Sen. Joey Hensley

Tennessee in strong financial position despite challenges

Passing a balanced budget is the most important duty of the Tennessee General Assembly. While the budget isn’t usually presented to the General Assembly until February, there’s plenty of pertinent information and news to be aware of. Departments are already announcing requests, economic statistics are being published regularly and experts are providing valuable testimony at recent meetings.

The state is in great financial condition despite challenges including inflation, which is impacting not only Tennessee, but the entire country and world. The state has already collected $585.8 million more in taxes and fees than budgeted in the first three months of the 2022-2023 fiscal year, which began in July. And last fiscal year, the state collected $4.6 billion more than budgeted in taxes and fees.

Revenues in October, the third month of the fiscal year, overall were $1.5 billion, which is $125.4 million more than October of last year and $178.1 million more than the budgeted estimate. The growth rate for October revenues was 8.3%.

October revenues surpassed budgeted estimates due to strong sales tax remittances. Tennessee Department of Finance and Administration Commissioner Jim Bryson said in a press release that the largest retail sales gains for the month came from the categories of building materials and eating and drinking places.

For fiscal year 2022-2023, the state’s Funding Board is projecting a growth rate of 7.2%-7.7% while estimates drop to between 1.25% and 2.25% for fiscal year 2023-2024. Governor Lee will build his budget for the upcoming fiscal year utilizing these estimates.

Sales tax collections are up dramatically in part because business activity is at an all-time high and because of the state’s ability to collect taxes on online sales, economists said at a November Tennessee State Funding Board meeting.

The tremendous increase in collections is of course also due to the state’s unprecedented population growth. Large amounts of in-migration are supporting labor force growth, and the growing economy is quickly absorbing those new workers, who tend to be high skilled workers with greater savings, according to economists.

Nationally, gross domestic product has declined in the first two quarters of 2022, and forecasters expect a similar decline through the middle of 2023. In 2021, Tennessee GDP growth was 8.6% compared to 5.7% nationally.

Tennessee has a proud tradition of being a fiscally conservative state that is well managed with the lowest possible tax burden to residents. The AAA-ranked Volunteer State is the least indebted state in the nation per capita and is the number one state in the nation for fiscal stability. Tennessee also is one of only five states without road debt, and ranks in the top 3 of states for best-funded pension plans. Tennessee’s outstanding other postemployment benefits (OPEB) obligation is estimated to be less than $250 million, down from $1 billion six years ago. This has been a legislative priority for several years.

One way to ensure the state’s financial stability in an economic downturn is maintaining adequate savings through Tennessee’s Rainy-Day Fund. The legislature has invested $250 million into the Rainy-Day Fund, bringing it to $1.8 billion, which is the highest level in state history.

This year, the General Assembly continued its commitment to low taxes for Tennesseans, approving over $280 million in tax cuts for fiscal year 2022-2023. That includes $121.6 million to waive the state’s license plate registration fee for one year — a financial relief that benefits only Tennesseans and not out-of-state residents who shop and do business in the state — $80 million for a grocery sales tax holiday in August, 2022, and $68 million to reduce sales tax on broadband supplies to incentivize companies to accelerate the deployment of needed broadband services to rural communities, among other cuts.

As for federal American Rescue Plan Act funding, Tennessee received a total of $3.725 billion, which has been spent on COVID-19 response, water infrastructure projects, and initiatives that support a strong economic recovery and strengthen the state’s fiscal stability. As of November 28, Tennessee’s unallocated ARPA funds balance is $148.9 million.

I look forward to taking a deeper dive into the budget during the upcoming legislative session, and as always, I welcome the feedback of my constituents.

Contact Senator Hensley at

425 5th Avenue North, Suite 746

Nashville TN 37243

615-741-3100

Toll Free 1-800-449-8366

ext. 13100

Fax 615-253-0231

855 Summertown Highway

Hohenwald TN 38462

Phone 931-796-2018

Cell Phone 931-212-8823

E-mail:

[email protected]