Funding Board Pessimist Predicts Revenue Growth

One of Tennessee’s most pessimistic economists says the worst of the recession may be over. MTSU professor Albert DePrince told the state Funding Board Wednesday revenues may grow a little in the coming year.

DePrince admits that compared to his colleagues, he hasn’t had the rosiest predictions for tax collections.

“I was not the buoyant forecast for the last two years, yes.”

But even DePrince expects positive sales tax growth in the budget year that begins July 1st.

“There’s gradual increases in employment, there’s gradual increases in car sales, and gradual increases in housing starts. All of which are critical for sales tax collection in Tennessee. They’re not booming. If they were booming the forecast would be twice as large.”

DePrince says his economic models show the state following a slow upward trend, lagging slightly behind the United States as a whole.

This week, the Funding Board is expected to determine how big next year’s state budget can be based on forecasts from a panel of economists.

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DePrince is a professor of Economics and Finance at the College of Business at MTSU.

His model is based on the ways that the Tennessee economy follows the national economy. He is a former banking industry economist.

The bottom line for economists advising the state funding board is the prediction for revenue growth for the coming year.

For the current year, ending June 30, the MTSU economist estimates total tax revenue at $10.023 billion, down 1.3 percent from the state’s revenue take for 2008-09. To put that in perspective, that’s the least the state has taken in since 2005-06.

For the fiscal year that begins July 1, he foresees growth of 2.3 percent. That would bring in $10.258 billion. That’s still below the revenue total for 2005-06.

For the following year, DePrince estimates growth at 2.8 percent, thus steadily building. That would bring in $10.544 billion. That figure, more than a year away, isn’t crucial to the board’s decision making.

The MTSU economist says the growth he expects is real – even if it does build on a year when revenues performed poorly.

“After a decline this year of somewhere between one, and one and half percent, in tax revenue, I think there’s a general expectation that brighter days are ahead in 2010-2011, of something in the order of two, two and a quarter percent, revenue growth.”