State Prepares Contingency Plans to Trim $4.5B from Budget

CORRECTION: This post originally misreported the dollar-amount in proposed cuts to the TennCare budget. The correct figure is $2,253,687,900. TNReport regrets the error and apologizes for any confusion it may have caused.

Tennessee government officials are prepared to cut up to $4.5 billion from the state’s $30.8 billion budget and lay off 5,100 people if the federal government significantly clips funding to the states.

That contingency plan, ordered by Gov. Bill Haslam’s administration in preparation of defending the state’s bond rating in September, is a 153-page list of reductions under two “what-if” scenarios to consider following a Congressional budget deal earlier this summer that increased the federal government’s borrowing authority. A Congressional super-committee has been charged with finding $1.2 trillion in savings over 10 years by Thanksgiving, and Haslam has said the state must prepare for potential budget reductions.

Each state department has broken down how it would adapt to a 15 percent and 30 percent reduction of federal funds, including money for programs funded by state and federal dollars. Agencies were instructed to “free” up their portion of any state match and further reduce total funding for those programs instead of compensating for the loss in Washington revenue with state dollars.

At the 30 percent reduction level:

• Some $2.2 billion would disappear from the TennCare budget, which funds health care for low-income women, children and the disabled. TennCare alone eats up about a quarter of the state’s budget.

• Another $861 million would be reduced in the human services budget.

• And $276 million would be trimmed from K-12 education.

“The human service agencies are where we are the most vulnerable,” Haslam said, referring to potential cuts to TennCare and the Department of Children’s Services. “Human services, children’s services, you see how much of their budget is federal-related, and it does cause you to catch your breath a little bit.”

Haslam told reporters last week he finds it unlikely that the federal government’s cuts will slice broadly across state governments. Instead, he said he expects officials will target individual programs. Federal dollars make up roughly 40 percent of the state’s annual budget.

Mike Morrow contributed to this report.