Presented to the ACADEMIC LEADERSHIP RETREAT August 26, 2014

1. The Economy:AsOptimistic as an Economist Can Be, Tax Revenues not so Positive Presented to the ACADEMIC LEADERSHIP RETREATAugust 26, 2014 William F. Fox, DirectorCenter for Business and Economic ResearchThe University of Tennessee, Knoxville

2. OUTLINE • National Economic Outlook • Tennessee Economy • Tennessee’s Fiscal Outlook William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

3. Growth in Quarterly Real Gross Domestic Product (Chained 2009 Dollars) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

4. Growth in Quarterly Real Personal Consumption Expenditures (Chained 2009 Dollars) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

5. REAL ANNUAL AVERAGE WAGES(1982-84=100) Occupational Employment and Wages

6. Unit Sales of New Light Vehicles William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

7. Unit Sales of Existing Homes and Housing Starts William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

8. * All Housing Units, 2000-2013 William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

9. Total Consumer Debt Balance William F. Fox, Center for Business and Economic Research, http://cber.bus.utk.edu

10. Estimated Total E-Commerce Sales *Sales-taxing states only. William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

11. Growth in Quarterly Real Business Investment William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

12. Unified Federal Budget Surplus William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

13. Real Exports Less Imports William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

14. U.S. Crude Oil Imports and Production,1998-2013 William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

15. Interest Rates and Inflation William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

16. Tennessee and U.S. Nonfarm Job Growth (3-month moving average, year-over-year) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

17. TN Nonfarm Jobs, Seasonally Adjusted, 2004-2014 William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

18. Tennessee and U.S. Unemployment Rates (Seasonally Adjusted) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

19. Tennessee Job Growth by Sector (June 2013 to June 2014) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

20. NONAG JOB LOSSES AND GAINS

21. Change in Total Taxes, July-March, FYTD 2013 to FYTD 2014 U.S. = 2.8% TN = 1.4% Greater than 2.8% --26— High: ND = 18.6% 0.0% to 1.4% --10— 1.4% to 2.8% --7-- Less than 0.0% --7— Low: AK = -41.7% William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

22. Tennessee Tax Revenues, Total and Share of Personal Income Tax Revenues (in millions) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

23. Growth in Sales Tax Revenue (Adjusted for Tax Increases)3-Month Moving Average, Year Over Year Increase William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

24. Sales Tax Collections by Category of Sales (FY13 to FY14) William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

25. Tennessee State Sales Tax Breadth of Base Source: State Tax Notes, Mikesell.. William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

26. Tennessee Sales Tax Collections as a Percent of Personal Income, 1997-2013 William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

27. Corporate Profits as a Percent of GDP Corporate profits with inventory valuation and capital consumption adjustments. William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

28. State Corporate Income Tax Revenue Since the Start of the RecessionFour-Quarter Moving Average, Adjusted for Inflation William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

29. Tennessee Fiscal Pressures • Normal government cost growth • Pension – biannual adjustment • BEP • Higher Ed • Debt Service • Health Insurance • Salary Increase • TennCare • Medicaid expansion • Woodwork effect • Total $580 million William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

30. Tax Cuts • Gift tax • Inheritance tax • Lower rate for food • Larger exemption for the Hall Income Tax William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

31. Rainy Day Fund by Fiscal Year William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

32. TennCare Reserve by Fiscal Year William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

33. Higher Education Allocation,University of Tennessee William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

34. Higher Education Allocation,Board of Regents William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu

35. Analysis of Knox Achieves • 5 percentage points more likely to graduate high school than matched control students • 20 percentage points more likely to enroll at any college • 29 percentage points more likely to enroll in a community college • 9.5 percentage points less likely to enroll in a four-year institution • Two-thirds of effect on community college enrollment came from students who would not have gone to college William F. Fox • Center for Business and Economic Research • http://cber.bus.utk.edu