(The Center Square) – Tennessee is expected to see a continued increase in sales tax and fees collections, according to the state’s Fiscal Review Committee.
Tuesday marked the start of Tennessee's 2022 legislative session. The Senate and House met briefly to start the day before the Senate Finance, Ways and Means Committee received an economic update from Fiscal Review Committee Director Bojan Savic and Chief Economist Joe Wegenka.
The Fiscal Review Committee is comprised of seven members of Tennessee's House and Senate, charged with reviewing everything from the state budget to financial estimates. The staff provides fiscal notes on bills considered by the Legislature.
The state has collected $1.2 billion in taxes and fees more than estimated this fiscal year, a 21.8% increase over last year. Wegenka said the group’s total year-over-year estimate is for 8.8% growth over last year and 4.85% growth in fiscal year 2023.
Tennessee collected $3.1 billion more than initial estimates last fiscal year and is estimated to collect $3.18 billion more than estimated this fiscal year. Wegenka said the November and December numbers showed higher growth than expected.
That again would allow the state’s Legislature freedom to approve spending above what was initially appropriated in the budget. This year, Tennessee approved $884 million in incentives for Ford to build its $5.6 billion 3,600-acre Blue Oval City to build electric trucks in West Tennessee.
Wegenka also said there is still room for growth in consumer spending, especially in areas such as new automobile sales, where supply chain issues have had a negative impact on consumer spending.
“We believe it is creating a lot of pent-up demand for motor vehicles that will be realized in the future,” Wegenka said.
In order to hit the Fiscal Review Committee’s estimate for the year, it would require a 1.46% growth rate for the remainder of the fiscal year, Wegenka said.
Other economic factors presented to the board were overall inflation, wage inflation and the fact the unemployment rate continues to drop but there are 32,000 fewer workers in the state than before the COVID-19 pandemic.
“Personal income is up past two years with stimulus funds, but now steadying out with higher-paying jobs and more (people) returning to the workforce,” Wegenka said.