State Budget Practice Report Cards and Budget Resource Guide
Tennessee was one of only five states winning top A average grades in three of five budgetary categories evaluated for fiscal 2015 through 2019. California, Hawaii, Idaho, and Utah also boasted three As apiece.
Tennessee won an A in transparency in part because of its reporting on deferred infrastructure maintenance. It is only one of five states to do such reporting. Though this information is not included in the budget, the Tennessee Advisory Commission on Intergovernmental Relations, a state agency created in 1978, is required by statute to assemble an inventory of needed public infrastructure. It issues reports that include the estimated cost of the deferred infrastructure liability over a five-year period. In 2020, the commission estimated that the state would need at least $58.6 billion of public infrastructure improvements in the five years ending in June 2023.
The state also earned As in budget maneuvers and reserve funds. It was one of eight states that eschewed moving revenues from future years to the current budget, deferring spending to achieve budgetary balance, or using borrowed money or the sale of assets to support operating expenditures. Tennessee won a top grade in reserve funds for having policies that govern withdrawals and replenishment for its revenue fluctuations account. The state also considers revenue volatility in setting reserve funding goals.
The state’s C average in budget forecasting stems from its failure to provide multiyear expenditure or revenue forecasts. In both areas, Tennessee makes projections for only two years. Its B in legacy costs reflected actuarially recommended funding of public worker pensions but not of other postemployment benefits (OPEB), primarily health care. The state’s pension was 94 percent funded in 2019, 23 percentage points above the total for all states.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.