Even as clothing retailers and restaurants took hard hits in an April economy that saw Tennessee sales tax collections fall 6%, other businesses like grocery stores and building materials had increased sales, according to one of the state’s top economists.

“We’ve had a lot of substitution,” said William Fox, director of the University of Tennessee Boyd Center for Business and Economic Research.

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For instance, while sales tax collections from eating and drinking establishments fell 29.5%, food stores saw sales tax collections increase 24.5%. People couldn’t sit down at restaurants closed during the COVID-19 crisis, so they started cooking more at home.

And while apparel and accessory stores took a sales tax hit of 45.2%, building materials jumped 12.9% and general merchandise collections went up 7.4%, according to Fox’s presentation to Gov. Bill Lee and the State Funding Board. The board will use the information to make economic growth projections for the rest of fiscal 2019-20 and all of fiscal 2020-21.

Considering unemployment rates hit 14%, Fox said any other time he would consider the state in a “worst-case scenario.” The Greater Memphis area saw 79,187 claims from March 21 to May 16, up 15.6%, compared to 184,996 for Northern Middle Tennessee, up 16.5%

Yet, Fox told the board: “The outcome is a bit less negative on how taxes will perform this year.”

Overall, he is anticipating zero revenue growth for fiscal 2020 and a 2.7% decrease in revenue growth for fiscal 2020-21.

An East Tennessee State University projection foresaw the biggest shortfall for fiscal 2021 at $1.7 billion, while Fox forecast an $801 million shortfall for next fiscal year. The Tennessee Department of Revenue predicted a $1.29 billion shortfall and the state’s Fiscal Review forecast a $583 million shortfall.

Once federal unemployment benefits disappear, Fox is predicting “recession-type” activity for the rest of this year but recovery in 2021.

On the other hand, Tennessee’s gross domestic product saw a 5% decline in the first quarter, and it’s likely to dip by 30% in the second quarter as manufacturers shut down. Some in the automotive industry have started to gear up again.

Fox’s biggest concern is the state’s franchise and excise tax collections, which have been extended into July. He’s expecting “significant” decreases but says predicting the amount is difficult.

He also told the Funding Board many companies will see the COVID-19 pandemic as the time to “right size,” deciding not to open some stores and then choosing to get rid of some stores permanently.

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One bright spot among the sales tax collections was the fact nearly every county in the state experienced total increases, including Shelby, which saw sales tax collections jump 16.5% to $33.7 million in April, up from $28.5 million a year ago.

“We should be elated,” Fox said.

In addition to increases from grocery and home improvement store sales, the state started seeing collections on remote sales since it began taking in revenues from in-state online sales.

The Tennessee Legislature will use the growth rate set by the Funding Board to plug holes in this year’s $39.1 billion budget, which saw a shortfall of $690 million from March and is expecting to see a shortfall of about $1.5 million when the next sales tax report comes back in early June.

Lawmakers are to start work in earnest on the budget next week, including the $39.9 billion budget for fiscal 2021, though they may be hamstrung by a lack of solid information.

Said Lt. Gov. Randy McNally on Twitter: “We’ve already trimmed the fat and most of the meat, so we’ll be into the bone of the budget. Probably in the 42 some odd years that I’ve been in the legislature, this is the worst budget crisis that we’ve faced.”

The virus and how it plays out is expected to control much of the economic outlook.

Statewide, Tennessee reported 20,306 cases Wednesday, May 27, with 13,900 recovered, 1,650 hospitalized and 353 deaths out of 409,630 tested. Shelby County has seen 4,615 of those cases.

Once people start moving around, hospitality and tourism could get back in the swing by July and August, Fox told the Funding Board.

The state is starting to loosen guidelines for tourist attractions such as Dollywood, and because people will be able to drive the short distance to the East Tennessee attraction, Fox expects the tourism seasons to be solid, considering the circumstances.

“I think it will be quick on the uptick,” Fox said.

The UT economist, who made his presentation to the board via Zoom while on vacation, also pointed out people are more likely to leave big cities such as New York City and move to Tennessee because they’ve learned to work remotely.

“This is going to, I think, in the long term enhance growth in Tennessee,” Fox said.

Jon Smith, director of the East Tennessee State University Bureau of Business and Economic Research, presented a bit gloomier outlook for the next year and a half.

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His report shows a 2.6% decline in fiscal 2019 and a larger dip in fiscal 2021.

“There’s an enormous potential for the economy to take some real body blows because of the change in consumer patterns,” Smith said.

The ETSU report predicts Tennessee won’t return to the rate of revenue collections seen in January and February until late 2021 or early 2022.

Smith presented five scenarios for an overall economic rebound, some taking up to six years, and discussed one showing the state would not return to its previous level.

Yet while he acknowledged it could take several years for the state’s economy to bounce back, Smith called the potential of never returning “awfully negative.”

He did note, however, Johnson City in East Tennessee needed about 10 years to recover from the Great Recession, which started in 2009.