Letters from the Capitol

Letters from the Capitol

By: Governor Phil Bredesen

Dear fellow Tennessean:
Recently I addressed a joint session of the General Assembly to outline my revised budget for next year. In January, I proposed a lean budget based on revenue forecasts that were prepared in December. At that time, we all shared concerns about the national economy and its impact on our tax collections. Since then, the nation’s economy has continued to deteriorate and Tennessee — like many states — faces a substantial revenue shortfall this year. As a result, we need to reduce the budget proposed earlier this year by an additional $468 million.
To place our situation in perspective, Tennessee is not alone. Across the country, two dozen states face budget shortfalls in the upcoming budget year. Our national economy is in recession and energy costs are soaring. Like private sector companies and families facing these challenges and tightening their belts, state government must do the same.
In Tennessee government, we will not on my watch set ourselves above those for whom we work. We’re going to do the necessary work, and we’re going to make the tough choices. That’s why I’ve proposed a revised budget that keeps us living within our means with no new taxes.
I am confident that Tennessee can handle this situation just fine. Our state is in excellent financial shape with good reserves. But now that the magnitude of the problem is becoming clear, we need to act decisively and conservatively. This is not a time for a lack of resolve or wishful thinking.
In order to manage the state and balance the budget, we are going to have to make some tough decisions. First, we will make honest cuts. We will use recurring funds to match recurring expenses, and not fall into the trap of using one-time dollars to fund ongoing expenses. Second, we will protect our major reserves — TennCare and the Rainy Day Fund. As large and tempting as these funds may seem, we’ll need them if the national economic situation worsens. And finally, we will resist calls to take the easy path. We can’t tax our way out of this shortfall. We need to make the changes necessary to live within our means.
Despite the reductions, the proposed budget safeguards pre-K through 12 education. It has been an article of faith for me to always protect education, so I’m pleased that we will be able to provide full funding for Tennessee’s education funding formula, known as the Basic Education Program (BEP), including $59 million for inflationary costs for pre-K-12 education.
What we have had to forego this year is funding for our “BEP 2.0” initiative – extra dollars we had originally hoped to provide – as well as any further expansion of pre-K classrooms. This is a painful step for me, but one that is necessary. Despite foregoing expansion, every classroom and every teacher we pay for today is again paid for, with inflation, in this budget. In Tennessee, education still comes first.
Unfortunately, it is not possible to make the kinds of cuts necessary without affecting state employees. We will have to reduce our workforce by five percent, or about 2,000 people. This is particularly difficult for me, as I very much value the service of our state employees. Our goal is to make these changes to the workforce on a voluntary basis, and our actions will be respectful of employees and designed to minimize negative impact on them and their departments.
We are currently working on the details of a voluntary buyout package that would use $50 million in reserve funds to provide attractive packages to employees in positions that can most easily be reduced while minimizing impact on the public. Using one-time funds to reduce recurring payroll expenses is an appropriate and responsible use of these resources.
What we are undergoing in Tennessee is a reflection of larger forces. The national economy will wax and wane, and the whole relationship of states with the federal government is also changing. Tennessee, along with 49 other states, will be going it alone without out much federal funding in the years ahead. We have already seen drastic cuts in federal funds for Children’s Services, and we need to prepare ourselves for less federal funding across the board.
I believe we have proposed honest reductions to deal with our revenue shortfall. While we’ve had to make tough choices, tight years don’t need to stall our progress. By managing carefully and identifying fundamental areas of focus, we can continue to move Tennessee forward even in tough times.
If you have questions or comments about this issue or any other, please email me at phil.bredesen@state.tn.us.
Published in The Messenger 5.22.08

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