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Haslam’s Budget Cuts Programs 2.5 Percent, Gives State Workers Raises

by Mike Morrow on March 14, 2011

Gov. Bill Haslam delivered a $30.2 billion budget proposal to the Tennessee General Assembly on Monday, his first as governor and one that despite tough economic times managed to offer state employees a 1.6 percent salary increase.

The plan includes no new taxes, although it bakes in $449 million in a hospital assessment fee, meant to decrease TennCare expenses, a strategy first implemented last year and designed to draw down matching funds from the federal government. It would have to be approved by the Legislature as part of the budget plan.

The budget assumes 3.65 percent revenue growth in 2011-12 and follows seven consecutive months of positive revenue figures, which further signals an overall recovery from the deep recession that had gripped the nation. Haslam and budget officials warned, however, that even though there is growth in revenue those funds are quickly eaten up by mandatory expenses and inflation.

The administration is cutting state programs an average of 2.5 percent.

The Haslam budget proposes reductions of $39.9 million in TennCare; $20.2 million in higher education; $7.8 million in corrections; $3.3 million in pre-K-12 education; $2.3 million in children’s services; $1.9 million in health; $1.8 million in intellectual and developmental disabilities; $1.5 million in mental health; $1.1 million in the Department of Revenue and more than $53 million in other agencies.

The reductions in TennCare include cuts in reimbursement rates for non-hospital and professional providers, cuts in reimbursement to emergency room physicians for non-emergency services, placing dosage limits on opioid detox for adults and cuts in reimbursement rates for C-sections.

Cuts in higher education affect the four-year universities — including $3.4 million at the University of Tennessee-Knoxville — as well as reductions at the state’s community colleges and technology centers.

Reductions in the Department of Correction include more than $5 million in cuts for housing inmates in local jails by merging two existing inmate programs and extending inmate sentence credits to additional inmates, which will increase admissions to prisons.

The reductions in the Department of Education include $1.5 million by abolishing several administrative and specialist positions. Reductions in the Department of Children’s Services include cuts in community treatment facilities. Cuts in the Department of Mental Health include reducing the number of beds at the Western Mental Health Institute and reducing the number of people able to receive community mental health recovery services. Reductions in the Department of Health are applied to operational expenditures including travel, printing and communications.

“We have made a lot of hard decisions in this year’s budget, but there are still more to come,” Haslam said. “State government is still not nearly out of the woods yet, and there’s still work to be done.”

The budget fully funds the Basic Education Program, the funding formula for K-12 schools, which was widely anticipated, given the state’s emphasis on education reform. The base budget for higher education would be reduced by 2 percent, although aid for low-income college students would be sustained.

Haslam says his budget restores $69 million to the state’s rainy day fund.

The 3.65 percent anticipated revenue growth would be $473 million above earlier estimates.

While the 1.6 percent increase in salary for state employees meets Haslam’s stated desire to boost pay after four years of no raises, the budget still calls for 1,100 fewer positions in state government, a reduction budget officials said they hope to attain in part through attrition, including retirements and not filling vacant positions.

The $30.2 billion proposed budget includes $13.4 billion in state funds, $11.9 billion in federal dollars and $4.9 billion in other revenues and fees. The budget picture reflects efforts under the previous administration headed by Gov. Phil Bredesen to make for as soft a landing as possible, yet one-time funds were used for many recurring expenses.

Haslam attempted to put the state’s financial condition in perspective.

“When I talk to other governors, I like the position we’re in,” Haslam said. “That being said, we do still have a $1 billion-plus hole to climb out of. While ours might be a little better than some other people’s situation, that is a real number.”

Haslam said the budget hole, which he referred to often in his campaign for office, includes about $1.1 billion in federal stimulus funds and another $300 million taken from rainy day funds or TennCare reserves that covered the current year’s budget.

But Haslam made a special point to state his intent of restoring reserve funds.

“One of the big issues we have to work with is: How do we build the rainy day fund back up? It very much served its purpose over the last two or three years,” he said. “We were in very difficult times. The state did use that to draw on to make sure we didn’t have to make drastic cuts in services.

“But as things come back, obviously we have to be responsible for the next time, when that rainy day fund is needed and start building that fund back up. That’s a discussion we had a lot during this budget process, and I think we’ll continue to have that.”

The $30.2 billion budget reflects a decrease of $1.8 billion from the 2010-2011 budget, a 5.6 percent difference.

“We do have issues, but I’ll take our issues over a lot of other states,” said Mark Emkes, Haslam’s commissioner of finance and administration.

Tennessee’s revenue is based mostly on sales taxes and franchise and excise taxes. Of every tax dollar collected, 54 cents comes from the sales tax, 13 cents from franchise and excise taxes. The state expects increases in all tax streams in the coming fiscal year.

In Haslam’s proposed general fund of $26.7 billion, the biggest chunks include $8.7 billion for TennCare, $5.19 billion for pre-K-12 education, $3.6 billion for higher education and $2.9 billion for human services.

Addressing the budget in difficult economic times is one piece of a three-pronged agenda for Haslam, who has stated the goals of overall education reforms and creating jobs in the state, which Haslam has said is the No. 1 priority.

“I feel very good about the relative position we’re in,” Haslam said. “I feel good about the budget process. It’s obviously my first one, but I’ve been very impressed with the thoroughness of the (Finance and Administration) department and the seriousness with which all our new cabinet members took their tasks to look department by department.”

Haslam spoke to the budget picture he found compared to the one he described when running for office.

“People say, ‘Now that you’ve been here, you’ve spent two years campaigning, talking about the budget, answering questions, now that you’ve been here seven or eight weeks, is the budget what you expected?’ And the answer is it primarily is,” he said.

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