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Tennessee state budget

Tennessee lawmakers unanimously approved the state's FY2012 $30.8 billion budget and signed it into law on June 16, 2011. The FY2012 budget is approximately $1.23 billion, or 3.9 percent, less than the FY2011 budget, which is primarily due to the loss of stimulus money from the federal government.^[1]

Tennessee has a total state debt of approximately $35,239,489,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[2]

See also: The Tennessee State Budget on State Budget Solutions

[edit] Fiscal Year 2013 State Budget

Legislative Budget

A conference committee began resolving differences between the House and Senate budgets on April 27, 2012.^[5] Both chambers of the legislature approved a final version out of the committee on April 30, 2012.^[6]

On April 26, 2012, the House approved a $31.4 billion^[7] FY2013 state budget by a vote of 66-30.^[8] The House budget follows the governor's proposed budget closely, but leaves out several pet projects that appear in the Republican-authored Senate version.^[8] House legislators authorized the state to issue up to $381.9 million in bonds.^[8]

The next day, April 27, 2012, the Senate approved its $31.1 billion version of the FY2013. The Senate budget cuts millions of dollars in funding for programs and projects in what is seen as a retaliatory move against the House for cutting some Senate projects.^[9]

Federal funding will account for $12.3 million, or about 39.6 percent of the state’s budget.^[8]

Governor's Proposed Budget

Governor Bill Haslam unveiled his $30.2 billion proposed FY2013 budget on Jan. 30, 2012. Haslam said the $12.3 billion in federal funding will account for 39.6 percent of the state's budget. Three years ago, it was 43.1 percent of the budget. As a result of the reduced federal contribution, the governor recommended shrinking the total state budget by 2.7%.^[10]

On April 2, 2012, the governor announced changes to his proposed budget, increasing spending by $28 million due to higher than anticipated revenue collection. The governor would also lower the state sales tax on groceries from 5.5 percent to 5.25 percent instead of the 5.3 percent he originally proposed and restore $5.5 million to the Department of Intellectual and Developmental Disabilities.^[11]

Under the governor's budget, all state employees will receive a 2.5 percent raise in FY2013 and is contained in [http://wapp.capitol.tn.gov/apps/BillInfo/Default.aspx?BillNumber=HB2384 HB2384).^[11]

The budget was originally built on the assumption that tax collections will grow 4 percent next year, reaching $9.4 billion.^[10] The budget makes two tax cuts:^[12]

• reducing the state sales tax on grocery food from 5.5 percent to 5.3 percent, costing the state $18 million;
• raising the inheritance tax exemption level from $1 million to $1.25 million, costing the state $15 million

Highlights of the governor's proposed budget:

• $263 million toward construction on college and university campuses;^[13]
• $70 million in additional state funds to give businesses expanding or relocating in Tennessee;^[13]
• cut more than 1,100 state jobs across the state, 617 filled positions statewide and 549 that are currently vacant;^[10]
• 2.5% raise for state employees, costing $123.8 million;^[10]
• $30 million to cover the cost of an ongoing comparison of public and private sector salaries;^[10]
• Full funding of the kindergarten-through-12th grade basic program, including about $55 million in new money to cover enrollment increases and other added expenses.^[13]

The Governor said in Dec. 2011 that his administration needs to close a gap of $360 million, a little more than 1 percent of Tennessee’s $32 billion budget and 2.5 percent of the portion of the budget funded by state tax dollars. Although the state had generated more revenue than expected in the first months of FY2012, officials anticipate that the cost of TennCare, state pensions and public education will rise by $500 million, using up all of the increased tax revenues and then some. Officials also wanted to cover the cost of $160 million in programs that were funded using money from the state’s financial reserves. The governor requested that departments to prepare for cuts of as much as 5 percent so that his budget writers can choose from as they write the state’s next spending plan.^[14]

Preparation for budgeting

State Finance Commissioner Mark Emkes asked state government agencies to submit by Sept. 30, 2011, base budget reduction plans for FY2013 that include 5 percent reduction in their state funding for next year. He also stated that agencies should not to propose any new programs unless they can save an equal amount with cuts elsewhere. Emkes said that spending cuts of $270 million will be necessary despite the prediction that state revenues will increase 3 percent in FY2013.^[15]

[edit] Fiscal Year 2012 State Budget

As of Dec. 1, 2011, Tennessee is on track to end the year with more than $300 million in reserves.^[14]

Governor Bill Haslam said of the state's nearly $30 billion annual spending plan^[16] that not all agency requests could be funded.^[17] K-12 education is projected to need an additional $70 million in FY2012, restoring about $57 million in programs that have been funded with stimulus money in FY2011, in addition to $12 million that were paid for out of state funds in FY2011.^[17][18]

Both chambers of the Tennessee General Assembly unanimously approved a $30.8 billion FY2012 budget. The Senate voted on May 21, 2011. The House approved the budget 96-0 on May 20, 2011.^[19] The approved budget bill an be found here.

