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Business, Free Enterprise and Constitutional Issues; Pro-Life and Pro Second Amendment. Susan Lynn is a member of the Tennessee General Assembly. She serves as Chairman of the Consumer and Human Resources subcommittee, a member of the Finance Ways and Means Committee and the Ethics Committee. She holds a BS in economics and a minor in history.

Tuesday, May 23, 2006

Budget Surplus Should be Returned

Every year when the General Assembly works on the budget huge numbers start flying around and it is difficult to understand what is really going on. This year is no different. Thankfully, the talk is of budget surpluses not shortfalls.

Recently, we’ve heard numbers predicting the budget surplus to be as low as $51 million to as high as $700 million. Just what is the real number?

Legislators are as confused as anybody so I spent my Sunday afternoon at the General Assembly budget hearing in Nashville to better understand the figures. Let me share what I’ve learned.

To understand all of the budgetspeak it’s important to understand five terms; current tax revenue projections; next year’s tax revenue projections; the Copeland Cap; recurring funds and non-recurring funds.

For the current fiscal year, tax revenues are $162,900,000 over collected. In other words, it’s the end of the year, we’ve got extra money, and legislators want to spend it.

Constitutionally, we can’t spend all $162.9 million. The Copeland Cap Constitutional Amendment declares the state government cannot spend more percentage-wise than the economy grows. Thus, if the economy is projected to grow at 3%, this year’s budget can only be 3% more than last year’s budget.

The growth in the current budget was smaller than the rate of growth of the economy. Because constitutionally, the General Assembly may spend up to the growth rate of the economy, we may spend $111,600,000 of the $162.9 million surplus. $51 million of the surplus revenue exceeds the growth in the economy. Therefore we cannot spend that money without overriding the Copeland Cap.

Now, onto the budget surplus for next fiscal year; when the Governor proposed his budget back in February, he received his revenue projections from the State Treasurer. However, revised projections indicate we’ll receive $328,600,000 more tax revenue than the ‘06-‘07 budget proposes to spend. Therefore, plans are being made to spend that extra money too.

Some of that money is recurring funds; funds we expect to come in year after year. Some of the money is non-recurring funds. Therefore, it is important not to spend the non-recurring funds on recurring expenses.

The bottom line is Tennessee has $491,500,000 of un-budgeted surplus revenue. That figure includes the current surplus, next year’s surplus and the funds over the Copeland Cap limit.

Finding ways to spend the money is never a problem. For instance, Cover Tennessee, Cover Kids, and the risk pool were not in the Governor’s February budget and must be funded. State employee raises and capital projects are important but so is setting aside money in the rainy day fund.

However, the right thing to do would be to give surplus money back to the taxpayers. Clearly, the $51 million indicates that Tennessee collected revenue faster than the economy grew. Perhaps, an indication the economy in Tennessee is very healthy. But it’s also a sign that our tax rates are simply set too high.

Giving money back to the citizens through a reduction in the sales tax on food would be a great way to do something that every Tennessean could enjoy everyday.