Tennessee’s revenue numbers for March are in and they offer a grim forecast for the immediate future. Total collections in April (for the preceding month) were $1.3 billion, nearly $700 million less than expected.
Commissioner Butch Eley of the state’s Finance and Administration Department reported “weakened” revenues “as the state began to withdraw from its usual patterns of consumer spending by mid-month… It has been 10 years since an economic downturn has impacted state revenues. The state’s large monthly revenue surpluses built up throughout the beginning of the year will now be tested as the pandemic’s impact begins to erase those gains. Yet, we remain committed to keeping the state’s budget in balance despite the current challenges.”
The decade-old “turndown” Eley referred to is the Great Recession of 2008-2009. A subprime mortgage-fueled housing bubble collapsed triggering a cascade of delinquencies, foreclosures and loss of value in mortgage-backed securities that ended with nearly nine million jobs lost.
The coronavirus pandemic has already stripped about 26 million jobs from the U.S. economy through April. The resulting unemployment rate of 14.7 percent is the highest since the federal Bureau of Labor Statistics began tracking it in 1948.
Crucially, the state’s most recent report reflects the falloff in tax revenue that occurred before the more stringent Tennessee recommendations (“Safer at Home”) took hold at the end of March. Next month’s accounting will reveal the impact of a full month of business “lockdowns.”
Knox County Finance Director Chris Caldwell said the latest revenue news “really was as expected” and might have been worse. The 6.01 percent year-to-year decline in April sales tax collections was anticipated to be as much as 10 percent.
But Caldwell understands state revenues haven’t bottomed out. The fourth quarter of FY 2020 looms bleak just as municipal budget calculations are getting serious.
Comes the Apocalypse?
The prospect of a long economic recovery is intimidating enough to make some officials’ push to rapidly reopen businesses nearly comprehensible. It took eight years for the unemployment rate to return to its pre-Great Recession level of 5 percent. For elected officials who navigate from poll to poll that’s several political generations.
So, the push to get back to business as usual is accelerating, but at what cost? Here at home, the indomitable Volunteer spirit motivating us to do our own thing our own way seems to have taken hold, consequences be damned.
If you doubt that, cruise by the area malls and take in the jammed parking lots. Or consider how a popular retailer’s recent reopening in Morristown prompted a crush of eager patrons to line up outside like thirsty elephants at a watering hole. Social distancing, anyone? (And, by the way, we don’t need no stinking masks.)
Sights like that and a recent candid snapshot of a jammed Franklin, Tennessee, restaurant/bar recall the savagely ironic words of the addled character Lt. Col. “Bill” Kilgore in Francis Ford Coppola’s 1973 Vietnam War epic, “Apocalypse Now,” with a slight twist: “I love the smell of coronavirus in the morning!”
The coronavirus is our napalm. Could anxious political leaders usher in a new apocalypse?
Larry Van Guilder is the business/government editor for Knox TN Today.