The agreement allowed for the earliest end to a legislative session in the state since since May 1, 1998, and five weeks earlier than the 2010 session ended, saving taxpayers $450,000 in legislative expenses.^[19]

[edit] Governor's Proposed Budget

Amendment

With state tax collections are projected to run ahead of expectations, the governor's administration amended its budget proposal to eliminate some previously planned cuts to the state budget. Specifically, the amendment would restore $48 million to TennCare, $22 million to HOPE scholarships to college students attending summer classes and $5 million to let the University of Memphis begin operating Lambuth College, a private institution in Jackson facing financial difficulties, as a branch campus.^[20] The budget also includes $71 million for disaster relief resulting from recent storms and flooding, $8.5 million to restore previously scheduled rate reductions to TennCare mental health providers, and a $6.9 million grant for three programs at Meharry Medical College. ^[21]

The administration also said that, if the federal government pays Tennessee the $82 million it owes the state, some more initial cuts may also be unnecessary. The federal government, however, has not specified a date for repayment. The Haslam budget amendment allocates funds to be received from the federal government on a "contingency" basis, to be spent only after being received.^[20] The budget also assumes reimbursement of $15.7 million for nursing home funding.^[21]

Original Proposal

On March 14, 2011, Gov. Haslam unveiled his $30.2 billion proposed budget, which closely followed that of his predecessor. Overall, the spending of state dollars would increase 3.5 percent under the Haslam plan thanks to a projected increase in state tax collections. But the state will receive and spend about 14.7 percent less from the federal government than in the current year.^[22] The budget contains no general tax increase.

Haslam's budget seeks to begin rebuilding the state's rainy day fund, which dwindled from a $750 million high in 2008 to a projected $257 million at the end of this year. Haslam is calling for the fund to increase to $326 million by June 30, 2012.^[23]

One area of increased spending under the Haslam plan will be in education. Haslam proposed a $63.4 million increase in K-12 education spending. ^[24] However, the budget does cut $20.2 million from higher education, which is likely to cause an increase in tuition. ^[25]

In the governor's proposed budget, nearly 1,200 state jobs will be eliminated, starting with currently unfilled positions and those jobs only recently created with federal stimulus money. For those employees keeping their positions, Haslam also proposed a 1.6 percent pay raise, the first since 2007. The proposal will cost the state about $77 million. ^[26]

The governor's proposed budget included $40 million in cuts to services to TennCare patients and reduction of $2.8 million in Children's Services funding.^[27] The cuts come through such things as tightening the rules for when TennCare will pay for child delivery by C-section rather than normal birth and eliminating the Governor's Office of Children's Care Coordination.^[28] The Tennessee Hospital Association proposed the tax as a means to draw down the federal Medicaid money at the almost $2-for-$1 match to avoid the cuts. ^[29]

The budget included an agreement drafted by former Gov.Bredesen to provide Electrolux $97 million in incentives to build a new plant in Memphis.^[27]

Some budget highlights include:^[30]

• Elimination of 1,180 positions - 575 of which are currently filled
• Uses $160 million of reserve money to preserve programs in the health, mental health and children's services departments for one more year
• Impose a 4.52 percent fee on hospital gross receipts for the coming year, up from 3.52 percent in the current year
• Reduce funding for TennCare by 2.1 percent to $8.7 billion
• Grants $131.6 million to two companies building plants in Tennessee, including Electrolux
• Provides no new funds for new higher education capital projects, but calls for $54 million in capital maintenance for existing structures
• Allocates $30 million for continuing Corrections Corporation of America's contract for operating a prison at Whiteville
• Reduce funding for higher education by $20 million, approximately 2 percent of the budget
• $7 million for the Port of Cates Landing near Tiptonville, Tenn.

[edit] Unions

Protests at the state Capitol at times included thousands of those opposed to the collective-bargaining bill and to other measures in the legislature that would limit the power of unions. On March 15, 2011, seven protesters were arrested at the state Capitol.^[31]

A compromise plan that reduces unions’ role in representing teachers passed the state legislature May 20, 2011, with a compromise by Republicans in the House and the Senate allowing the Tennessee Education Association continue to represent teachers in contract talks with local school boards but also involving other organizations at the bargaining table. It sets new limits on what could be written into final agreements, stating that while compensation, insurance and benefits could be spelled out, matters directly impacting the performance of students, including job assignments and bonuses, could not be part of the agreements. The bill was sent to Gov. Haslam.^[32]

