Isabella Carter
In the United States, the federal government is not required to have a balanced budget, and Congress usually does not pass one. However, the state of Tennessee is one of 44 states in which the governor has line-item veto authority and is constitutionally mandated to submit a balanced budget proposal. The Tennessee state legislature is also required to adopt a balanced budget. The General Assembly reviews and holds public hearings on the budget recommendations, with the goal of passing a balanced budget before the fiscal year begins on July 1. Tennessee's budget process includes generating revenues and approving expenditures, which may change during the fiscal year.
| Characteristics | Values |
|---|---|
| Fiscal year | Begins July 1 |
| Budget adoption | Between April and June |
| Majority required to pass a budget | Simple majority |
| Governor's authority | Line item veto |
| Governor's obligation | Submit a balanced budget proposal |
| Legislature's obligation | Adopt a balanced budget |
| Budget review | The General Assembly reviews and holds public hearings on the budget recommendations |
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What You'll Learn
The governor must submit a balanced budget proposal
The governor of Tennessee is constitutionally required to submit a balanced budget proposal. This means that the state's finances are managed effectively, with revenue streams and expenditure plans carefully considered. The governor must ensure that revenue keeps pace with expenditure to avoid the need to raise taxes, cut services, or borrow money.
Tennessee's budget proposal is influenced by national and local policy decisions. For example, the Affordable Care Act, energy and environmental regulations, crime rates, and the quality of education can all impact the state's finances. The governor must, therefore, take these factors into account when drafting the budget proposal to ensure it is balanced.
The proposal is typically submitted between April and June, with the fiscal year beginning on July 1. This allows the General Assembly time to review and hold public hearings on the budget recommendations, including any amendments. The Assembly aims to pass a balanced budget before the start of the fiscal year.
The requirement for the governor to submit a balanced budget proposal is an important mechanism to control spending and manage the state's finances responsibly. It ensures that Tennessee lives within its means and does not accumulate excessive debt. This fiscal discipline is essential for maintaining the state's economic health and stability.
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The legislature must adopt a balanced budget
In Tennessee, the governor and the legislature are constitutionally required to submit and adopt a balanced budget proposal. The fiscal year begins on July 1, and the legislature typically adopts a budget between April and June. A simple majority is required to pass a budget.
The budget proposal is informed by anticipated revenues and planned expenditures, which may change over the course of the fiscal year. Revenues are generated from various sources, including taxes on dividend and interest income, while expenditures cover governmental functions and servicing state debt. If revenues fall short of expenditures, Tennessee, like other states, may have to raise taxes, cut services, borrow money, or a combination thereof.
The General Assembly plays a crucial role in the budget process by reviewing and holding public hearings on the budget recommendations, including any amendments introduced during the legislative session. The Assembly aims to pass a balanced budget before the start of the new fiscal year on July 1.
The budget and finance matters are further overseen by several standing committees within the Tennessee State Legislature. These include the Finance, Ways, and Means Committee in both the Tennessee State Senate and the Tennessee House of Representatives, as well as the Fiscal Review Committee. These committees provide additional scrutiny and expertise to ensure that the budget is balanced and aligns with the state's financial goals and obligations.
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Tennessee doesn't levy a universal personal income tax
Tennessee's state constitution requires the governor to submit a balanced budget proposal, and the legislature is required to adopt a balanced budget. The fiscal year begins on July 1, and the budget is typically adopted between April and June.
Tennessee does not levy a universal personal income tax, making it one of the states with the lowest taxes. Instead, it has a 6.5% corporate income tax rate and levies a state gross receipts tax. Tennessee has a 7% state sales tax rate, with local rates ranging from 1.5% to 2.75%, resulting in a combined state and local sales tax rate of 9.55%. This high sales tax rate helps to compensate for the lack of personal income tax.
Tennessee also imposes other taxes, such as a 0.48% effective property tax rate on owner-occupied housing, a 27.4 cents per gallon gas tax, and a $0.62 cigarette excise tax. The state used to tax income from interest and dividends at a rate of 1-2%, known as the "Hall Income Tax," but this was repealed starting with the 2021 tax year.
