Bredesen touts budget plan in visit with Times-News Editorial Board

Hank Hayes • Mar 24, 2009 at 12:00 AM

KINGSPORT — Tennessee Gov. Phil Bredesen pitched his current $29.3 billion budget proposal Tuesday by noting that “most of the pain” will be in next year’s budget plan.

In a meeting with members of the Times-News Editorial Board, Bredesen also defended using about $5 billion in federal stimulus funds over the next two years to shore up K-12 education and higher education, as well as TennCare, the state’s multi-billion-dollar Medicaid program.

“It doesn’t matter what my opinion of the stimulus money is. It’s being paid for by Tennesseans,” Bredesen said. “What’s happened with the stimulus package? ... Everybody has said, ‘Well, all our problems are solved’ and they’re not. It does buy us some time. It’s not a silver bullet.”

Bredesen’s budget proposal, submitted to lawmakers on Monday night, includes fully funding the state’s Basic Education Program (BEP) for K-12 education; reducing non-BEP areas of the budget by 12 percent over a four-year period; and limiting layoffs due to the stimulus payout.

“There are three areas where the (budget) pain is deferred two years, and that is TennCare, non-BEP education stuff and higher education,” Bredesen said. “Everywhere else, including very tough things in children’s services, are all in my second year’s budget. I’m telling all the departments, you need to get going with these things and get on with it and not leave yourself with a problem this time next year.”

For instance, he indicated lump-sum payments to hospitals for indigent care are on track to cease.

State employees faced buyouts last year, but Bredesen said more work force reductions would be made through natural attrition.

“I don’t have any great taste for throwing people out of a job at a time when jobs are hard to find,” he said. “I don’t think the legislature would ever let me lay off 2,500 people and put $400 million of stimulus dollars in the Rainy Day Fund (the state’s reserve account).

“We’ve got a whole bunch of prisons and a whole bunch of people in jail, and I know the economy is bad, but we’re not going to let 3,000 prisoners out on the street to get rid of guards. You have federal programs like welfare, and I’m not going to turn that off.”

The federal stimulus funds include $490 million for the food stamp program, $318 million for unemployment insurance, and $573 million for road and bridge construction.

Another $500 million goes directly to higher education, while $1.6 billion helps balance the state’s budget while state agencies transition to smaller individual budgets.

“There’s not a lot to argue with in this budget,” Bredesen insisted.

But one contested item might be Bredesen’s plan to close a tax exemption for family-owned non-corporate entities, or FONCEs, to gain another $25 million in revenue.

Bredesen indicated that revenue would fund a number of Department of Safety positions, including those held by state troopers.

“When I’ve always asked for a tax increase, either as governor or as mayor (of Nashville), I’ve tied it to something,” Bredesen explained of the budget move. “I just think it’s the right thing to do as opposed to general budget balancing.”

Current FONCE provisions allow more than 3,200 entities to shield more than $5 billion in commercial real estate properties from the state’s franchise and excise tax, according to the Department of Revenue.

“Approximately 20 percent of these FONCEs are owned by out-of-state investors that control over $1 billion worth of commercial property, making Tennessee a tax haven for out-of-state, wealthy investors who want to shield their commercial property investments from taxes,” said a Department of Revenue report on FONCEs.

Otherwise, Bredesen said there will be no other proposed changes in the state’s tax structure.

“We will show that we can manage through up and down times,” he said. “My very first speech on the budget when I was governor, I said ‘We’re going to be like a family, figure out what money is coming in and spend that much and no more.’

“If we get through this ... we will be in a very small cadre of states that have managed well through this thing.”

More budget details can be found at www.tn.gov.

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