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Budget Talks Kick Off

Governor asks departments to prep contingencies for 7 percent reductions

Tennessee Gov. Bill Haslam launched the administration’s annual round of budget hearings Monday.

In September Haslam told state agencies to prepare budgets reflecting a 7 percent decrease from the last year’s budget. Haslam, who in 2013 asked the departments to make a 5 percent cut, said the cuts aren’t necessarily inevitable.

“I want to emphasize there’s not been a determination to make a 7 percent cut,” Haslam said Monday at the open of the talks. “We’re waiting on revenue, we’re waiting to see the impact of a lot of other things.”

The governor, who won a second four-year term in November, added that the departments had done “hard work” in terms of making “difficult decisions” to prepare for a “worst-case scenario,” which is part of “responsible” budget preparation.

“The cuts that might be proposed by the departments are not something that — I want to be real clear — that they would like to do, and they’re not things that necessarily that we would like to do,” Haslam said. “But they are a preparation in case that had to happen.”

The state of state government revenues will move to the forefront of political concern as the legislative session approaches.

On Nov. 4, two-thirds of Tennessee voters approved a constitutional ban on the state or any local governments levying a tax on personal income. Following the passage of the amendment, state Sen. Brian Kelsey, R-Germantown, filed legislation to phase the Hall Tax on investment income out over three years. “Now it’s time to eliminate the Hall tax,” he said.

A proposal to cut the state’s general sales tax from 7 to 6.75 percent was also filed by the majority leaders for both legislative chambers — Sen. Mark Norris and Rep. Gerald McCormick. Both leaders have said their proposal stems from a desire to see a broader discussion about overall tax reform in the Legislature.

Both tax cuts would reduce the state budget by around $250 million.

But following a year of a rocky revenue landscape, Haslam isn’t too keen on the state’s ability to trim any more potential revenue.

While Haslam says he’s generally in favor of tax cuts, he recently suggested that legislators who want to cut taxes ought to find some expenses to cut, as well. “It’s easy to talk about the revenue part, then we talk about the expense part it gets a little harder,” he said.

However, McCormick told TNReport last week that revenue reports from the past couple of months indicate an improving economic picture for Tennessee, which gives him hope that they can cut taxes without cutting programs, which “would be the best of both worlds.”

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