NASHVILLE - Tennessee may have to slash as much as $350 million more from its budget next year on top of $753 million in already planned reductions.
"I really think you need to expect and can treat these $1 billion to $1.1 billion in base reductions ... as permanent," said Jim White, executive director of the legislature's Fiscal Review Committee, told House leaders on Thursday. "State government is going to be smaller and different after we complete this budget year."
House Speaker Kent Williams, R-Elizabethton, called the special hearing for top leaders, committee chairs and Budget Subcommittee members to help lawmakers hit the ground running when the General Assembly reconvenes in January.
Tennessee revenues have been taking a beating in the nation's worst economic downturn since the Great Depression.
Faced with a $1.2 billion shortfall, Tennessee lawmakers last spring approved $750 million in recurring cuts to state services and set plans over the next two years to eliminate about 1,400 positions. About one in 10 state positions are currently going unfilled.
Federal stimulus funds have provided one-time money that is allowing the state to delay most actions until the 2010-11 fiscal year. But some actions must be taken in the current 2009-10 budget year, including slashing TennCare reimbursement rates for nursing homes, hospitals and doctors by about $219 million in January, state Finance Commissioner Dave Goetz said.
The administration's five-year projections assume a $432 million deficit in the current fiscal year and a $209 million deficit in 2010-11. Those figures are based on assumptions that state revenues will increase 0.96 percent this budget year and have 4.4 percent growth in 2010-11.
Right now, the state is having trouble meeting its meager 0.96 percent growth projection.
Mr. Goetz told lawmakers that revenues in the current 2009-10 fiscal year that began July 1 are already running about $70 million below estimates on a month-to-month basis. If the trend continues, it could result in having to cut an additional $350 million in 2010-11, Mr. Goetz said.
Mr. White's estimates that state revenues are about $20 million below projections and thinks the cuts would be about $290 million. If that's the case, he said, total percentage cuts in some agencies could hit 21.6 percent next year.
After more than two hours of grim assessments Thursday, House Speaker Emeritus Jimmy Naifeh, D-Covington, had enough. He predicted the state's Rainy Day Fund, once at $750 million and projected to fall to $323 million in 2010-11, "is probably going to go down to zero."
He called the removal of some TennCare recipients "heartbreaking" and said lawmakers are to blame. He also urged colleagues to look at a tax increase.
"No one has got the backbone or the guts to talk about revenue enhancement," Rep. Naifeh complained. "That's what we need to at least explore."
House Budget Subcommittee Chairman Harry Tindell, D-Knoxville, said the meeting's purpose "is not to pave the way for such action. It is to educate and inform members."
Rep. Williams said "our whole country is in a deep recession. I don't feel this is the time to try to increase our revenues with any type of higher taxes."
Mr. Goetz later said the administration has no plans to offer a general tax increase although it may offer a traditional bill that seeks to close tax loopholes.