Gov. Phil Bredesen presented a revised “live within our means” budget Monday night to a joint session of the state legislature and members of the Blount County delegation said, for the most part, they liked what they heard.
State Rep. Joe McCord said “conceptually” he agreed with what the governor is trying to accomplish and the manner in which he is doing it. “One quote was that it was a ‘Live within our means’ budget, and that’s how he tried to approach it and that’s how we’re approaching it,” McCord said. “We will find the detail, and there-in lies the Devil.”
McCord said statistics maintained since 1961 showed this third quarter in the fiscal year was the worst on record since 1961. The state isn’t alone in its budget crisis, as more than 25 states are having budget shortfalls this year, he said.
The revised budget Bredesen proposed would use recurring revenue to pay recurring expense, wouldn’t take anything from the rainy day fund and would cut $468 million from the budget.
“These are honest cuts, not fudging numbers with rainy day funds and recurring vs. non-recurring dollars,” McCord said.
State Rep. Doug Overbey said that despite some the hardship that may be suffered by state employees and possibly a reduction in some government services, constituents expect the government to live within its means and to “tighten the belt” when revenues are low. “I do think it’s appropriate not to use the rainy day fund at this point. That is only building in a problem later on and if the economic conditions worsen, there remains the rainy day fund for a fall back position,” he said. “I think times like these do make us prioritize and that is what the governor has proposed. Over the next couple days, the finance committee will be exploring details.”
State Sen. Raymond Finney said lawmakers had been anticipating the governor’s revised budget with cuts for several weeks. “We knew what was coming. We just didn’t know the final numbers,” he said.
The senator said Tennessee, like many other states, is feeling the recession, and the governor proposed cuts to deal with the situation. “I think just about most departments in the state will be affected somewhat, and we’re hoping to be as fair as possible,” he said.
The senator said lawmakers gave the governor a couple extra weeks to come up with the revised budget, in part to get tax revenue figures from April, a historically good month for revenues. Lawmakers also wanted to see estimates for next fiscal year, which begins in July.
McCord said the budget is responsible. “The cuts are what we have to do to live within our means and I think what he has proposed. It doesn’t set us on an irresponsible course to a budget nightmare five years down the road,” he said.
McCord said the governor outlined the five areas where the biggest cuts would occur:
“The governor’s pre-kindergarten program would not be expanded. “Obviously I agreed with this,” McCord said. “You’ve got to take care of K-12.”
“It would not fully fund the Basic Education Program 2.0. “The BEP, when it was passed last year, Doug and I voted against it and a lot of people knew it had a negative effect on local schools,” McCord said. “In a way it may be a mixed blessing they won’t continue further changes of BEP.”
Higher education received a 4.1 percent reduction equal to $55 million, which means no new capital projects. “It’s a good thing we were able to get the Pellissippi Blount campus in last year,” McCord said. “There was a request from the governor this be absorbed rather than placed on the backs of students with higher tuitions.”
The governor proposed in December putting $35 million toward the rainy day fund. The revised budget will have put no new funds into the rainy day fund, but no money will be taken out of it to balance the budget either.
The governor has proposed no increase in pay for state works and also proposed reducing the workforce by five percent, equal to around 2,000 people. “They’re going to try a buy-out and make this on a voluntary basis where possible,” McCord said. “Not all state employees will be offered a buy-out. To put that in perspective, California proposed 20,000 educators be laid off.”
McCord said that by July the state government would have a better idea of the number of people voluntarily leaving. “At that point, if it isn’t effective, the administration may have to look at forced lay offs,” he said.
McCord said the governor reported that he expected a $229 million reversion or turn-back of funds by departments that didn’t spend all of their budgets. This helps in crafting next year’s budgets as they will mirror what wasn’t spent the previous year, Overbey said.
“That, in effect, reduces recurring expenses,” he said. “We basically build on budgets from prior years. If you take $100 out this year, it’s automatically taken out next year.”
Overbey said the finance commissioner was set to meet with the House and Senate finance committees. “Each finance committee will be considering the revised budget, and I’m sure asking tough questions as well as offering our own opinions,” he said.
McCord said one aspect of the revised budget Bredesen proposed that may not be very exciting is how it would affect the state’s bond rating. “It’s vitally important that it should have no negative effect on our bond rating, which also translates into our local bond rating,” he said. “We’re in financially sound shape.”
Overbey said the bond rating agencies should see this as a responsible approach to worsening economic conditions. “What they look for from us is to make sure we’re matching recurring expenses with recurring revenues,” he said.
Finney agreed with the governor’s plan to use only recurring revenues rather than tapping into reserves. “If we’re not careful how we use reserve funds, that affects bond ratings and causes everything to be more expense in the future,” he said. “It’s bad policy to use reserve funds for short-term problems.”
Finney said lawmakers are trying their best to do what they can with limited money. “I see a resolve in legislators to work with the governor to come up with the best plan possible,” he said. “We’re getting through this and I think we’re being as responsible as we can. I hope this is a short-lived downturn in the economy. We’ll just have to see how this plays out.”