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Recession makes state revenue estimates into guessing game

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NASHVILLE - Trying economic times are making revenue forecasts harder to get a handle on for Tennessee and virtually every other state.

The Pew Center on the States is out with a new report, which finds that in 2009, half the states overestimated their revenues by more than ten percent. Tennessee, which relies on sales taxes for 57 percent of its total revenues, was particularly stung: In 2009, sales tax revenues declined for the first time ever.

Study researcher Steve Fehr says sales tax revenue became an especially difficult number to pinpoint as the recession started.

"Consumers stopped spending and they decided to pay off debt, so the normally reliable revenue they had from sales tax not only dropped, but they couldn't guess from month to month how it was going to be."

Bill Fox, an economics professor at University of Tennessee, says the state did not anticipate the worst recession in the last 80 years, and even if it had, it wouldn't have solved the problem.

"We need to have a plan for how you deal with very difficult fiscal problems, which again requires a contingency plan on how we're going to spend, and it requires a big rainy day fund."

Fox says the study shows there's more volatility than anticipated in forecasting tax revenues.

"So everybody is trying to do better and to learn from the experience, but I'll be honest enough to say that if there's another massive crash like what we just saw, it's going to be hard to fully anticipate the extent of that."

Researcher Steve Fehr says many states, including Tennessee, are trying to do a better job by refining their process. The state Legislative Estimating Conference has said revenue was running ahead by six percent over last year.

The report can be seen at: www.pewtrusts.org

Gove. Bill Haslam's State of teh State address can be found here.

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Economy, Pew Center on the States, State, TNNS
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Members Opinions:
March 20, 2011 at 7:59am
It won't be a problem if we stop spending.
March 20, 2011 at 12:43pm
Sptman that is a nice sentiment but it is not that easy who pays to fill the pot holes, salt the roads, the police, fire, dept of health, schools, the library, the greenway, building and safety inspectors,the jail?
A balance trimming budgets and FAIR taxation will solve the problems we have.
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