State revenue projected to grow 4 percent for next year’s budget

NASHVILLE, Tenn. Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. ? Members of Tennessee’s funding board on Tuesday projected relatively strong revenue growth for the remainder of this fiscal year, but were more conservative for next year mainly because of the unpredictability of business taxes.

The board is preparing figures that will be key to next year’s state budget. Last week, it heard revenue growth forecasts from several economists that ranged from 3.6 percent to 5.3 percent over the next two years. The average growth rate was expected to be about 4.3 percent.

On Tuesday, the board said revenue growth could be as much as 4.9 percent through June 30, while next year’s forecast is estimated to be about 4 percent.

“We acknowledge that the economy has shown some remarkable resilience in the face of oil price shocks and natural disasters for the current year,” said Finance Commissioner Dave Goetz. “But over time you just can’t continue to count on franchise and excise (taxes) growing at the kind of rate that it has been growing. We believe the corporations will find ways to legally avoid some of the tax increases they’ve been paying.”

Goetz said revenue for the remainder of this year could be as much as $190 million in new money, and a total of $500 million next year.

According to a summary presented to the board by its staff, another reason for the conservative approach next year is because of a “lack of an educated workforce,” especially in Tennessee’s rural areas.

That keeps Tennessee from attracting companies “needing a large and consistent pool of technically proficient workers and workers with advanced degrees,” according to the summary.

“Tennessee’s tax system depends upon healthy growth in sales tax collections,” the summary said. “Such growth is in turn dependent on growth in per capita income resulting in increased discretionary income.”

Also at last week’s meeting, the board received figures from Tennessee State Lottery officials and the Tennessee Higher Education Commission, which awards scholarships from lottery money.

According to the state Fiscal Review Committee, which also presented figures comparable to those from lottery officials, net revenue from the lottery is projected to be about $856 million in fiscal year 2007. Of that amount, about $240 million will go toward education initiatives.

THEC officials estimate they need roughly $206 million for lottery scholarships and the Department of Education is seeking $25 million to continue initiatives set for the governor’s expanded preschool program.