News on state budget grim

On November 15, 2009, in News 2009, by Mark Norris

Hundreds of millions in cuts will be needed for the coming fiscal year

By Tom Humphrey,
November 15, 2009

NASHVILLE – Phil Bredesen, preparing the last state budget he will present as Tennessee’s governor, will begin on Monday hearing recommendations from his most trusted advisers on how to cut spending plans to account for relentless bad news.

Tennessee, according to a nationwide study released last week, is fiscally better off than many states. Further, according to a legislative committee’s staff calculations, the current state revenue shortfall is less severe than the Bredesen administration estimates.

But there is no quarrel with the general proposition that Tennessee state government faces a grim situation.

The budget plan adopted in June and now in place for the present fiscal year, which began July 1, includes the anticipation that about $750 million in cuts will be needed for the fiscal year beginning July 1, 2010 – most of that amount in reductions avoided this year by using federal stimulus money.

And that was before things got worse. According to the state Department of Finance and Administration, which is part of Bredesen’s administration, state tax collections are already $101.3 million less than assumed when this year’s budget was enacted.

“The stimulus has kind of concealed what’s been going on in terms of revenues,” Bredesen said.

Overall, federal funding provides about $12.1 billion of the $29.6 billion state budget this year. General state taxes provide about $12.6 billion – the shrinking portion that funds general state government – with the rest coming from earmarked revenues such as college tuition and license fees.

The Legislature’s Fiscal Review Committee staff has calculated that the state revenue shortfall currently is just $7.2 million below what it was projected back when the current budget was presented to lawmakers. An explanation of the differences gets pretty complex, including a committee estimate that the state’s tax take will decline more dramatically in the next few months than does the Bredesen administration’s projection of a rebound.

‘A very deep hole’

But there is uniform agreement that the state’s budget picture is grim.

“The state remains in a very deep hole that it is not going to climb out of in this budget year,” said Jim White, executive director of the Fiscal Review Committee. “That hole is going to require very painful and drastic budget reductions across much of state government. The only question is how bad it will be.”

White says $290 million in cuts will be needed in addition to the programmed $750 million in cuts.

Bredesen, accepting his staff calculations, has told his department heads to present him with suggestions for budget cuts of 6 percent and to include contingency plans for adding another 3 percent in cuts if things go even worse than expected. That process begins Monday with the Department of Education.

The state funds public schools statewide through the Basic Education Program. The governor and the Legislature avoided cuts to the BEP for the current year.

Avoiding them again, Bredesen said, will be a priority. But any increase in education funding, such as needed for making more children eligible for pre-kindergarten programs, is forgotten.

Another priority is honoring commitments to economic development projects, Bredesen has said.

Keeping education and economic development commitments whole, of course, requires deep cutting in other areas, such as the Department of Children’s Services or the Department of Mental Health, which were aided by federal stimulus money this year.

Employee furloughs an option

Layoffs of state employees are likely, the governor says, though he will look at alternatives such as furloughs.

“This will be my toughest budget year,” said Bredesen, who will leave office in January 2011, after his successor is elected next year. “I hate to go out that way, but that’s the way it is.”

Bredesen has taken some partisan criticism for the budget situation. Senate Republican leader Mark Norris, for example, recently declared Bredesen should have made deeper cuts in the current budget in accord with a GOP proposal that the Democratic governor branded “stupid” during the legislative session.

But Senate Speaker Ron Ramsey, a Republican who is seeking his party’s nomination for election as governor next year, said he generally agrees with the Bredesen approach.

“The governor is doing exactly as I’ll do when I’m governor,” he told reporters last week.

“It’s going to be a tough budget year. The only upside is that people realize we’re in tough times and it’s not going to be easy.”

Tennessee is apparently in better shape, fiscally speaking, than many other states.

In a rating of all 50 states’ fiscal status last week, the Pew Center for the States declared that there are 10 states threatened with “economic disaster,” with California leading the list. The rating assigned a score for each state, with the higher scores indicating a more dangerous financial situation.

California had a 30, and all the others in the top 10 problem states had a score of 22 or greater.

Tennessee’s score was 15, the same as North Carolina. Other border states have lower scores, including Arkansas at 14 and Virginia at 13, while others had higher scores, including Kentucky at 21 and Mississippi at 20.

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