The state’s dire fiscal straits from the ripples of the Great Recession must be apparent to most Tennesseans by now. Certainly legislators should be aware of the continuing budget squeeze. With state tax revenue continuing a 19-month skid, Gov. Bredesen has proposed a range of drastic cuts for the 2010-2011 budget, including firing 1,396 current state employees; elimination of another 456 unfilled positions; a $1.5 billion cut in spending from the current fiscal-year level; and a $1.2 billion cut in the TennCare (Medicaid) budget ($800,000 of which will be in the loss of federal matching funds).
The governor also proposes to draw down the state’s contingency reserve fund by $202 million over the next two years, leaving it at around $445 million, a minimum to maintain the state’s improved bond credit rating.
All told, Gov. Bredesen would leave a state budget just $99 million out of whack, in terms of recurring dollars, for the proposed 2010-2011 fiscal year, in the hope that renewed growth will balance that red ink. To pull off this fiscal miracle after being pummeled by 19 straight months (through December) of what our economists call “negative growth” in state tax revenue, he also proposes a few technical fiscal corrections that would bring in an additional $71.7 million to help spare further job and spending cuts.
And Republicans, naturally, are objecting. In an election year, they don’t want to yield to anything that can be seen as a tax increase, never mind how modest, and never mind that their only recourse would be needlessly deeper cuts, or more deficit spending through heavier use of the non-recurring contingency fund savings.
Parts of the corrections package can be seen as modest, but defensible, tax increases. The largest piece, which would produce roughly $21.3 million, would equalize the sales tax on cable and satellite services by applying sales taxes to the first $15 of a cable bill. That portion now is exempt and untaxed, while all of the satellite fee is taxed. Satellite companies have reasonably filed a lawsuit over the disparity. Ending it would be beneficial both from a revenue and an equity point of view.
Another part of the corrections package would hike drivers’ license fees from $19.50 for a 5-year license to $46 for an 8-year license. The proceeds would fund payments for a $78 million Highway Patrol radio system and save the jobs of 85 state troopers and 56 workers at license testing stations.
In the larger context of the state overall budget, such adjustments are negligible and defensible. Lawmakers have given themselves far larger benefits in tough times by raising their office allowances, per diem compensation while they’re doing state business, salary and pension — all of which amount to a tax on Tennesseans’ paychecks.
And even in tough times, it is reasonable to exact modest increases in some fees and taxes to avert the relentless savaging of state jobs and the services to residents performed by the workers who lose their jobs. There should be a balance point at which lawmakers finally tweak fees and taxes to thwart the negative ripple effect of job losses, especially with the recession slowing and the prospect of a strengthening of the economy on the horizon.
Indeed, economists rightly have begun warning of the excessive and needless damage inflicted on our overall economy by incessant cut-backs, which cripple capacity and contribute heavily to the cost of joblessness, unemployment aid and lost consumer spending and employee productivity.
In short, Republicans’ knee-jerk insistence on more cuts in lieu of minor tax increases should be seen as thoughtlessly counter-productive. That’s a heavy price to pay to be myopically doctrinaire about the tax base which funds our government and its public benefits.