Another month and more surplus tax money is flooding into Tennessee government coffers — an additional $129.4 million in January, or almost 12% more than anticipated, according to Gov. Bill Lee’s administration.
During January, total tax collections came to $1.55 billion, due primarily to strong growth in state sales taxes and corporate taxes, according to state Finance Commissioner Stuart McWhorter.
He said in a news release Friday that adjusted second quarter growth on sales activity was 6.14% over the last fiscal year. It was “driven by solid performances in retail and manufacturing sales,” McWhorter noted.
Corporate franchise and excise taxes, often difficult to predict on a monthly basis, soared 23.8% over projections.
“The economic growth we have experienced in these first six months puts the state in a good position to fund the current and upcoming fiscal years,” McWhorter said, noting year-to-date total tax collections are outpacing estimates by 6.48%, which the commissioner said “signals a promising finish” for the 2020 fiscal year.
“Nevertheless, we will continue to closely monitor our monthly receipts, being mindful that economic conditions may change,” McWhorter said.
Latest collections put the state well on its way to hitting the nearly $1.24 billion budget surplus of nonrecurring revenues by the end of FY 2020 on June 30, according to a copy of Lee’s budget overview for fiscal 2021 provided to legislators.
Revenue growth is spurring lawmakers to offer up a variety of proposals this year for tax cuts and a tax holiday. Last week, Rep. Patsy Hazlewood, R-Signal Mountain, had a bill up in the House Appropriations Subcommittee that calls for a two-month holiday on Tennessee’s 4% sales tax on grocery food.
Lee opposes the bill, which would cost the state $88 million in revenue. Because it’s not included in his budget proposal, the panel delayed consideration until late this spring when the traditional final wrangling between lawmakers and governors over the budget occurs.
Senate Finance Committee Chairman Bo Watson, R-Hixson, is that chamber’s sponsor of Hazlewood’s food sales tax holiday. But Watson is also sponsoring another measure that involves cutting the state’s corporate franchise and excise taxes. And Rep. Mike Carter, R-Ooltewah, has his own ideas.
While total revenues are soaring, so are those in the state’s general fund, which pays for most state operations outside transportation and several other areas.
General fund revenues exceeded budgeted estimates by $105.7 million, while the four other funds that share in state tax revenues were $23.7 million over estimates.
Sales tax revenues were $72 million more than the estimate for January, and the growth rate was 11.11%. For six months, revenues are $195.5 million higher than estimated.
Franchise and excise tax revenues were $46.3 million more than the January budgeted estimate.
Gasoline and motor fuel revenues for January increased by 3.46% compared to January 2019 but were still $1.4 million less than the budgeted estimate of $105.5 million. For six months, revenues, however, collections for transportation funding exceeded estimates by $29.7 million.