NASHVILLE -- Gov. Phil Bredesen says "very, very tough" choices await him and Tennessee lawmakers when it comes to Tennessee's upcoming 2010-11 budget.
"It's coming on the heels of two years of budget reductions," said Gov. Bredesen, who starts public budget hearings Monday. "The fat and the easy stuff and the vacant positions are long gone, and we're really now down to the tough (decisions)."
Hearings start with presentations by the Education Department and other agencies including the Correction Department. They continue Wednesday and go through Friday with one final day of hearings scheduled Nov. 23.
The culprit behind the cuts is the national recession, which has pounded most states' revenues into the ground. While there are signs the economy is rebounding, just last week the National Governors Association and National Association of State Budget Officers warned that state finances will be in a ditch for years to come.
"The bottom line is that states will not fully recover from this recession until late in the next decade," warned NGA Executive Director Ray Scheppach as he fretted about a "lost decade" for states.
Tennessee agencies are looking at cutting their budgets by up to 9 percent to make the new budget balance. It may get worse, officials said.
Last spring, the state faced a $1.2 billion shortfall. Lawmakers slashed $753 million in ongoing spending from the current 2009-10 budget that took effect July 1. But one-time federal stimulus funds and state reserves were used to delay implementation of $526 million of those cuts until the 2010-11 and 2011-12 budget years. About $290 million in cuts are expected in the 2010-11 budget.
"The stimulus package sort of filled in the holes," Gov. Bredesen said, but he noted federal stimulus aid for state governments begins disappearing next year. He expects it will take "some explaining" to the general public why cuts remain necessary "when the news is good. ... But the reality is we're living on borrowed time."
Tennessee general fund collections in the current $29.4 billion budget already are running $88 million below projections. That could grow to as much as a $350 million shortfall by June 30, Finance Commissioner Dave Goetz has said.
Last week, Mr. Goetz said department and agency heads' marching orders are clear.
"In August we told them (department heads) to show up with 6 percent initial (cuts) plus an additional 3 percent," the commissioner said. "That's on top of an average of 12 percent that the agencies reduced their budgets in the current year. That's the magnitude of things we're facing."
A few areas such as the state's Basic Education Program funding formula, which helps pay local school costs, are expected to be spared.
"Some of the stimulus money was for two years and some was not," Mr. Goetz said. "K-12 and higher ed continue to get their money through the next year."
Lt. Gov. Ron Ramsey, R-Blountville, the Senate speaker, said, "It's going to be a tough budget year, no doubt about it."
The lieutentant governor hopes to succeed Democrat Gov. Bredesen, who is barred by law from seeking a third term. Gov. Bredesen "is doing exactly what I'd do when I'm governor -- looking at all departments," Lt. Gov. Ramsey said. But he said he agrees with Gov. Bredesen that some areas such as the BEP "need to be protected."
Voicing concerns, Rep. JoAnne Favors, D-Chattanooga, said, "I know that we can't maintain all our programs the way we have in the past, but I hope we'll be extremely careful before we make additional cuts in mental health."
The Bredesen administration already has put an additional squeeze on state agencies in the current fiscal year, holding back $157.6 million. The current state portion is running a $432 million recurring funding shortfall.
Gov. Bredesen encouraged lawmakers to attend the hearings. Once they are over, the governor said, "that's when I have to shut the door and start shuffling things around trying to figure out how to get through this."
"To be really clear about this, this next six months is the toughest six months of my time as governor," he said.
The next governor, he said, "is definitely going to have a really tough couple of years. There's no way around that. I'm trying to make it as easy as I possibly can by getting a lot of this stuff out ahead of time. But it's a tough row to hoe. It's going to take a decade to get back really to where we were a couple of years ago."
State lawmakers in the current budget also approved plans to eliminate 1,372 positions over the next two years. Abput 719, mostly vacant positions, are to be eliminated in the current budget year. Gov. Bredesen has said layoffs are likely in 2010-11.
But the governor said last week he is willing to explore the use of employee furloughs -- days off without pay -- to help blunt the need for layoffs. According to a National Conference of State Legislatures report in September, 25 states including Georgia have implemented or have approved furlough programs that include such measures as taking one or two days off per month.
Mr. Goetz noted there is also a 7 percent rate reduction "for all TennCare providers in the current budget that takes effect in the next year because it's been temporarily halted by the use of federal stimulus funds. But that's one cut that's already approved by the legislature and will have to take effect, and we'll be looking for more."
* Gov. Phil Bredesen begins hearing from department and agency heads Monday on how they will deal with budget reductions in the 2010-11 budget.
* The administration has told agencies to prepare initial budget cuts of 6 percent with contingency plans to reduce another 3 percent.
* More cuts may be needed if revenues continue to fall. Shortfall could hit $350 million by year's end.