sycamore Institute
Get Updates in Your Inbox
  • This field is for validation purposes and should be left unchanged.