May 11, 2010

Gov. Phil Bredesen and leaders of the state Senate’s Republican majority Tuesday outlined plans for revising the state budget plan the governor proposed in February, agreeing on some things but clashing on taxes, environmental spending and pay for teachers and state employees.

A highlight to Bredesen’s proposed changes in his earlier draft budget is an extra $341.6 million in one-time “contingent” spending for the coming year, including $100 million for community colleges, $51 million for two unidentified businesses opening operations in Tennessee – at least one in the eastern part of the state — and $16.9 million to help build a fish hatchery.

Some of the contingency money could also wind up going to cover costs that local governments have incurred from recent flooding in Middle and West Tennessee under a complicated and tentative arrangement.

The availability of the money is contingent on passage in Congress of legislation that would grant a six-month extension of aw, part of the federal stimulus package, that is now giving state governments more federal matching money than they normally receive. Finance Commissioner Dave Goetz said the legislation has passed the U.S. House and Senate, but in different forms.

About 30 other states have already included similar anticipated funding in their budgets, Goetz said, but Bredesen has chosen to add it only as a contingency, meaning it would not be spent unless the federal funds are appropriated.

The Republican alternative budget, as presented by Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, would not impact the contingency plans.

The GOP plan is founded on the premise of rejecting various proposals Bredesen has made to increase state revenues and avoid further budget cuts. The biggest items are $85 million that would come from requiring the full state sales tax rate to be charged on single-item purchases costing more than $3,200 – exempting vehicles, boats and manufactured home – plus $21 million by repealing a current partial exemption to sales taxes on cable TV bills.

Republicans had announced their opposition to the tax increases earlier, but not how they would balance the state budget by eliminating the revenue Bredesen projects from enactment of his tax proposals. Key provisions of the Republican plan unveiled Tuesday include:

-Eliminating a one-time, 3 percent salary bonus for state employees, teachers and higher education employees that would cost $113 million. State employees and teachers have not had a general pay raise for three years.

-Take about $15 million in funds that Bredesen proposes go to environmental and “agricultural enhancement” projects and instead place it in the general fund for spending on general government. That eliminates funds for such things as purchase of land for state and local parks and preservation of wetlands.

-Scrapping Bredesen’s proposal to raise driver’s license fees by about $2 per year to avoid layoffs of about 85 employees in the Highway and at driver’s license examination stations. The Bredesen plan also called for using the fee increase to cover purchase of a new radio communication system for the Highway Patrol. Both the GOP plan and the revised Bredesen plan call for covering the radio system cost by other means.

-Shifting about $65 million in spending that Bredesen had marked as “recurring,” meaning it will presumably continue indefinitely into the future, to “non-recurring,” meaning it will presumably end after the next budget year. The biggest item there is $34.5 million in “career ladder” salary supplements, which would cease to be funded after two years under the GOP plan.

All those provisions were criticized by Democrats.

About 29,000 teachers now receive career ladder salary supplements, typically $3,000 per year, according to Jerry Winters, lobbyist for the Tennessee Education Association.

The career ladder program launched by former Republican Gov. Lamar Alexander in the 1980s as a compromise merit pay system. Currently, no new teachers are being added to the program, but those that qualified years ago still draw the salary bonuses.

“That adds insult to injury,” said Winters, citing the potential future pay cut for career ladder teachers and elimination of the proposed 3 percent bonus for the coming year.

After McNally’s presentation, Senate Democratic Leader Jim Kyle of Memphis called on the Republicans, who hold a solid majority on both the Finance Committee and in the full Senate, to move quickly by voting on it today (Wednesday) in committee and on the Senate floor as early as Thursday. But Republicans balked at the idea, indicating that some modifications may come through negotiation.

“A wise man once said that sometimes when we go slower, we get there faster,” said Senate Speaker Pro Tempore Jamie Woodson, R-Knoxville. “I don’t think I feel compelled to act in haste.”

(Last year, Senate Republicans presented an alternative plan to Bredesen’s budget, but wound up retreating from their proposal. “We held our nose and went with the governor’s plan,” Senate Majority Leader Mark Norris, R-Collierville, recalled Tuesday in suggesting that may have been a mistake and that Bredesen is now “straying from” his own long-range plans.)

In the House, where Republicans hold a narrow 51-48 majority, Speaker Kent Williams and Democrats have said they are inclined to dip further into state reserve funds than Bredesen has proposed and avoid some cuts outlined in his original budget. That means the House could pass a budget plan substantially different than the Senate, leading to a potentially long-running dispute over resolving those differences.
Other proposed “contingency” funding in the new Bredesen plan:

-$50.9 million for higher education institutions around the state.
-$29.5 million for a new Highway Patrol radio communication system and equipment used in issuing driver’s licenses.
-$31.5 million for development of a WestTennessee ‘megasite” for industrial recruitment.
-$10 million for “critical access” hospitals with a high percentage of low-income patients.
-$10 million for the “Small Business Jobs Opportunity Fund” operated by the Department of Economic and Community Development.
-$5 million for the National Civil Rights Museum in Memphis.

House Democratic Caucus Chairman Mike Turner of Nashville, who listened to the GOP presentation, said he had “promised not to say anything is dead on arrival” but doubts the Republican plan can win appreciable Democratic support and, if adopted by the Republican majority, would help elect more Democratic legislators in November.

Bredesen’s new budget amendment also envisions providing flexibility to deal with the costs of flood damage to local government facilities in Middle and West Tennessee, according to Goetz. The Federal Emergency Management Agency (FEMA) covers 75 percent of local government costs in a disaster area, but the local government must come up with 25 percent. By tradition, state government has paid half local government share.

The state currently has about $17 million in funds held for such emergency costs, Goetz said, but that will likely be exhausted quickly once bills from flooding early this month come in.

The “contingency” funding of $100 million for community colleges and $16.9 million for a fish hatchery in Carter County could be raided to cover flooding costs under the way the contingency funding proposal is drafted, Goetz said. Otherwise, the money would come out of the state’s “rainy day” reserve fund.

The revised Bredesen plan also eliminates $430 million in cuts earlier proposed in payments to health care providers through the TennCare system. That was made possible by the Legislature’s approval last week of a new 3.52 percent charge to hospitals, known as an “enhanced coverage assessment,” that will trigger a flow of $430 million in expanded federal funding.

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