State on track to have budget surplus above $2 billion
Through the first six months of the budget year, the State of Tennessee has collected $1.2 billion more in revenue than was projected, the Department of Finance and Administration announced.
If that trend continues through the end of the fiscal year, the state will collect about $2.4 billion in unbudgeted revenue. However, Commissioner of Finance and Administration Jim Bryson suggests revenue numbers typically slow in the second half of the year.
“Second quarter total tax growth slowed to 5.89 percent and was lower than the 9.94 percent growth the state experienced for the first quarter of the fiscal year,” Bryson said. “We are very mindful that economic activity appears to be moderating from early elevated levels. January sales tax receipts, reflecting consumer holiday spending in December, followed reports of lower sales trends nationally - the lowest growth rate since September 2020. On a positive note, state corporate tax revenues, or franchise and excise taxes, and mixed drink taxes outperformed expectations. Still, rising interest rates have caused sharp declines in realty transfer and realty mortgage tax collections reported within privilege tax receipts. All other monthly taxes combined declined when compared to last year."
The Department noted that January revenue came in at $212 million above budgeted estimates.
The top two sources of revenue growth were sales taxes and franchise and excise tax. While sales tax growth is expected in January, following the Holiday season, franchise and excise taxes continue to outpace projections at a double-digit rate - that rate was over 23% for January.
Even if revenue growth slows, as Bryson notes is likely, the total surplus is on pace to be at least $2 billion.
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