Friday, January 31, 2003

Short Bread

Local and state governments face a batch of new problems with a shortage of dough.

Posted By on Fri, Jan 31, 2003 at 4:00 AM

Even as the president and Congress hunker down in Washington this week to take on questions of war and peace, so are newly inaugurated Governor Phil Bredesen and members of the state legislature constrained to address some intractable problems at the state level.

Just as George W. Bush made his annual report to the nation this week via his State of the Union address, so will Bredesen be obliged to clarify Tennessee issues in a State of the State address, probably next week.

Although perspectives necessarily differ, what the two executives and their respective legislatures have in common is a situation of multiplying demands and diminishing fiscal base.

It was only last year that former Governor Don Sundquist, who had fought unsuccessfully for a tax-reform package based on a state income tax, reluctantly signed into law a mammoth $933 million sales-tax increase -- the largest tax increase in Tennessee history. Now comes word from Bredesen that the state is still short by more than half a billion dollars -- and the shortage is especially pronounced in the case of the state's revamped (but still costly) TennCare insurance program.

Meeting with his cabinet for the first time last week in Nashville, Bredesen announced that the state looked to have a $511 million shortfall. Meeting with cabinet members again this week, the governor said he'd identified an additional shortfall which could be attributed directly to TennCare.

"We've found two flat errors," Bredesen said. TennCare is the problem -- with an anticipated shortfall of $259 million for this year and a larger one for next year. As the governor explained, the state has begun paying $100 million to hospitals bearing a disproportionate load of TennCare patients. Moreover, the state miscalculated the reduction in federal payments resulting from the terms of the latest federal waiver under which the Tennessee program -- a substitute for Medicaid -- operates. That could mean another $80 million in unforeseen costs.

Accordingly, former healthcare entrepreneur Bredesen seems inclined to follow through on his campaign promise -- businesslike but hardly inspirational -- to apply his "management" skills to the state's fiscal problem. In the short run, that means downsizing.

The new governor promised in his inaugural address of two weekends ago -- relatively brief and delivered to a shivering, undersized crowd of auditors in War Memorial Plaza -- to find some practical middle between the state's needs and what it can afford. He now says he wants to cut the number of state employees -- excluding educational employees -- to about 37,200, a figure equivalent to the number on the state payroll three years ago.

Sweetening the pill with a promise to forgo his own $89,000 annual salary, mega-millionaire Bredesen also instructed his department heads to reduce their budget requests for the new year by some 7.5 percent. He foresaw, however, that several departments -- TennCare, Corrections, Children's Services, and Mental Health and Mental Retardation -- might not be able to toe that line.

The state financial crunch is likely to cut quite close to home, of course. Or so believes Rufus Jones, the able city lobbyist who served more than a decade in the state House of Representatives before leaving to make an unsuccessful run for Congress in 1996.

"If we don't heal this split, we're going to be losing dollars. Every which way," said Jones at a Tuesday lunch at the University of Memphis, which followed a meeting of the Shelby County delegation with various government officials.

The "split," as Jones defined it, is the widening gap in opinion between spokespersons for the city of Memphis on one hand and various county entities on the other over the issue of education -- specifically, how to amend relations between the Memphis school system and the Shelby County system.

Both Memphis mayor Willie Herenton and county mayor A C Wharton were heard from by the legislators, as were various suburban mayors, speaking more or less as a body. Neither the twain nor the triad met, and that is more or less what Jones had in mind. Disunity over the school-reorganization issue -- Herenton proposes consolidation, the suburban mayors are adamant against it, and Wharton splits the difference -- is an impediment to agreements on a variety of other issues for which the city and county need state aid.

The newly elected chair of the legislative delegation, Rep. Carol Chumney of Midtown, is still hopeful that the various conflicts can evolve into a regional consensus, however. To this end she has proposed broadening delegation contacts in Nashville with those of adjoining Tennessee counties and in Memphis with those of counties in adjoining states.

"We need more people sitting at the table. From all around," Chumney said this week. "We need a combined urban-suburban consensus on the school issue." Though she ran for county mayor last year on a platform which emphasized city/county consolidation, she is leery of solutions -- like that proposed by Herenton -- which emphasize a sudden dissolution of divisions into one unitary school system.

"It's always a good idea to get the facts out before rushing forward with something," said Chumney, who noted that Herenton had proposed many dramatic initiatives in the past, only to "drop them like a hot potato." Of the Memphis mayor's current proposal to unify the schools by abolishing the Memphis school board by referendum, legislative action, or whatever other means proves necessary -- Chumney observed skeptically, "Is this a serious thing? Or just the idea of the week.?"

Economic ideas like the desirability of impact or development fees should get a fair hearing before consolidation, lest the city and county property tax be counted on to pay for increased short-term costs, Chumney said.

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