the long road to recovery - tn.govtennessee monthly sales & use tax revenue id dindexed to bi...

The Long Road to RecoveryThe Long Road to Recovery

Matthew N. MurraySeptember 10, 2010

Forecasting is like trying to drive forward while lookingdrive forward while looking out your rear‐view mirror

Real GDP: 2005 to 2013

15,000 4.0

14,000

14,500

1 0

2.0

3.0

05 dollars

Percentage c

13,000

13,500

‐1.0

0.0

1.0

ns of chained

200

hange, same qu

12,000

12,500

4 0

‐3.0

‐2.0

Real GDP

Growth

Level, billion

arter last year

11,500

05.1 06.1 07.1 08.1 09.1 10.1 11.1 12.1 13.1

‐5.0

‐4.0

Matthew N. Murray, UT Center for Business & Economic Research 3September 2010

Source: IHS Global Insight, Inc.

Household Net Worth: 2005.1 to 2013.4

20 0

30.0

10.0

20.0

ual rate

‐10.0

0.0

age change, ann

30 0

‐20.0Percenta

‐40.0

‐30.0

05.1 06.1 07.1 08.1 09.1 10.1 11.1 12.1 13.1



U.S. Housing Starts and Light Vehicle Sales:2005 t 20132005 to 2013

2 5 20 0Housing Starts

(millions, annual rate)

2.0

2.5

16.0

18.0

20.0Light Vehicle Sales

1.5

10.0

12.0

14.0

sing Starts

Light Vehicle

0.5

1.0

4.0

6.0

8.0Hous Sales

0.0

2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1

0.0

2.0



U.S. Nonfarm Employment: 2005 to 2013U S o a p oy e t 005 to 0 3

140 3.0

(seasonally adjusted)

136

138

0 0

1.0

2.0

s)Percentage c

132

134

‐2.0

‐1.0

0.0

L l

oyment (million

change, same qu

126

128

130

5 0

‐4.0

‐3.0LevelGrowthEmpl

uarter last year

124

126

05.1 06.1 07.1 08.1 09.1 10.1 11.1 12.1 13.1

‐6.0

‐5.0



Annual Growth in Tennessee County Total Covered* E l t 2008 t 2009Employment: 2008 to 2009

Tennessee: ‐5.7%United States: ‐4.6%

Loss greater than 10.0%Loss of 5.1% to 10.0%Loss of 0.1% to 5.0%Gain of 0.0% to 8.0%

*Total employment covered by the state unemployment insurance program.

Source: Bureau of Labor Statistics.


Tennessee Nonfarm Employment: 2006 to 2012

2,850.0 3.0

(seasonally adjusted)p y

2,750.0

2,800.0

0 0

1.0

2.0

nds)

Percentage c

2,650.0

2,700.0

‐2.0

‐1.0

0.0

LevelG hym

ent (tho

usan

change, same q

2,550.0

2,600.0

‐5.0

‐4.0

‐3.0Growth

Employ

uarter last year

2,450.0

2,500.0

2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1

‐7.0

‐6.0

r


Source: Bureau of Labor Statistics and CBER-UT.

Tennessee County Unemployment Rate: July 2010y p y y(not seasonally adjusted)

Tennessee: 9.6% NSAUnited States: 9.7% NSA

Less than 9.5%9.5% to 10.9%11.0% to 13.4%13.5% to 15.7%19.4%Tennessee: 9.8% SA

Source: Bureau of Labor Statistics.

United States: 9.5% SA


Annual Unemployment Rate: 2009 to 2019p y

12.0TN U.S.

10.5 10.29.4

8.59.3

9.7 9.69.0

8.3

10.0

(%)

7.87.2 7.0 6.8 6.5 6.2 5.9

7.67.0

6.66.1 5.8 5.56.0

8.0

oym

ent r

ate

(

4.0

unem

plo

0.0

2.0

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Bureau of Labor Statistics; IHS Global Insight, Inc.; and CBER-UT.

Change in Total Tax Revenue, July‐March, FY2009 to FY2010

Note: Tennessee’s total tax revenue growth for FY2010 over FY 2009 is (1.6)%.

U.S. = ‐4.6%

Greater than ‐2.5%13

‐8.0% to ‐2.5%22

Less than ‐8.0%15


‐‐13‐‐‐‐22‐‐‐‐15‐‐

Change in Sales Tax Revenue, July‐March, FY2009 to FY2010

Note: Tennessee’s sales tax revenue growth for FY2010 over FY 2009 is (3.7)%.

U.S. = ‐5.2%

Greater than ‐4.4%12

‐6.0% to ‐4.4%Less than ‐6.0% NA5


‐‐12‐‐‐‐11‐‐‐‐22‐‐ ‐‐5‐‐

Growth in Tennessee Total Tax Collections:1971–2010

25.0% Actual

Adjusted for Rate Increases

15.0%

20.0%Adjusted for Rate Increases

5.0%

10.0%

‐5.0%

0.0%

‐15.0%

‐10.0%


71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

Tennessee Monthly Sales & Use Tax Revenue I d d t B i i f R iIndexed to Beginning of Recession

180.0

120 0

140.0

160.0

0.0

80.0

100.0

120.0

mon

th #1 = 10

20 0

40.0

60.0Nov 1973Jan 1980Jul 1990Mar 2001

Inde

x, m

0.0

20.0

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

Mar 2001Dec 2007

Number of months from recession start month


Number of months from recession start month

Source: Calculated by CBER using data from the Tennessee Department of Revenue.

