State Budget Practice Report Cards and Budget Resource Guide

Tennessee received straight A’s for its lack of budgetary maneuvers and its handling of fiscal reserves, two of the five budget categories evaluated by the Volcker Alliance for fiscal 2015 through 2017. The state’s funding of legacy costs and its budget transparency practices earned B marks, while its lone C was in budgetary forecasting.

Its top grade in budget maneuvers—one-time actions to achieve balance—reflected Tennessee’s refusal to defer recurring expenditures, shift costs and revenues from one year to another, fund recurring expenditures with debt, or use asset sales or up-front revenues to keep the budget balanced. The A in reserve funds was driven by Tennessee’s legislative mandate that the state, to the extent practicable, offset revenue shortfalls with reductions in expenditures before tapping the rainy day fund.

Tennessee’s lower grade in budget forecasting stemmed from the lack of multiyear expenditure or revenue forecasts, which can make it difficult to do meaningful long-term financial planning. The state estimates revenues and expenditures for only two years in budget documents, although it does disclose longer-term projections for the state lottery fund.

Budget transparency was generally in line with best practices, save for an absence of disclosures about deferred infrastructure costs, a shortcoming shared by all states except Alaska and California.

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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 presented here are taken from the 2017 Volcker Alliance report, Truth and Integrity in State Budgeting: What Is the Reality? which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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