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Evaluation of the Fiscal Capacity formula


March 2023

Authors: Linda Wesson, Cassie Stinson, and Dana Spoonmore

Full Report

Public Chapter 966 (2022), the Tennessee Investment in Student Achievement (TISA) Act, requires the Comptroller of the Treasury to evaluate the fiscal capacity calculation, which is used to determine the percentage of total local funding each county must contribute to K-12 education. The fiscal capacity calculation is intended to estimate the ability of counties to raise local revenues. Each county’s estimated ability is then used to fairly and equitably distribute state funding, and thus equalize education opportunities for Tennessee students, regardless of where they live.

The act requires the fiscal capacity of each county to be determined from the average of the fiscal capacity estimates generated by the formula established by the Boyd Center for Business and Economic Research at the University of Tennessee and the formula established by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR). The Comptroller’s 2023 evaluation found that both formulas appear to be reasonable methods for estimating fiscal capacity. The evaluation does not include any recommended changes.