Tax Collections by Source: FY2007–FY2011Tax Collections by Source: FY2007 FY2011(billions of dollars)

Ann. Avg. PercentageEst Est Growth of FY11Est. Est. Growth of FY11

FY07 FY08 FY09 FY10 FY11 FY07–FY11 TOTALSales 6.83 6.87 6.34 6.13 6.25 ‐2.2 61.1%

Franchise & Excise 1.74 1.65 1.32 1.45 1.48 ‐4.0 14.5%Gas, Motor Fuel,

Gas Inspect.0.85 0.85 0.82 0.82 0.83 ‐0.6 8.1%

Motor Vehicle R i t ti

0.26 0.26 0.25 0.24 0.25 ‐1.0 2.4%Registrations

Privilege 0.32 0.29 0.26 0.23 0.24 ‐6.9 2.3%Gross Receipts 0.27 0.30 0.31 0.34 0.32 4.3 3.1%

Other Tax Revenue 0.71 0.94 0.87 0.85 0.86 4.9 8.4%Other Tax Revenue 0.71 0.94 0.87 0.85 0.86 4.9 8.4%TOTAL 10.98 11.16 10.17 10.06 10.23 ‐1.8 100.0%

Federal Funds 9.39 9.59 10.95 12.92 12.37 7.13 —


Tennessee Tax Revenues, Total and as a Share of lPersonal Income: 1988–011

12,000 5.5

8,000

10,000

4.5

5.0

Tax Redo

llars)

6,000

8,000

4.0

4.5

Tax Revenues

venue as Share (m

illions of d

2 000

4,000

3 0

3.5Tax Revenues as Share of PI

re of PI (%)

Tax Revenu

e

0

2,000

1988 1991 1994 1997 2000 2003 2006 2009

2.5

3.0


1988 1991 1994 1997 2000 2003 2006 2009

Total Tennessee Tax Revenuesll b d i /Fully Rebound in 2012/13

$16,000

$12,000

$14,000

ars)

$8,000

$10,000 Policy Neutral Scenario

Policy Change Scenario

(mill

ions

of d

olla

$4,000

$6,000

tax

reve

nues

(

$0

$2,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

← →History← → CyclicalForecast

Trend Forecast← →


Rainy Day Fund BalanceRainy Day Fund Balance

800.0 $750M

600.0

700.0

400.0

500.0

ns of d

ollars $445M

200.0

300.0million

0.0

100.0$101M


FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

TennCare Reserves

$550600.0

(millions of dollars)

$474$434 $434500.0

$264300.0

400.0

200.0

0.0

100.0


FY07 FY08 FY09 FY10 FY11

Base Funding Reductions: FY2009–FY2010g(millions of dollars)

Percentage ofFY09 FY10 FY11 TOTAL Appropriations

Education (K‐12) ‐9.4 ‐68.9 ‐34.8 ‐113.1 ‐3.0%Higher Education ‐56.0 ‐181.7 ‐69.8 ‐307.5 ‐19.2%TennCare ‐87.7 ‐255.6 ‐200.5 ‐543.8 ‐20.2%Human Services ‐5.8 ‐11.8 ‐5.4 ‐23.0 ‐12.5%Mental Health ‐4.0 ‐22.8 ‐6.2 ‐33.0 ‐18.4%Correction ‐17.3 ‐64.3 ‐6.4 ‐88.0 ‐13.2%Other Programs ‐98.5 ‐148.8 ‐88.1 ‐335.4 ‐15.9%

%

Note: Discretionary Base excludes K‐12 Basic Education Program, dedicated funds, statutory positions, and various poverty programs.

‐278.7 ‐753.9 ‐411.2 ‐1443.8 ‐12.9%


The University of Tennessee SystemBase State Appropriation Dollars Compared to Inflation‐Adjusted DollarsBase State Appropriation Dollars Compared to Inflation Adjusted Dollars(HEPI FY2002–FY2011)

600.0

400.0

500.0

State Appropriations Base

300.0Base Adj for Inflation (HEPI Base = 2002)

100.0

200.0

26 percent decrease in "real" value

0.0

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11


Source: The University of Tennessee, Office of the Treasurer.

The University of TennesseeB d t d U t i t d R FY2011Budgeted Unrestricted Revenues: FY2011

REVENUE SOURCES

4%4%

5%

Tuition & Fees

9%39%

Tuition & Fees

Appropriations

MOE & ARRA

Grants & Contracts

Sales & Service

Gifts & Misc.

39%



The University of TennesseeT Y U t i t d RTen Year Unrestricted Revenues

Appropriations MOE & ARRA TuitionGrants & Contracts Sales & Service Gifts & Misc.

1,000

1,200Grants & Contracts Sales & Service Gifts & Misc.

600

800

400

600

0

200


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


CBO’s Baseline Budget Outlook‐‐D ’ E H l f h F d !Don’t Expect Help from the Feds!

02009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

0.0

-400

-2002009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

-2.0

rs D

-800

-600

-6.0

-4.0

ns o

f dol

lar D

eficit, perc

1 200

-1,000

800

-8.0

6.0

DeficitDef

icit,

bill

iocent of G

DP

-1,400

-1,200

-10.0% of GDP

D


-1,600 -12.0Source: Congressional Budget Office.

Center for Business & Economic ResearchCenter for Business & Economic Research

College of Business AdministrationThe University of Tennessee, Knoxville716 Stokely Management Centery g916 Volunteer BoulevardKnoxville, Tennessee 37996‐0570

phone: 865.974.5441fax: 865.974.3100

http://cber bus utk eduhttp://cber.bus.utk.edu


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