Tennessee will likely face as much as a $400 million budget gap next year as spending on services like education, TennCare and pensions likely swell beyond the state’s predicted revenue growth, Gov. Bill Haslam’s administration said Wednesday.
To compensate, state government is going to have to find options for cuts, and the governor has asked each department to explain their contingency plan for absorbing a 5 percent reduction.
“I think all of us realize in government it’s not usually between choosing between something good and something bad in terms of what you spend money on. It’s between spending your money on one good project or another good project or an issue we can address,” he said in his opening to this year’s budget hearings, which began in Memphis.
Haslam expects the state will collect $300 million in new revenue which is outpaced by about $500 million in “ingrained cost increases,” including education, TennCare, debts on large-scale projects, pensions and state employee health insurance.
The hearings, he said, are a place for him to “begin to ask those hard questions to figure out how we’re going to make up that $200 million gap” in writing next year’s roughly $30 billion budget.
But that gap might be bigger, Finance and Administration Commissioner Mark Emkes said at the hearing. Another $160 million that was used from the rainy day fund this year isn’t available in the next year’s budget, leaving a potential $360 million gap, he said.
“We actually have a $360 million, $400 million hole to dig out of,” he said.
On the docket for the first of five days of hearings were the departments of Safety and Homeland Security, Labor and Workforce Development, Economic and Community Development, and Financial Institutions.
Safety Commissioner Bill Gibbons said he’d be willing to eliminate 82 positions if his department is asked to take 5 percent off the top. Those cuts would mean 39 fewer workers at driver’s license centers during a time when the department is looking to revamp operations and lower wait times.
The department would also use surveillance equipment to eliminate four patrol officers at the Capitol Building, take DARE officers out of classrooms and shelve the state’s bomb squad, dive team and aviation unit.
If a 5 percent cut is necessary in the Department of Economic and Community Development, the state would mainly reduce funding for the state’s Fast Track infrastructure development grants, Commissioner Bill Hagerty told the governor. He’d rather be adding money to that grant program right now which helps businesses fund projects like sewer, site or technology improvements to help spur economic growth and job creation, he added.
The Department of Labor and Workforce Development is looking to open up more than 100 vacant jobs, but if the agency needs to cut, it would reduce funding in an account that covers worker’s compensation for workers injured a second time, said Commissioner Karla Davis.
Financial Institutions Commissioner Greg Gonzales, who oversees 155 state banks and whose department is funded through fees, didn’t offer cuts like the taxpayer-funded agencies did.
However, he took the chance to say his department is concerned with uncertainty in both the economy and Washington regulations on community banks, in addition to his department’s struggle to keep staff from leaving for higher-paying jobs.
“I understand the need you’re talking about in terms of personnel,” Haslam said. “We’ll have to figure out how we can address that, but I understand the need not just to bring people in, train them to go to work for somebody else.”
In August, Haslam’s administration asked departments to prepare plans for a 15 percent and 30 percent reduction in federal funds without filling them in with state dollars, mostly at the benefit of bond rating agencies which at the time needed proof of financial independence from Washington before giving the state a high bond rating.