(The Center Square) – Tennessee’s October revenues were $48.7 million more than estimated and $115 million higher than October of last year, according to Department of Finance and Administration Commissioner Jim Bryson.
Tax revenues for the first three months of the 2026 fiscal year are up 1.59% from forecasts, according to the revenue report.
Franchise and excise tax collections exceeded estimates by 11.58% with $7.7 million collected. The year-to-date numbers are still below estimates by $18.9 million, a decline attributed to corporate tax cuts approved by the Tennessee General Assembly in 2024.
“We are encouraged that revenues continue to remain ahead of projections year-to-date,” Bryson said in a statement. “However, we will continue to monitor economic activity and revenue trends to ensure fiscal stability.”
Gov. Bill Lee and state lawmakers are taking a look at the fiscal year 2027 budget. Economists told the Tennessee State Funding Board earlier this month that they were cautiously optimistic about revenue predictions for the upcoming fiscal year.
“I think we’re not really at risk of not being able to pay our bills, but we’re certainly not in a position to start large scale investments above and beyond what we’re doing now,” said Dr. Don Bruce, director of the Boyd Center for Economic and Business Research at the University of Tennessee. “Collections will be slow, steady, positive, could be much higher but could also be significantly lower.”
Bruce predicted a 2.3% increase in total revenues and a 1.3% increase in general funds.
Tennessee is relying heavily on sales tax, Jeff Bjarke, research director for the Tennessee Department of Revenue, said. The state is used to seeing sales and use tax account for about 60% of total tax collections. That has increased to 67%, Bjarke said.
The change is based in part on a reduction in the corporate franchise and excise taxes, according to Bjarke.
“October sales tax revenues, which reflect September’s taxable sales activity, demonstrate the continued strength of consumer spending across the state,” Bryson said. “Although October is typically a slower month for corporate tax collections, Tennessee still exceeded expectations in that category as well.”
Lee wrapped up his annual budget hearings last week with some large requests.
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The Tennessee Department of Children’s Services is requesting an additional 153 positions and $151.6 million in overall funding for fiscal year 2027.
An additional 212 positions, including 139 new state troopers, were requested by the Department of Safety and Homeland Security. The total ask of the department is 84.2 million.
Lawmakers return to Nashville in January to consider the state’s spending plan.