Tag Archives: revenue

February revenue over-collection: Only $20M

News release from Department of Finance and Administration
NASHVILLE, Tenn. – Tennessee tax revenues exceeded the state’s budgeted estimates for the month of February. Department of Finance and Administration Commissioner Larry Martin today announced that overall February revenues were $818.2 million, which is $20.0 million more than the state budgeted.

“February’s sales tax growth rate was the lowest we’ve seen in the past year, but receipts still managed to come in a little over the budgeted estimate,” Martin said. “Franchise and Excise taxes recorded negative growth for the month, but were marginally higher than the budgeted estimate for the month.

“Typically, more than half of our annual corporate revenues are realized in the months of April through June, so we’ll be watching corporate taxes closely through the remainder of the fiscal year.”
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January added another $45.6M to budget surplus

News release from Department of Finance and Administration
NASHVILLE, Tenn. – Strong consumer spending in December pushed Tennessee tax revenues above budgeted estimates for January. Finance and Administration Commissioner Larry Martin today announced that overall January revenues were $1.3 billion, which is $45.6 million more than the state budgeted.

“January sales taxes, which included the holiday buying season, posted the largest monthly growth rate so far this fiscal year, and in fact, it’s been our strongest second quarter growth since 2006,” Martin said. “Strong consumer spending, a continued decline in gasoline prices and an overall improving economy contributed to the sales tax growth in January.

“Corporate tax revenues recorded negative growth for the month, but we had a significant and unexpected one-time payment in January of last year that accounts for the difference.”
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Bill to repeal RAP expansion filed by Bell, Casada

Sen. Mike Bell, R-Riceville, and House GOP Caucus Chairman Glen Casada of Franklin have proposed a bill to block the expansion of the Revenue Accountability program, part of the state Department of Revenue’s tax enforcement efforts, reports the Times-Free Press.

The bill (SB1475), backed by much of the business lobby, would also require the department to propose formal rules for the previous program, which applied only to beer and tobacco sales.

Under RAP, wholesalers must provide a report to the department on their sales of covered products to retaliers. The department then compares the retailer’s sales tax collections to product stocking to catch tax cheats — an effort revenue officials say has been highly successful. (Note: Previous post HERE)

Bell now believes the changes passed last year were too broad.

“I know I did not expect the commissioner to implement such a broad program and require so much reporting by our businesses in the state,” he said. “I didn’t get that from the language in the bill nor in the explanation the commissioner [Richard Roberts] gave on more than one occasion before committees.”

He became aware of problems when the owner of a tiny meat wholesale operation in Bradley County, who’d been in business for decades and still does bookkeeping on paper, came to him, worried about having to buy a computer to send information to the state.

Revenue officials strongly defend the existing program and the expansion and say they’re bending over backward to address critics’ concerns. And they stress that the whole point is for retailers to send in the sales taxes they collect in a state where the levy accounts for 55 cents out of every state revenue dollar.

Fifty-seven percent of sales taxes go to K-12 education, Revenue officials like to say, as well as paying for programs from housing felons to the TennCare program for low-income women and their children.

Tennessee cities and counties also rely on them. The state rate is 7 percent (5 percent on food) while local option taxes can tag on up to 2.75 percent more.

As Revenue officials see it, RAP is getting a bad rap.

“It’s worked very well,” Deputy Commissioner David Gerregano said last week. “It’s allowed us to collect at least $60 million in sales tax that is paid by the consumer to retailers but would not have been otherwise paid over to the state.”

It also “makes things fair” for retailers who are turning over all the taxes they collect, Gerregano said.

“We know there’s a population that hasn’t been complying.”

Gerregano pointed out that wholesalers have been required to report on their sales to retailers since Tennessee created the sales tax in 1947. Now new technology lets them upload their data files to the Revenue Department and makes it easier for the state to check compliance.

And, he said, the state has responded to feedback and criticisms by collapsing the proposed 21 categories into just one, to make wholesalers’ reporting easier. And it threw out the category on “non-edible grocery” items like paper towels.

Business groups see bad RAP in tax enforcement

Some business groups and the Tennessee Department of Revenue appear on a collision course over a new tax enforcement program as the 2016 legislative session gets underway.

Revenue Commissioner Richard Roberts says the Revenue Accountability Program (RAP), implemented under a 2012 law applying only to beer and tobacco sales, has worked well, and he intends to proceed with implementing the expansion — known as “Phase II” — that covers 23 categories of products.

