Tennessee State Representative Harry Tindell provided Chamber members a blunt, straightforward review of the state budget during April’s legislative briefing. The event was the third in a series sponsored by AT&T in which Chamber members are updated on the ongoing Tennessee legislative session.
As chairman of the House Budget Subcommittee, Tindell detailed a bleak situation.
“I wish I was bringing good news, but as many of you know, as cycles change in the economy so do the fortunes of state government,” Tindell told those gathered inside the Chamber’s Market House.
“This is one of those years where trends are pointing downward.”
Tindell referenced Governor Phil Bredesen’s budget proposals made public in January and February and presumed at the time to be conservative. The governor set forth his proposal based on December’s revenue projections, but those projections have proven to be too optimistic. Tindell told attendees the state is now in a situation where it’s most likely going to slice a layer off the top of the cake instead of adding a layer to it.
“This will be painful to some people,” Tindell said. “It probably won’t be catastrophic or irreversible but it’s going to be a tough year.”
Tindell noted the state was seeing lower returns in revenue as early as last August. This past holiday season did little to provide recovery.
“Sales tax revenue during December, which is a big period, started underperforming as well,” Tindell added. “So now instead of firing on all cylinders, we’re under firing on fewer than we need. It’s a concerning situation.”
Tindell says it appears the state is facing a $400 million dollar shortfall through eight months of the present fiscal year.
On top of the state situation, the federal government is in the midst of its own budget tightening. Congress has been reducing healthcare funding and road funding to the states. State road monies are down dramatically and few new road projects have started in Tennessee in quite some time.
“While we funded a lot of higher education building projects and state building projects in the past few years, we’re not starting any new projects because the cost of construction is so high. Increases in the price of oil (a central component in asphalt) and increases in the price of steel, cement, labor, and just about everything that goes into road and bridge construction, has afforded us about half of what we used to get for a dollar of road spending.”
The upcoming fiscal year isn’t going to be solely doom and gloom. Due to franchise and excise tax revenues in recent years, the state’s rainy-day fund is in a better position than it’s ever been. This should be of comfort as the state looks towards the future, a future, Tindell noted, which will include a few state programs that should not feel the effects of a tighter budget. These programs include corrections, TennCare, health and human services, and disabled and mental health services.
However, the negative forecast will apply to state and government employees expecting pay raises in fiscal year 2008.
“Pay raises for state employees are on the chopping block and there are going to be many unhappy workers,” Tindell said. “However, I would be surprised if both houses didn’t try to find some money, even if it’s just a one-time bonus of something close to two percent.”
The Chamber’s legislative briefings are key opportunities to hear from legislative leaders and to share the concerns of the business community.