Prior to the compromise, companion bills had been pending in the Tennessee House and Senate that would end collective bargaining by teachers, making it so that Tennessee school districts no longer have to negotiate with teachers' unions.^[33] The Senate Education Committee approved Senate Bill 0113 along party lines by a vote of 6-3 on Feb. 16, 2011.^[33] The Senate held up a vote on the bill while House leaders worked on an amendment that would give local school boards the option of deciding whether to negotiate contracts with their teachers, and which may ease passage of the bill.^[34] Republican Gov. Bill Haslam has remained neutral on the bill.^[34] House Bill 130, as initially approved by the House Education Committee, would eliminate collective bargaining on wages and benefits, but would have allowed negotiations to continue on some other working conditions.^[35]

On May 3, 2011, the House Finance Committee voted to send [HB130 back to the House Education Committee for another hearing. The bill had previously been approved, but not in the form as approved by the Senate. The Education Committee has officially closed for the year, but is expected to reopen for the additional hearing.^[35]

Supporters of the bills note that none of Tennessee's neighboring states require collective bargaining with teachers, and that the teachers' negotiating rights are unique among public employees.^[33] Arguing against the bill, a lobbyist for the Tennessee Education Association said that the legislation unfairly targets teachers.^[33] Opponents also say the move takes away the assurance that teachers are compensated at decent levels,noting that Tennessee teachers own salaries below the national average.^[36]

Teacher Tenure

The Senate passed a Republican-supported bill that would make it more difficult for teachers to get and keep tenure on March 10, 2011. A companion bill is scheduled to be heard by the House Education Committee.^[37] Under the Senate bill, teachers would not be eligible for tenure for at least five years - up from the current three-year probationary period - and they could lose that status later if students perform poorly on standardized tests.^[38]

[edit] Use of Reserve Funds

The governor and legislative leaders have all said that the FY2012 budget should include spending around $186 million in "core services reserves" from the FY2011 budget. "Core services reserves" are earmarked funds set aside for specific programs, but the governor has the option of recommending they be used for purposes other than their earmarks in the FY2012 budget.^[18]

The rainy day fund has declined from $1.2 billion in 2007 to $500 million in 2012. The governor and legislative leaders favored building that fund back up.^[18]

[edit] Delays

The State Funding Board, which includes the state comptroller, treasurer, secretary of state and the governor's top financial adviser, did not meet as scheduled and officials said Dec. 16, 2010, that they're uncertain when final revenue projections for Tennessee will be released. Lawmakers will use the figures to draft the 2012 budget and they have typically been released around the middle of in mid-December.^[39]

In January 2011 the state delayed issuing its comprehensive annual financial report due to computer problems.^[40] The report is used to draft the new budget and as Comptroller Justin Wilson said regarding the information and the new budget, "Whenever you have current information, you make better decisions than when you don't have current information."^[40]

[edit] Budget transparency

• See sample transparency legislation at the Sunshine Standard

Tennessee has a statewide, official spending database online, "Open Government for the State of Tennessee."

In addition, thanks to Tennessee House Bill 246 (2009), a spending transparency site mandated by the legislature will be available by January 1, 2010. As Nebraska's treasurer Shane Osborn pointed out in his letter to Tennessee's legislators, "In the current economic climate, it is as important as ever that citizens have the ability to easily navigate the state budget, giving them access to information on how government is spending their hard-earned income."^[41]

[edit] Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
Open Government	P	N	Y	N	Y	Y

Although it is not a searchable database, the Tennessee Arts Commission has provided a .pdf document of its funding history.

See also: Evaluation of Tennessee state website

[edit] Limitations and suggestions

While the "Open Government for the State of Tennessee" transparency site does have searchable salary information, its list of vendor payments and expenditures is in .pdf form and not readily searchable.

[edit] Support for creation of the database

In 2008, the National Taxpayers Union endorsed HB 4034, saying "it is imperative that you move forward with this legislation to enable Tennessee's residents to make sense of how their tax dollars are parceled out."^[42]

Americans for Tax Reform issued a press release detailing the progress of transparency in Tennessee.^[43]

[edit] Fiscal Year 2011 State Budget

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

In FY2011, the state collected $10.5 billion in taxes. It ended the fiscal year with a $269.4 million surplus.^[44] The financial commissioner recommended that the state hold a $28 million general fund surplus in reserve in case state tax collections drop.^[45]

Gov. Phil Bredesen signed the state's $30 billion budget for Fiscal Year 2011 into law on June 25, 2010.^[46][47] The Senate passed the budget bill 30-3 and then the house approved the measure 94-0, marking the first time in years that a budget passed the House without dissenting votes.^[48]

Gov. Bredesen proposed a series of tax increases as a way to balance the budget, Republicans from the Tennessee Senate favored more spending cuts and House members from both parties from the House wanted to dip into the state's reserve fund.^[47] In the end, the budget as passed mostly follows the governor's plan^[48] relies on reserves more than the governor had suggested.^[46] Approximately $12.8 billion in the budget comes from state tax dollars. The budget spends approximately $185 million from the state's reserve funds; almost $600 million remains in reserve.^[48]

