VOL. 123 | NO. 49 | Tuesday, March 11, 2008
More Cuts Could be Needed Amid Tenn.'s Worsening Revenue Picture
By ERIK SCHELZIG | Associated Press Writer
NASHVILLE (AP) - More state spending cuts may be necessary after another month of lower-than-expected tax collections, Gov. Phil Bredesen said Monday.
Tennessee's general fund tax collections were $28 million below expectations in February, bringing the state's overall budget shortfall for the year to about $212 million.
"We almost certainly will have some further cuts," Bredesen said. "We'll handle them smoothly."
Bredesen, a Democrat, said he would wait another month before deciding on what specific cuts will be necessary.
"I'm certainly going to see one more month in the can here before we make final decisions at the end," he said. "I'm not going to chase it every two weeks as numbers come in."
The budget year ends June 30.
State officials want to see if business tax collections filed in March or April during tax season will defray sluggish sales tax collections. Sales taxes have missed expectations by nearly $100 million so far this year.
Bredesen's spending proposal for the budget year that begins on July 1 assumed an under-collection of $165 million in the current year.
"It clearly is a year where we're having some challenges," Bredesen said. "But these kinds of years can be healthy."
Bredesen cited his current proposal to restructure long-term care spending - instead of just adding more money - to create more options for home-based services for the elderly and disabled.
"What we're doing today with long-term care is something we really can do in a tight year better than in a year in which there was a lot of money floating around," he said.
Tobacco tax collections were $2.8 million below the budgeted estimate of nearly $26 million in February. Collections have fallen far below expectations for the year following a 42-cent tax increase on every pack of cigarettes beginning in July.
Revenue officials complained that wholesalers originally stockpiled tax stamps at the previous rate, and that consumers began buying their cigarettes in bulk out of state. The effects of both trends appear to have largely subsided, but the state is still nearly $47 million below its expected tobacco tax collections for the year.
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