Emkes: Even With Surplus, State Must Be Cautious

State revenue exceeded expectations by $563 million for the fiscal year ended June 30, according to figures released last week, but Finance Commissioner Mark Emkes says that doesn’t mean legislators should get ready for a spending spree next year.
Of the total “overcollection,” as the surplus is called in state budget discourse, about $543 million is in money going into the state’s general fund and thus available for most any purpose. Of that, the commissioner said about $210 million is “baked into the budget” for the current fiscal year, which began July 1, and will be spent according to plans.
“Take that out and the real overcollection is $333 million,” he said.
The commissioner said $333 million may not go very far in state budget terms when health care inflation is expected to run about 7 percent in this fiscal year, driving up TennCare costs even without factoring in the potential impact of the Affordable Care Act. State spending on education can be expected to increase by $50 million or so because of enrollment growth and the like.
“All of a sudden you’re at $300 million just when you open the door (to look at options for the next fiscal year),” he said.
The state’s rainy-day fund, which was built up to $750 million at one point in former Gov. Phil Bredesen’s administration, fell to $250 million last year and will be built back to $356 million in the current fiscal year, according to budget plans. But Emkes noted that still only about half the former level exists and, given the uncertain economic times, it would be prudent to build up the fund further while surplus revenue is flowing.
The state’s July tax collections marked the 12th consecutive month in which total collections have exceeded the budgeted estimates, officials said. July sales tax collections represent consumer spending that took place in the month of June.

Note: Gail Kerr, meanwhile, is soliciting suggestions on how to spend the surplus.

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