RAP is intended to ensure, he says, that retailers accurately report their sales and the resulting taxes. Under the program, wholesalers must provide a list of products they send to retailers. The department then matches that list with a retailer’s report to the department to see if all sales taxes due have been remitted to the state.

In 28 months of RAP-Phase I, Roberts says $57 million of tax cheating has been discovered in beer and cigarette sales and added to the coffers of state and local governments.
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December state revenue $99.3M above estimates

News release from Department of Finance and Administration
NASHVILLE, Tenn. – Tennessee revenue collections for December of 2015 reflected growth more than the same period a year before. Finance and Administration Commissioner Larry Martin reported today that state revenue collections for December were $1.1 billion, representing 8.95% growth and $91.1 million more than December 2014. December sales tax collections represent consumer spending that occurred in November.

“Total revenues in December were higher than expected due to collections in the sales and corporate tax categories,” Martin said. “We believe the December sales tax growth rate, which includes ‘Black Friday’ and after-Thanksgiving sales, may have been influenced by lower gasoline prices and renewed consumer confidence. January’s report will give us a clearer picture with Christmas retail activity included.

“We are pleased with strong revenues but are concerned about the economic impact of the stock market and international issues as we begin to work with the Legislature on a responsible spending plan for the next fiscal year.”

On an accrual basis, December is the fifth month in the 2015-2016 fiscal year.

Total collections in December were $99.3 million more than the budgeted estimate. The general fund recorded collections above the budgeted estimates in the amount of $93.0 million, and the four other funds that share in state tax revenues were $6.3 million more than the estimates.
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Battle lines form in city-county dispute over tax revenue

Chattanooga Mayor Andy Berke told state legislators that he doesn’t like a proposal, pushed by Hamilton County Mayor Jim Coppinger, to change the way sales tax revenue is distributed to local governments, reports the Times-Free Press.

Currently, some of the money raised from the sales tax goes back to all of the cities in the state, based on their population. Coppinger has proposed changing that to include people who live outside incorporated areas, as well, by counting them as though they were in a city and giving that share of the sales tax revenues to the county to spend.

That could cost the city as much as $5.4 million, Berke said, in an interview after the luncheon. He warned that smaller towns, which don’t have much budget flexibility, could be crippled by the possible budget shortfalls.

Berke said most of the sales tax in the metro area is collected in its largest cities, and those cities have big infrastructure needs — roads, bridges, sewer systems, police and fire departments, e.g. — that support the businesses that generate the tax revenues.

… Interviewed after the luncheon, (Sen. Todd) Gardenhire said he believed some form of Coppinger’s sales tax legislation would pass the General Assembly, but would probably guarantee cities their current level of revenues and add a share of any increased revenues to county coffers based on their unincorporated population.

Gardenhire also indicated that Gov. Bill Haslam may be getting some traction on his push to raise the state’s gasoline tax to pay for road and bridge improvements. At least 44 bridges need replacement or repair in his district alone, Gardenhire said, and he estimated that it would take $500 million to $750 million to pay for all of the needed road and bridge work in the Chattanooga metro area. He conceded that many lawmakers had taken a “no tax increase” pledge, but indicated that he felt this might be the proper time to raise the gasoline tax given that gas prices are at historic lows.

TN tax take in November adds $50M to surplus

News release from Department of Finance and Administration
NASHVILLE, Tenn. – Tennessee revenue collections for November continued to reflect economic growth. Finance and Administration Commissioner Larry Martin reported today that November collections were $902.6 million, which is 9.58% more than November 2014.

“We believe the current fiscal year will show moderate growth, somewhat better than most recent post-recession years,” Martin said. “Sales tax revenues are improved from last year, but economists aren’t certain we will sustain this growth pattern. We won’t know how after-Thanksgiving retail sales performed until this time next month.

“Franchise and excise taxes, which have been volatile in recent years, have been more than budgeted levels for the last three months.”

On an accrual basis, November is the fourth month in the 2015-2016 fiscal year.

November collections were $50.9 million more than the budgeted estimate. The general fund was over collected by $42.6 million, and the four other funds that share in state tax collections were over collected by $8.3 million.
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Impact of tax breaks kept confidential

The confidentiality granted state Department of Revenue records prevents legislators from learning whether the estimates used in adopting tax credit legislation are accurate, the executive director of the Fiscal Review Committee told lawmakers last week.

