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Tennnessee faces continued budget crisis

By: Lauren Gregory
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Marilyn Wilson

A sweeping $106 million emergency budget reduction announced Tuesday probably will not be the last sacrifice Tennessee’s public service agencies will have to make in these tough economic times, according to state Finance Commissioner Dave Goetz.

“We don’t even know what the effect of the financial crisis that started in September is really going to be,” Mr. Goetz said Tuesday in a conference call with reporters. “This gets us into an interim step. It’s a step-wise approach towards being able to deal with what is a very serious fiscal crisis.”

Although $126.5 million in cuts already had been “baked into the budget” to avoid shortfalls, debilitatingly low sales tax collections have forced the state to pull $106 million more out of money already promised to various agencies this year, Mr. Goetz said.

He was unable to provide the specific breakdown of affected agencies Tuesday but said most state agencies will be affected. The biggest hits included $44 million to TennCare — which already had to weather $20 million in cuts as part of the original $126.5 million cushion — and $42 million on top of the original $1.7 million cut from higher education.

The other $20 million in new reductions are spread among other agencies based on “what we felt we could do immediately and what people could manage their way through,” Mr. Goetz said.

The new strategy is based on projections for September sales tax revenues, which will not be finalized for release until Thursday but “can’t be good,” according to Mr. Goetz.

But looking at a 30-percent decrease in car sales is troubling, he said. Sixty-two percent of the state’s revenue comes from sales tax and, of that, 10 to 12 percent is from auto sales.

“If, through some economic miracle, things were to turn around, we could restore some of these funds,” he said. “But right now, I don’t know of anyone who believes that in fact will occur.”

Even more cuts may be necessary depending upon future economic conditions, he said. Other options would be dipping into the state’s $750 million “rainy day fund” or considering layoffs, though Mr. Goetz noted that the state Legislature has refused to talk about firing anyone before January.

Gov. Phil Bredesen attempted to avoid layoffs by asking 2,011 employees to take voluntary buyouts over the summer. But only 1,521 ended up taking the offer, reducing savings from a projected $64 million to only $42.7 million.

On Tuesday, the governor was “consumed with the presidential debate” — taking place that night in Nashville — and unable to comment on the budget situation, his spokeswoman, Lydia Lenker, said in an e-mail. Ms. Lenker referred all questions to Lola Potter, Mr. Goetz’s spokeswoman.

Affected agencies have been struggling with the new budget cuts since late last week, when they first were notified of the additional funds they must cut by the end of the year. The order comes on top of an Aug. 18 memo directing agency heads to plan on cutting at least 3 percent from their budgets for the upcoming 2009-2010 fiscal year.

TennCare officials still were reeling Tuesday and were unsure exactly how they will make up the shortfall, according to spokeswoman Marilyn Wilson.

Cutting the programs and services that do not fall under federal funding requirements would be one option, Ms. Wilson said, but “any cuts are going to be difficult. In social services, we’re counter-cyclical to the economy. As the economy goes down, the need for social services goes up.

“We’re well aware that we’re one of the state’s largest programs, and we wouldn’t expect to be immune to cuts,” she said. “We’ll just have to figure out how to take our limited resources and stretch them even farther.”

The Tennessee Board of Regents, which oversees the two-year state colleges, including Chattanooga State Technical Community College, will be forced to cut $25 million from spending, said Mary Morgan, a spokeswomen for the Board of Regents.

Chattanooga State will cut $844,400 from the $24.5 million originally appropriated by the state, she said. Board of Regents universities such as the University of Memphis and Middle Tennessee State will lose $13.5 million in state appropriations, she said.

The University of Tennessee system, which must weather $17 million in cuts, will submit its plan for budget reductions by Wednesday, according to Hank Dye, UT’s vice president for public and government relations.

“We are working the details out,” said Mr. Dye. “We will try to minimize the impact on the quality of our programs. We will be strategic.”

The University of Tennessee at Chattanooga must return $1.4 million in allotted state funds, according to Chancellor Roger Brown. That will force the school to implement a hiring freeze and will preclude the purchase of new equipment and funding for some faculty research, Dr. Brown said.

“We will have to seriously look at postponing projects we had hoped to get done this year,” he said. “Anything you can imagine that we had planned to accomplish this year may get put off. You have to hope that it gets better, but we don’t know that it will get better.”

Staff writer Joan Garrett contributed to this story.

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