Gubernatorial field focus on job growth and spending cuts

NASHVILLE -- Tennessee's gubernatorial candidates say that "growing" jobs -- not taxes -- as well as slashing state spending top their plans on how to manage state government in the wake of the Great Recession.

With state revenues not expected to return to 2007 levels for at least two more years, candidates are offering sober although not always detailed approaches to what they will do if voters elect them governor.

All seven major Republican and Democratic candidates agree on one thing: There will be no state income tax.

"You're also not going to raise the sales tax," argued Knoxville Mayor Bill Haslam, a Republican, during a recent candidates' forum. "We have the highest average state and local sales tax (rates) in the country right now. I think your only alternative is to drastically restructure the way you do state government."

Former state House Majority Leader Kim McMillan, D-Clarksville, said a first priority is to grow to jobs, a move also endorsed by Mr. Haslam and fellow Republicans Bill Gibbons, Ron Ramsey and Zach Wamp as well Democrats Jim Kyle and Mike McWherter.

All also agree the next governor will also have to remain tough on state spending cuts.

"We've got to shrink our (government) footprint and grow our economy," said U.S. Rep. Wamp, R-Tenn., who wants to name a chief operating officer to help oversee cuts. The Chattanooga congressman also vows to correct what he singles out as less-than-adequate state purchasing practices.

DEEP HOLE

There's good reason for the sobriety. In a recent annual report to Democratic Gov. Phil Bredesen, University of Tennessee economist Matt Murray said that although the economy is showing signs of life, the state remains in a "deep hole."

"We're looking at two to three years out before revenues get back to their peak before the recession began," Dr. Murray said. "In the interim, state employees will not have had a pay raise. Programs will not have had upgrades. There will have been cutbacks, certainly, in many programs."

Demands on services continue to rise due to increased population. But Tennessee's number of jobs is at its lowest level since 1999, Dr. Murray said.

"It's going to be a very difficult time for the next governor," Dr. Murray said. "We will have a smaller government in Tennessee when it's all said and done."

In his eighth and final state budget proposal, Gov. Bredesen outlines a $28.41 billion spending plan -- a 5.1 percent reduction below the current budget. It slashes another $394.2 million in recurring state funding for programs such as TennCare. Some programs are being cut not only because of revenue shortfalls but to pay for other priorities such as K-12 education.

State appropriations, according to the 2010-11 budget document, plummeted from $13.53 billion in the 2008-09 fiscal year to an estimated $12.4 billion in the proposed 2010-2011 budget.

Dust on the campaign trail

While all the candidates say they oppose of a state income tax, some are less forthcoming about increases in existing taxes. In a recent Chattanooga Times Free Press survey, for example, three of the six candidates responding ignored a question about whether they would rule out other tax increases.

Mr. Haslam did state he opposes increases to the state's 7 percent sales tax, the main source of state revenue.

In her response, Ms. McMillan said that "raising taxes in tough economic times is not the answer to our budget shortfall. Creating jobs and lowering the high unemployment level is what creates additional revenue in our sales tax-based system."

But she alone among the candidates said she would "encourage" a continuing review of tax exemptions "along with closing tax loopholes to require that all pay their fair share toward running our state government."

Shelby County Attorney General Gibbons noted he opposed tax increases as a member of the Memphis City Council and the Shelby County Commission.

But in his survey response, he noted that while he would cut and prioritize education, roads and anti-crime measures, "I do believe that certain types of government services should pay for themselves and will not rule out adjustments accordingly."

Lt. Gov. Ramsey, R-Blountville; Rep. Wamp; and Jackson, Tenn., businessman Mike McWherter stated nothing in their responses as to whether they would rule out tax increases.

Speaking last Thursday at a GOP gubernatorial forum hosted by the Franklin-Cool Springs Chamber of Commerce, Lt. Gov. Ramsey, who is the state Senate speaker, said the state will have to grow its way out of the economic doldrums.

"The worst thing we can possibly do right now is raise taxes," he said.

The campaign of state Senate Minority Leader Kyle, D-Memphis, did not respond to the questionnaire. However, as Democratic leader, Sen. Kyle has sponsored and continues to sponsor Gov. Bredesen's efforts -- most of them successful -- to close off what the administration considers to be tax loopholes. He also has sponsored Gov. Bredesen's spending cut proposals.

Speaking last summer, Rep. Wamp said that "if it was closing a loophole that made absolutely no sense whatsoever, I wouldn't consider that a tax increase. But I think we absolutely do not need to raise the tax obligation of Tennesseans during an economic time such as this."

When candidates were asked in a Feb. 11 Tennessee Press Association forum to name just one program they would eliminate, Rep. Wamp said some people have told him the Tennessee Regulatory Authority, which oversees telecommunications, water and gas utilities, could be targeted.

State Sen. Kyle, noting he has worked with Gov. Bredesen to balance ongoing revenues with ongoing expenditures, said he would eliminate the state's energy efficient schools initiative, which took $90 million from Tennessee Education Lottery reserves and uses interest to make energy-efficiency grants to local schools.

"They took money away from scholarships," he said.

Mr. McWherter quickly agreed with state Sen. Kyle on lottery-funded scholarships, saying the state "should not allow anyone to raid that program."

Lt. Gov. Ramsey noted the state has been cutting largely across the board but sparing K-12 education. That is "exactly" the approach that is needed, he said. He also said he would double the number of TennCare fraud inspectors, noting the anti-fraud program saves the state millions of dollars annually.

Mr. Gibbons said the officials must "grow our way out of, not tax our way out" of problems.

In the Feb. 18 GOP forum, Mr. Haslam said he would approach state government the say way he did as mayor.

"The first question is, should we be doing this? The second is are we doing it as effectively as possible?" he said.

Mr. Gibbons later retorted that "my friend here, Mayor Haslam, has a track record. The most important decision he made as mayor of Knoxville was to raise property taxes by 15 percent in his first year in office."

Mr. Haslam said Knoxville property tax rates are their lowest in 50 years.

But Mr. Gibbons said the rates are determined by an independent third party based on property value. It does not mitigate the fact that taxes went up, he said.