NASHVILLE - Gov. Phil Bredesen said Monday night that a federal economic stimulus package will enable Tennessee to steer through its worst financial straights since the Great Depression.
Outlining a four-year spending plan, he said the proposal uses stimulus funds to help the recession-battered state maintain services in areas such as higher education while preparing to phase in cuts to Tennessee government by 2012.
"This so-called stimulus package is not a silver bullet - what it does is buy us time," Gov. Bredesen told a joint convention of the General Assembly as he discussed his $29.34 billion budget proposal for 2009-10.
"What I'm trying to achieve with this budget is sensible and conservative long-range fiscal stewardship - to recognize these stimulus funds for the one-time help that they are, to use them wisely and compassionately and, most of all, when this recession is over, to leave our state looking to the future," Gov. Bredesen said.
Federal stimulus money will allow Tennessee agencies to phase in 12 percent spending cuts for most agencies over three years, he said. The state hopes to spare the Basic Education Program funding formula for K-12, he said.
On yet another front, the federal funds also reduce the state's need to lay off state employees, dropping from a projected 1,600 people to just 80 workers this year, Gov. Bredesen said. But no pay increases are envisioned for the next three years.
At the same time, the state will issue bonds to meet obligations to meet a $56 million infrastructure commitment to Wacker Chemical Corp., which is building a $1 billion plant in Bradley County that will employ 500 people and manufacture polysilicon, a material used to make solar cells and semiconductors.
State revenues are running $1.1 billion below original projections, and officials were looking at a $27.03 billion budget in 2009-10 (fiscal year 2010). The current 2008-09 budget was $27.6 billion.
The state will receive about $5 billion in federal funds over the next two years through the American Recovery and Reinvestment Act, but there are huge restrictions on how much of the money can be spent, Gov. Bredesen cautioned.
He noted that three-fifths, or $2.9 billion, is mandated by Congress to go directly to programs such as federal food stamps, and about $524 million is to be distributed to local schools based on their numbers of poor and special education students.
The remaining two-fifths are "Tennessee funds" that can be used in a variety of ways, he said.
For instance, the funds will allow the state to use $470 million to restore $100 million in higher education cuts made this year. The state would use $185 million in fiscal year 2010-11 budget and another $185 million in fiscal year 2011-12 to let student tuition increases rise more slowly and enable colleges and universities phase in program cuts instead of all implementing them all at once, Gov. Bredesen said.
But he warned that when the funds run out, public higher education must be ready to operate with about $180 million less per year than it currently has.
Other federal funds will offset what likely would have been $150 million in cuts to the state's K-12 education funding formula in fiscal years 2011 and 2012.
The budget calls for two tax increases, including raising an existing premium tax on HMOs to raise $139 million, most of which would be used for TennCare. Gov. Bredesen also wants to end a tax break for certain family owned businesses engaged largely in commercial real estate. That would bring in $25 million.
Calling Democrat Bredesen's budget proposal "extremely complex," Sen. Bo Watson, R-Hixson, said he thinks the Senate will have "some concerns" about congressional mandates requiring changes in state laws should Tennessee accept $140 million in stimulus funds for unemployment insurance compensation. He also voiced skepticism about a plan to issue bonds to build state bridges.
Sen. Andy Berke, D-Chattanooga, said the "critical point" of the governor's proposals is "that even in these tough times we have these priorities - economic development, education and health care - and we need to keep moving forward."