This week, budget hearings begin at the Tennessee state capitol. They come at a time when it appears economists overshot how much tax revenue would come in to fund state government.
Tennessee operates primarily on the sales tax. And until recently, collections have been above projections. So the state’s economists who advise the governor chose to aim even higher. Turns out, it was too high.
Tax revenues have missed in the three months of the fiscal year so far, down roughly $2 million from budgeted estimates but still growing over the previous year by 3.5 percent.
University of Tennessee economist Bill Fox says consumers may have fundamentally changed their buying habits since the recession of 2008.
“They have gotten more conservative with their spending behavior. They have de-leveraged – is the word we’ve heard used a lot. Consumers haven’t built back up credit card debt.”
With the rate the economy is growing, Fox says he would have thought Tennesseans would be buying more stuff, and the state would be reaping more in sales taxes.