The Tennessee Department of Revenue gave the State Funding Board a forecast of 1.6% in total revenue and 2.2% in general fund revenue for fiscal year 2025. The numbers were better for fiscal year 2026 – a 3.1% total revenue increase and a 3.9% general fund revenue increase.

The Fiscal Review Committee Staff predicted 2024-25 fiscal year growth at 0.79% growth. For 2025-26, the total revenue fund growth is projected at 3.17%.

Changes to Tennessee’s franchise tax calculations helped businesses but have taken a bite out of state revenue projections with estimated losses between 11.54% and 17%.

Dr. Don Bruce of the University of Tennessee’s Boyd Center for Business and Economic Research projected a nominal negative growth of minus-1.3% for this fiscal year and a 2.5% growth for 2026.

The changes are all due to policy changes, he said.”Were it not for the needed or mandatory responses in terms of policy, especially with franchise and excise taxes in Tennessee, we would certainly be seeing positive growth and total revenue because F&E would not be down,” Bruce said.

The 2023 food tax holiday that ran from September through October will add $180 million to this year’s coffers since it is not happening in 2024, according to a presentation by Joe Wegenka, chief economist for the Fiscal Review Committee.

Dr. Joseph Newhard, assistant professor of economics at East Tennessee State University, said his forecast anticipates strong growth for small and medium businesses in Tennessee. He predicted an increase of 0.61% for 2024-25 and 4.54% from 2025-26.

“Overall, we think the tax structure is very conducive to business and growth and that it will continue to attract production to the state,” Newhard said.

The State Funding Board will meet again on Nov. 25 to discuss revenue estimates and other business.