Tennessee's budget shortfall grows

By Theo Emery • THE TENNESSEAN • January 10, 2009 As the national recession deepens, revenues in Tennessee continued their downward slide in December, with a record plunge in sales taxes, a mainstay of the state's revenue collections, according to administration officials. The state collected $811 million in overall revenues in December, about $83 million less than budgeted, according to the Finance and Administration Department. This fiscal year, the state has taken in almost $380 million less in general funds than expected, putting the state on track for a projected billion-dollar shortfall estimated late last year, said Finance Commissioner Dave Goetz. The steepest decline appeared in sales taxes, which came in almost $68 million less than estimated, a fall of about 10.3 percent compared with last December. The declines were spread across various categories of goods, from groceries to new and used cars to home furnishings. Two out of every three state tax dollars in Tennessee come from sales taxes. "We are seeing a continued, relentless deterioration in sales taxes," Goetz said. The last time that sales tax dropped at the same rate compared to the year before was in 1961, when sales tax collections fell 8.7 percent, he said. The gloomy revenue reports have become a monthly exercise, with each month providing new grim reports and dour predictions. The latest revenue data are for business activity in November, so the numbers don't reflect most holiday sales. The data, however, do include revenue generated on Black Friday, the day after Thanksgiving that generally marks the first day of holiday shopping. The new revenue figures come as Gov. Phil Bredesen's administration grapples with the state budget, which has been thrown out of balance by the recession. The administration expects this fiscal year's revenues to be up to a billion dollars less than estimated, and possibly a billion dollars again next year. At the end of December, most state departments submitted new budgets that included multi-stage plans for budget-cutting: two stages of potential cuts totaling about 15 percent, and then contingency plans for cutting an additional 5 percent if necessary. Governors across the country are waiting to see if economic stimulus from Washington will help, but creating a package, which probably will include relief for state Medicaid spending and funds for infrastructure, appears to be taking longer than originally expected. The state's budget problems have forced Bredesen to delay his State of the State address and wait to unveil his budget until after the first week in February. The General Assembly convenes next week for an organizational session, but then plans to adjourn for three weeks. On Thursday, Lt. Gov. Ron Ramsey suggested that the administration wait even longer, until mid-March, to propose the budget. Goetz said that waiting wouldn't necessarily help because the federal stimulus "won't be some sort of silver bullet."