JacksonSun
March 18, 2008

NASHVILLE — Tennessee’s revenue picture continues to worsen, but officials maintain that the state will be able to make do without drastic spending cuts facing other states.

Gov. Phil Bredesen, a Democrat, has asked state departments to trim spending this year to try bridging a funding gap that had grown to about $212 million by last month.

Bredesen has also targeted spending in next year’s budget to account for the worse-than-expected tax collections, but he’s resisted calls to tap Tennessee’s reserve funds.

The state expects to have about $750 million in its so-called ‘‘rainy day’’ fund by the end of the budget year, and has another $600 million in TennCare reserves.

State officials remain concerned that federal rule changes could leave the state on the hook for hundreds of millions of dollars it had not been previously been responsible for in TennCare, the state’s expanded Medicaid program.

State Finance Commissioner Dave Goetz said Tennessee has avoided some of the more dire economic scenarios of other states because of strong planning and because it does not rely on a personal income tax.

Still, sales tax collections over the crucial Christmas holiday season were lower than the year before, which is leading to concerns that the state’s budget situation could be getting worse.

‘‘We are going to have a larger deficit than we originally said,’’ Goetz said.

But Goetz said the administration is prepared to deal with a downturn because of experience gathered during more extreme shortfalls — like the more than $500 million funding gap that greeted Bredesen when came into office in 2003.

Still, the lagging revenues may present some challenges to Bredesen’s budget priorities.

Bredesen wants to spend $25 million to add public pre-kindergarten classroom as part of his long-term goal is to expand pre-K access beyond children who qualify for free or reduced lunch.

But state Republicans — who were already tepid in their support of pre-K before the budget crunch set in — may now have more leverage to trim Bredesen’s plans.

‘‘We’ve had some reservations about starting a new program, more new pre-K classes, in a year where we’re financially strapped,’’ said Senate Speaker Ron Ramsey, R-Blountville.

Senate Republican Leader Mark Norris added that the state should be spending more money on the existing K-12 program rather than adding pre-K classrooms.

The state had planned to spend an additional $100 million on K-12 education next year, but Bredesen now only proposes $84 million because of worse-than-expected cigarette tax collections.

Norris said the state should find other ways to come up with the money.

‘‘It is inconsistent to propose much in the way in new spending, particularly if you’re not keeping your commitments made last year,’’ Norris said. ‘‘We should be putting another $100 million in there.’’

Bredesen called his pre-K plans reasonable, and said he expects to find a ‘‘sensible balance’’ among budget priorities.

‘‘I don’t see it as an all-or-nothing thing — that we ought to do all of one and nothing of the other,’’ he said. ‘‘I think we keep them in balance, we keep moving forward.’’

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