Krista Lee’s comments came in an annual report by committee staff to the watchdog panel, which is charged with overseeing the effectiveness of state spending in general, on whether the estimates on the cost of legislation presented at the time a bill passes — they’re called “fiscal notes” — prove true after a review in later years.

One of the bills reviewed was enacted in 2012, sponsored by Sen. Mike Bell, R-Riceville, and then-Rep. Eric Watson, R-Cleveland. Now recorded as Public Chapter 937 of 2012, it granted a tax credit of 1.75 percent on investments in an “environmental project” that exceed $100 million — provided the corporation taking the credit agreed to forego taking a separate tax credit for job creation.

At the time, Fiscal Review staff accepted a Department of Revenue estimate that the new law would cost the state $12.5 million, spread over a seven-year period, but save the same amount over the period because the company or companies would be foregoing the jobs credit tax break.

“It seemed odd,” Lee told the committee, that legislation would be needed for something that was “a complete wash” for both the state and the company or companies involved. So the staff picked the bill as one to review on the outcome three years later.

“What we found is, we still don’t know,” she said, though it appears “one or more” companies took advantage of the law.
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With revenue surplus growing, Haslam budget-cutting exercise gets underway

With state government building up a large revenue surplus and legislators plotting ways to spend it, Gov. Bill Haslam begins a week-long series of budget planning hearings today asking all departments to present plans for 3.5 percent cuts in spending.

The 3.5 percent cuts are not really going to be implemented. It’s an exercise that Haslam says has helped in bringing $450 million of reductions to state spending over his tenure as governor (accompanied, of course, by increases in other areas). The schedule for this year’s hearings is HERE.

From The Tennessean on the 3.5 percent:

That is only a request: Haslam and the administration are quick to note that this presentation is an exercise to examine potential cuts and in no way means any of those cuts will actually happen. Last year the governor asked departments to prepare their budgets with a 7 percent cut, but proposed a budget with cuts that were generally much lower.

From the Times-Free Press on the state’s money picture:

A major part of the annual revenue game was resolved last week when the State Funding Board lowballed projected revenue growth for the last half of this fiscal year as well as in the FY 2017 spending plan that will come before the General Assembly early next year. The board ignored more optimistic projections by University of Tennessee economist Bill Fox and economists in Haslam’s Department of Revenue and the Legislature’s Fiscal Review Committee.

The Funding Board comprises Haslam’s finance commissioner, Larry Martin, and three constitutional officers appointed by the GOP-controlled Legislature: Comptroller Justin Wilson, Secretary of State Tre Hargett and Treasurer David Lillard.

Funding board members are banking on a current-year surplus of up to $353 million, and revenue growth next year of as much as $348 million. Legislative estimates say the fiscal 2017 budget year could see as much as $662.6 million in new, recurring revenue over and above the $10.4 billion budgeted for the general fund this year.
…Haslam is expected to be on the defensive on at least two major budget fronts during the 2016 legislative session.

The first is transportation funding, where he is trying to make the case that Tennessee needs to raise fuel taxes for road building and maintenance. Highway money comes from gas and diesel taxes, not the general fund, and has been basically flat for several years.

Some lawmakers are demanding the state repay $280 million taken from transportation by two prior governors.

The second is pressure on the state’s Hall income tax of 6 percent on interest and dividends.

Senate Judiciary Committee Chairman Brian Kelsey, R-Germantown, has struggled to phase out the levy for several years. Emboldened by the surplus, Kelsey is now calling for outright repeal. That would cost the state some $285 million a year going forward.

Note: See also Andrea Zelenski on the annual “dog and pony show” budget hearings, HERE. The schedule for this week’s budget hearings is HERE.

State Funding Board goes low with revenue projections

NASHVILLE, Tenn. (AP) — The State Funding Board has issued its official revenue projections for the current and next budget years that fall below the estimates presented by experts earlier this month.

The panel made up by the finance commissioner and the state’s three constitutional officers on Monday predicted that this year’s surplus will be up to $353 million, while next year’s revenues could grow by up to $348 million.

The experts had estimated a range of $340 million to $422 million for the surplus; and next year’s growth was pegged at $376 million to $525 million.

Members of the funding panel said they wanted to be conservative in the estimates used to shape the state’s annual spending plan. They also want to treat a combined $350 million in corporate taxes as one-time revenue.

Note: The board’s figures chart is HERE.