NASHVILLE - When Republican Bill Haslam and Democrat Mike McWherter held their first general election debate last week, one of their starkest differences was over how awful the state's financial situation will be when the victor takes office in January.
"We have a billion and a half dollars that was in this year's budget that won't be available for the next governor," warned Haslam, who argued the state faces a financial "cliff" and that his experience as Knoxville mayor makes him best qualified to deal with it.
McWherter, a businessman, scoffed.
"You know, Bill wants to terrify you into thinking our budget is going to be in a huge hole once the federal stimulus runs out," McWherter said.
But he said current Gov. Phil Bredesen, a Democrat, and state lawmakers adopted a budget blueprint for the coming year that deals with the problems.
Senate Minority Leader Jim Kyle, D-Memphis, said the truth lies somewhere in between.
"I would say it is an overstatement to claim doom and gloom, but I think it's also optimistic to claim that everything is fine," said Kyle, who dropped out of the Democratic gubernatorial primary earlier this year.
He said the budget picture "is really contingent on how our economy reacts and how our revenues are."
Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, said revenue declines and additional obligations created a $1.5 billion "shortfall" in the state's $29.9 billion budget.
"We've addressed that through cuts," McNally said, noting there's still a deficit of about $185 million left to address over the next few years.
But he noted that some props to this year's budget, such as a one-year, 3.52 percent hospital assessment fee that raises $310 million for TennCare, will expire unless hospitals and lawmakers agree to extend it.
McNally, too, worries that Bredesen's revenue predictions in outgoing years may be too high.
Cuts coming in July
In the past two years, Tennessee's revenue has shrunk $1.2 billion, according the General Assembly's Office of Legislative Budget Analysis.
At Bredesen's urging, lawmakers slashed $770 million in fiscal 2009-10 and $420 million in fiscal 2010-11, which began July 1.
But the state is using $991 million in one-time federal stimulus funds and $852.6 million from state reserves to push back the cuts until July 2011, the legislative analysis shows.
And though Bredesen recently told reporters it is a "great overstatement" to say Tennessee will "fall off a cliff," he ordered state agencies last week to come up with plans to cut $45 million to $160 million more.
Social services at risk
Social-services advocates say the cuts are very real unless they can persuade the next governor and legislature to change them.
"We're on the line," warned Sita Diehl, executive director of the National Alliance on Mental Illness Tennessee, as TennCare, mental health, education and other advocates met. "We've had a stay of execution. But it's only temporary."
During last week's debate, McWherter noted that state budget plans have lined up recurring dollars with recurring needs and used one-time money for one-time purposes.
But Haslam noted that about $300 million in stimulus-related funding for higher education goes away in the 2011-12 budget. Moreover, he argued, the state risks losing some $400 million in state funding for TennCare.
"Are you really unaware of that?" Haslam asked McWherter.
Countered McWherter: "Bill, frankly, I disagree with your figures."
Russ Deaton, fiscal policy director with the Tennessee Higher Education Commission, said the University of Tennessee and State Board of Regents systems have had two years to prepare for anticipated state cuts.
"From where I sit, they definitely are [prepared]," Deaton said.
On the hospital assessment fee, Tennessee Hospital Association President Craig Becker said he doesn't expect a decision until November whether to argue to extend the fee into future years.
"If we make sure we've got everything hammered out, I could see that it would go forward."
State Finance Commissioner Dave Goetz, meanwhile, said the reductions have been carefully planned.
"You can choose to do those. You can choose not to and to come up with some other solution. But we've left the plan in place. All you have to do is follow the plan," he said.
McWherter aligned himself with Bredesen, who has high approval ratings. He called the governor's plan "very responsible, although sometimes painful."
"I will certainly use the road map and his administration have provided as a guide," he said.
Haslam spokesman David Smith said Haslam "recognizes the importance of the preparations made by the current governor," but added, "the job of the next governor will include carefully reviewing that blueprint and set of identified reductions and analyzing them in the context of both the unique circumstances that come with each new budget cycle and legislative session as well as his own administration's priorities."
Contact Andy Sher at 615-255-0550 or at asher@timesfreepress.com