What percent of the total budget is the budget surplus? What is the best practice among state governments for amount/percentage of budget surpluses? All governments are advised to keep rainy day funds. It’s difficult to evaluate the amount of Tennessee’s budget surplus without knowing the big picture.
Great questions, Christina. The state has the largest rainy day fund in its history. The surplus, to be clear, is dollars not budgeted and not part of the current rainy day fund. Best practice at the state government level is to be able to fund 30-60 days of operations with revenue at ZERO. TN exceeds that goal with well over 10% of total state government covered by the current rainy day fund balance. In short, as it stands now, if all funding (state revenue and federal dollars) went to ZERO, TN would be able to cover all functions of government at current levels for at least 2 full months. That means the $2 billion in surplus this year is available to be spent. The amount of the surplus, then, is $2 billion - that's $$ the legislature can spend without raising taxes or harming the rainy day fund.
The surplus referred to here is exclusively state tax revenue - the state has been underestimating tax revenue for a decade now - and budgets are built on revenue estimates. COVID relief funds were directly passed through to districts and were to be spent on specific purposes as outlined by districts. This surplus in state funds is a result of tax revenue consistently arriving well above estimates. So much so that one wonders if the funding board is intentionally underestimating to keep budgets artificially low.
What percent of the total budget is the budget surplus? What is the best practice among state governments for amount/percentage of budget surpluses? All governments are advised to keep rainy day funds. It’s difficult to evaluate the amount of Tennessee’s budget surplus without knowing the big picture.
Great questions, Christina. The state has the largest rainy day fund in its history. The surplus, to be clear, is dollars not budgeted and not part of the current rainy day fund. Best practice at the state government level is to be able to fund 30-60 days of operations with revenue at ZERO. TN exceeds that goal with well over 10% of total state government covered by the current rainy day fund balance. In short, as it stands now, if all funding (state revenue and federal dollars) went to ZERO, TN would be able to cover all functions of government at current levels for at least 2 full months. That means the $2 billion in surplus this year is available to be spent. The amount of the surplus, then, is $2 billion - that's $$ the legislature can spend without raising taxes or harming the rainy day fund.
Is the surplus a result of Federal Covid relief funds or increased tax revenue?
The surplus referred to here is exclusively state tax revenue - the state has been underestimating tax revenue for a decade now - and budgets are built on revenue estimates. COVID relief funds were directly passed through to districts and were to be spent on specific purposes as outlined by districts. This surplus in state funds is a result of tax revenue consistently arriving well above estimates. So much so that one wonders if the funding board is intentionally underestimating to keep budgets artificially low.