The projected Tennessee structural deficit is the mathematical result of projecting spending and revenues, comparing the two, and finding a budget gap or structural deficit equal to the excess of projected spending over projected revenues. Because Tennessee shows a bigger gap than any other major state, there must be something in its spending, its revenues, or some in each that explains the difference from the average state.

To make a long story short, the answer isn’t spending. By the standard national projections used in the study, the demographic factors driving spending such as population and school enrollment in Tennessee will grow somewhat faster than the national average. But Tennessee’s economy and thus tax bases will grow a little faster too. In these characteristics, Tennessee is similar to neighboring states which don’t show the same large structural deficits. The Tennessee structural deficit problem comes from its revenues, not its spending pressures. In sweeping terms, Tennessee’s spending for maintaining current services will grow about as fast as Tennessee personal income grows. So if revenues also grew about as fast as personal income, state and local taxes would remain about the same percentage of personal income they are today. (Economists use the term elasticity to describe the relationship between tax revenue growth and personal income growth. For example, if revenue growth from a particular tax were exactly equal to personal income growth, that revenue source would be said to have an elasticity of one.)