Let’s say that you want to buy the example property we mentioned earlier. Remember, this property consists of two houses on one 5,197-square-foot lot, which were built in 1948. The mix has two one-bedroom houses that are in good condition. The owner wants $279,000 for this property. Is that a fair price? We’ll see. After checking with a few local brokers and appraisers, let’s further assume that you are able to locate three comparative sales (comps). We’ll call these comps Properties “X,” “Y,” and “Z.” Here’s what we know about those properties.

Property “X” also has two houses and looks like it may have been built by the same contractor as the property you want to buy. The difference is both units have two bedrooms each (the Lawndale duplex has one one-bedroom and one two-bedroom). Property “X” also has nicer landscaping. This property sold two months ago for $293,900.

Property “Y” is an attached duplex, was also built in 1948, and is the same size and condition as your property. The units have open parking instead of garages. This building sold a few months ago for $264,000.

Finally, Property “Z” is also just like the property you want except that it sold one year ago for $262,000. Because the sale occurred so long ago, it may be less relevant, albeit still important, to analyze, for there aren’t any other comps available.

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.)