State Budget 'Just Doesn't Add Up'

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A recent press release submitted to area newspapers stated that the state budget that was passed for 2009-2010 had no tax increases, was a balanced budget and even cut state workers.

While it is true that the budget was cut, there were as a matter of fact several tax increases, totaling $57 million. Of course, they are never called tax increases, they are called the “Technical Corrections Bill” by the Department of Revenue. However, removing tax exemptions is a tax increase for some. For instance, an exemption was removed for some family-owned businesses, which means some family owned businesses will now owe taxes on “rents from residential property or farm property”, to the tune of $25 million.

In addition, there was a sales tax exemption removed for businesses on “In-House Software” to the tune of $9 million, a change in the business tax collection to the tune of $21 million, along with about $500,000 in miscellaneous “technical corrections”.

As to a balanced budget being passed, when do you balance a budget by using one time stimulus money to fund recurring expenses and have a balanced budget? In my home, that is not a balanced budget. Yet the legislature passed a budget with over $500 million dollars of one-time stimulus money being used to plug holes in the budget for recurring expenditures.

In addition, since 1986 Tennessee has been a strong pay as you go state on highway and bridge improvements. Governor McWherter began this and was a strict adherent to pay as you go. This has served Tennessee well because other states are now struggling under the heavy load of debt and interest payments in a recession in which revenues have declined dramatically. Tennessee has been much better off than many of her sister states because we follow pay as you go.

However, this year the legislature voted to issue bonds for road and bridge improvements, something I very much opposed. It makes sense in my household that we do not borrow money or charge up on credit cards when you know your salary is going to be decreasing. Why would the State Legislature vote to borrow money when the projections for revenue growth are so unsure?

The General Purpose Stimulus money and the General fund stimulus money (approximately $361 million dollars) will run out June 30, 2010.

It should be noted that the net effect of the above actions in the 2009-2010 budget is that the budget is balanced on a cash in/cash out basis, but when you compare the recurring revenues to recurring expenditures, the 2009-2010 is out of balance about $432 million dollars.

As an overview, this year’s budget as enacted requires that the Administration make additional budget cuts of about $290 million in the 2010-2011 budget, and that assumes some revenue growth occurs during this budget year of 2009-2010. In fact, the opposite is happening. For the first two months of the fiscal year, July and August 2009, state tax collections are UNDER Finance and Administration estimates by about $69 million.

According to the experts, if this trend continues, and economists generally concur that it will continue for at least until mid calendar 2010, then the cumulative hole in state revenues just gets deeper and the amount that must be cut in 2010-2011 budget gets bigger.

I now believe that those of us who took the more conservative view on the state budget this year were absolutely right. Revenues have continued to decline and it is predicted will continue to decline.

Some newspapers stated that I voted against the budget when we had a huge surplus. You bet I did, because it was loaded with tens of millions of dollars of pork. I do not apologize for voting against the budget the last three years. I call it being conservative and responsible to the taxpayers.
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