The absence of a personal income tax in Tennessee means that individuals are not subject to income tax on their earnings. However, businesses and individuals may still pay certain Tennessee taxes, and the IRS allows deductions for these on federal tax returns.
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State budget decisions are influenced by national policy decisions
In Tennessee, the governor is constitutionally required to submit a balanced budget proposal each year. The state legislature is also required to adopt a balanced budget. State budget decisions are influenced by national policy decisions in several ways. Firstly, national policies set the framework for state budgets by determining the sources and amounts of revenue available to states. For example, federal income tax policies impact the amount of personal income tax revenue collected by states. Additionally, states receive aid from the federal government, primarily in the form of grants, which account for a significant portion of their budgets. Changes in federal grant policies can significantly impact state budgets.
Furthermore, national policies can create new requirements or mandates for states, which affect their spending decisions. For example, the Affordable Care Act impacted state budget decisions by influencing healthcare spending. Similarly, national energy and environmental regulations can influence state spending on energy infrastructure and environmental protection initiatives. State budget decisions are also influenced by national policies that address issues such as crime and education quality.
Another way national policy decisions influence state budgets is through the determination of funding priorities. For instance, the federal budget process involves Congress making spending decisions across various sectors, including defense, civilian agencies, medical care for veterans, and education. These decisions impact the allocation of funds to specific areas, which in turn guides state budget decisions.
Additionally, national economic policies, such as decisions regarding interest rates and fiscal stimulus measures, can influence the overall health of the economy and, consequently, the revenue available to states. For example, economic policies that promote growth and reduce unemployment can result in higher tax revenues for states. Conversely, economic downturns can lead to reduced tax revenues, forcing states to adjust their budgets accordingly.
Finally, national policies can impact the timing and process of state budget decisions. For example, the Congressional Budget Act, which outlines the federal budget process, can shape the consideration of fiscal policy. While Congress has not strictly adhered to the Act's orderly process in recent years, its rules and procedures still carry weight and can influence the timing and content of state budget decisions. In conclusion, state budget decisions are influenced by national policy decisions in a multitude of ways, including revenue generation, expenditure mandates, funding priorities, economic conditions, and procedural considerations.
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The fiscal year begins on July 1
In Tennessee, the fiscal year begins on July 1. The state legislature typically adopts a budget between April and June, with a simple majority required to pass it. The General Assembly reviews and holds public hearings on the budget recommendations, with the goal of passing a balanced budget before the fiscal year begins.
Tennessee's budget process involves generating revenues and approving expenditures. Revenues refer to money coming into the state from various sources, such as taxes, fees, and grants. Expenditures, on the other hand, refer to the money spent on governmental functions, servicing state debt, and providing public services. The state's budget decisions are influenced by both national and local policy decisions, as well as economic factors.
The governor of Tennessee is constitutionally required to submit a balanced budget proposal. This proposal is then reviewed and amended by the General Assembly, which is required to pass a balanced budget before the start of the fiscal year. The budget process in Tennessee aims to ensure that revenues match or exceed expenditures to maintain fiscal responsibility.
The start of the fiscal year on July 1 sets the timeline for the state's budget process. It allows for the necessary review, discussion, and approval of the budget before the new fiscal period begins. This timeline provides a structured framework for the state's financial planning and management, enabling Tennessee to allocate resources effectively and meet its financial obligations.
The fiscal year beginning on July 1 also aligns with the financial planning of many organizations and individuals, as it coincides with the start of the second half of the calendar year. This alignment facilitates a coherent approach to economic activities and helps stakeholders make informed decisions based on the state's budgetary priorities and allocations.
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Frequently asked questions
Yes, the Tennessee State Constitution requires a balanced budget. The governor is constitutionally required to submit a balanced budget proposal, and the legislature is required to adopt a balanced budget.
The legislature typically adopts a budget between April and June with a simple majority. The fiscal year begins on July 1.
If revenues do not keep pace with expenditures, states like Tennessee generally have to raise taxes, cut services, borrow money, or a combination of these measures.
State budget decisions in Tennessee are influenced by national policy decisions, such as the Affordable Care Act, energy and environmental regulations, as well as local issues, including crime and education quality.
Lawmakers and public officials are elected, in part, to manage the state's finances. This includes generating revenues and approving expenditures.