Republicans eliminated some of Bredesen’s proposed tax increases, including lifting of the single-article tax cap for items valued at more than $3,200 that would have raised $85 million.^[46][47] Republican lawmakers had declared that plan dead before arrival and are currently working on a counterproposal.^[49]

With the budget Tennessee will have cut $1.1 billion in spending of state dollars over the past two years while eliminating about 3,500 state job positions.^[48] Some of the provision include^[48]:

• If state revenues end up better than officially projected, state employees, teachers and higher education employees will get a salary bonus payment, provided that $50 per year of service as a state employee with a $150 minimum.
• 120 million is marked for improvements at community colleges and technology centers but will only be spent if federal funds materialize
• Nearly $10 million for conservation land purchases, stripped from an earlier Senate version of the budget, is restored for two years.
• $20 million is set aside to help victims of flooding in the middle and western portions of the state, not counting a package of tax credits authorized in separate legislation for businesses and homeowners suffering flood damage.

College and universities in the state are considering tuition hikes ranging from 6% to 11%, depending on how much of the state funding cuts the regents decide to replace with student revenue.^[49]

October revenue for 2010 was up by 4.95%, compared to the same month in 2009. The total revenue was $732.8 million in October 2010.^[50]

[edit] Budget Background

Tennessee's budget process begins in August of each year when the Commissioner of Finance and Administration issues budget instructions to all departments and agencies of state government. Agency budget requests are submitted by October 1. During October and November, the Governor meets with the departments and agencies to hear their budget proposals for the following fiscal year. ^[51] Following the hearings the Governor issues a budget recommendation for the upcoming fiscal year to the Legislature. Both the House and the Senate are required to make any necessary changes or adjustments to the budget until the bill is passed in both houses. Lawmakers must pass a balanced budget before the fiscal year begins on July 1 of each year. ^[52]

• Tennessee has no general income tax.^[53]
• Tennessee's current tax structure has the majority of its tax revenue coming from the sales tax, the largest portion of which funds K-12 education. ^[54]
• Out of the state's tax revenue the state spends approximately 48 percent on education; 4 percent on resources and regulation; 12 percent on law, safety and correction; 3 percent on the general government; 32 percent on health and social services; 1 percent on business and economic development. ^[54]
• State tax revenue is comprised of 57 percent sales tax, 2 percent motor vehicle tax, 7 percent gasoline tax, 3 percent income and inheritance tax, 5 percent gross receipts and privilege, 14 percent franchise and excise tax, 3 percent insurance and banking tax, 6 percent from other taxes, and 3 percent from tobacco, alcohol and beer tax. ^[54]

[edit] Accounting Principles

Main article: Tennessee government accounting principles

Tennessee's Comptroller of the Treasury Audit Division is responsible for state and local audits and divided into the following divisions:^[55]

• County Audit - The division is responsible for annual audits of all 95 counties in the state. The division establishes standards for county audits conducted by public accounting firms. The division assists local governments with financial administration questions.
• Municipal Audit - This division ensures that municipalities, designated school system funds, utility districts and government-funded, non-profit agencies are audited as required by state statute. The division investigates and issues reports on allegations of misconduct, fraud or waste in local government, often referring findings to other agencies for appropriate action.
• State Audit - The Division of State Audit conducts financial and compliance and performance audits, conducts investigations, and performs special studies to provide the General Assembly, the Governor, and the citizens of Tennessee with objective information about the state's financial condition and the performance of the state's many agencies and programs.

Tennessee's audit reports are posted online. The Comptroller of the Treasury is a constitutional officer elected by a joint vote of both Houses of the General Assembly for a two-year term. Justin P. Wilson the current Comptroller.^[56]

The Institute for Truth in Accounting (IFTA) rates Tennessee “Timely” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider Tennessee's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[57] Tennessee's CAFRs are annual publications of the Tennessee Department of Finance and Administration. Dave Goetz is Commissioner of the Department of Finance and Administration, the governor's chief financial officer for Tennessee state government and manages over a $21.5 billion budget.^[58]

[edit] Stimulus

Tennessee has received $3 billion in federal funding.^[60]

[edit] Public Employees

Main article: Tennessee public employee salaries

Main article: Tennessee public pensions

According to 2008 Census data, the state of Tennessee and local governments in the state employed a total of 369,578 people.^[61] Of those employees, 306,328 were full-time employees receiving a net pay of $1,043,980,357 per month and 63,250 were part-time employees paid $51,602,338 per month.^[61] More than 52% of those employees, or 192,840 employees, were in education or higher education.^[61]

[edit] External links

[edit] Additional reading

• Knoxville News Sentinel,"The stimulus plan: Impact on Tennessee," February 19,2009
• The Daily Times,"Tennessee not putting some public records online," March 15,2009

[edit] References

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