by Jackson Baker
hoehorned into
a tiny one-room office on the ground floor of Nashville's War Memorial Building,
which adjoins and is connected to the basement bunker complex of Legislative
Plaza, is the staff headquarters of one Connie Hardin, the former
budget director for both current Governor Don Sundquist, a Republican,
and his predecessor, Ned Ray McWherter, a Democrat.
If
that pedigree suggests the ability to function in a bipartisan atmosphere,
that's exactly how Hardin -- named by the 1997 General Assembly to be the
first legislative budget director in history -- means to play her
hand. "I work for the whole legislature, and that means both parties,"
says Hardin, most recently chief fiscal officer for the Tennessee Higher
Education Commission.
Even so, it is the state's Democrats who, after the election of 1996, control both houses of the legislature; it is they who basically hired her back in January; and it is they who are privately setting great store by the pending findings by Hardin and staff concerning Governor Sundquist's 1997 austerity budget, which seeks to cut $110 million from last year's total -- and, critics say, to throttle any number of good causes in the process.
SEVERAL OF SUNDQUIST'S BUDget cuts are indisputably real and, by general agreement, cut deep into the state's commitments in such areas as housing and higher education. Other cuts are window-dressing and don't do what the governor claims they do and in many cases aren't even reductions at all, say the Democrats, many of whom, in the words of State Rep. Matt Kisber of Jackson, see the process as a "budgetary charade," a game of "smoke and mirrors."
Preliminary indications from Hardin's office are that both kinds of reservations about the budget will be reflected in her official report, which is due, she says, "within the next two weeks." The report will incorporate responses from throughout the state concerning the impact of various reductions, and, while Hardin intends to be even-handed in her presentation, some conclusions will "speak for themselves."
For example, there are the 77 state firefighters who will be dropped from the Department of Agriculture's payroll, according to the Sundquist budget. "We've already heard concerns from many of the communities that think they are going to be affected," says Hardin, who points out, too, that the term of service for the remaining firefighting personnel will be extended and aid will be given to volunteer fire departments. "And that, to some degree, could be an offsetting factor."
But, while Hardin insists that she will let the evidence speak for itself, highlighting the facts only to ensure that the entire picture and differing points of view get exposed, and John Ferguson, Governor Sundquist's Commissioner of Finance and Administration, expresses confidence that Hardin's report will be both fair and honest, it is members of the Democratic leadership who, with an air of vindication, are touting her report in advance.
Sure to be incorporated in the report are some bizarre tergiversations uncovered in recent and ongoing hearings by the House Finance, Ways, and Means Committee, chaired by Kisber. Among the disclosures:
Some 12 positions in the Tennessee Wildlife Resources Agency, totaling $313,000, were slated for elimination and presented as an economy in Governor Sundquist's initial budget presentation. The problem, as committee members found, is that none of the 12 positions -- those of inspectors, in the main -- were ever actually paid for out of the state's general fund. They were financed wholly by hunters' and fishers' user fees and thus never constituted a burden upon the taxpayers of Tennessee.
Moreover, as TWRA director Gary Myers freely admitted to the House committee, his agency has every intention of seeking to have the positions reinstated on final budget review. In other words, the cuts -- which were never really budget reductions in the strict sense, anyhow -- are a case of Now You See 'Em, Now You Won't.
What happened? Myers contended, and Ferguson conceded, that the administration pressured the TWRA to make the cuts for the sake of providing an example to other agencies. That the reductions wouldn't in any case make a dent upon the state's financial predicament is beside the point, maintains Ferguson, who insists that all state agencies, whether they are user- or taxpayer-funded, should get used to the principle of downsizing.
That principle would evidently apply as well to the state Military Department, whose commander, Major General Jackie D. Wood, concedes that a substantial portion of the $722,700 put forth as cuts in his department are actually reductions in federally funded positions -- a fact which prompted State Rep. Tommy Head of Clarksville to muse out loud: "I guess it's hard for me to understand how we can cut federal dollars and save state funds."
Part of the answer, as Ferguson points out, is that many of the federal dollars are matching funds, requiring state outlays. But the committee's Democrats pressed hard on the matter last week and indicated they would keep on trying to discover whether, in the Byzantine complexity of the administration's cost-accounting policies, More was Less or vice versa and who was costing whom to do what.
As is the case with TWRA, a significant portion of the Department of Environment and Conservation's $662,200 is related to positions paid for by state-imposed fees, not directly by the taxpayers. And indications are that the House Finance Committee will allege -- and Hardin's report will confirm -- that there is possible legerdemain as well in the accounting for the General Services Department and the Department of Commerce and Insurance. In both of these agencies, accounting procedures may have been used which posit "reductions" that turn out to be nullified elsewhere in the department's expenditures.
And last week a minor storm ensued from the disclosure that the Sundquist administration, which has vowed to hold the line on any new taxes, may actually be trying to enact a significant new tax by the back door. This is embedded in legislation which would double the annual fees paid by the state's limited-liability corporations, which number in the thousands.
The measure would stanch the loss of some $6 million a year in potential revenue, Governor Sundquist maintained, but, after various legislators and the media kicked up a fuss over the apparent discrepancy between anti-tax rhetoric and revenue-poor reality, Sundquist indicated that he would "rethink" the fee increase.
Even some of the governor's critics -- notably Kisber -- would prefer that he hold to his guns on the LLCs, because the fact remains that there is a larger problem than that of possible arithmetical sleight-of-hand on the administration's part. The budgetary shortfall, based on current estimated revenues of $234 million and pledged expenditures of some $460 million, is real, and nobody doubts it.
WHILE IN MEMPHIS LAST MONTH for the Shelby County Republican Party's annual Lincoln Day Dinner, Governor Sundquist professed an optimism that the revenue forecasts on which his 1997 budget is based might understate the actual case. If so, he said, the windfall could be reallocated two ways: as pay-raise increases for state employees, who have been asked to go without raises this year as part of a $50 million administrative-cost reduction; and as add-on money for higher education, which is scheduled to take a $40 million hit in planned budget cuts.
But even that hope of partial relief was dashed by a revenue update issued this week by Commissioner Ferguson's office, showing that, while sales-tax revenues have been higher recently than forecast and excise-tax revenues were somewhat less than predicted, there is nothing in the figures to indicate that his original estimates were significantly off the mark.
That means that, come what may, ordinary Tennesseans are going to have to do without something they've gotten used to. That could be in a diminished number of Veterans' Affairs offices, in the aforementioned diminishment of firefighting wherewithal (including the much-protested loss of a fire tower in Tipton County just south of Munford), in truncated subsidies for agribusiness research and in the development of international marketing approaches for state products, in a slowdown of industrial waste cleanups, and in much else that has been uncovered by the House Finance, Ways, and Means Committee and by other investigative arms of the legislature.
The fate of two programs in particular will keenly affect the outlook for Memphis and Shelby County:
The Tennessee Housing Development Agency's START loan program for first-time low-income homebuyers would probably have to be eliminated if the administration follows through on its plans to raid THDA's reserves of some $88 million as part of its budget-balancing effort.
"I would not want to claim the sky is falling, but we would have to seriously re-evaluate the questions of, Can we serve the same kinds of potential borrowers, or do we need to tighten up?" said THDA director Jeff Reynolds last week.
Reynolds noted that THDA had closed some 4,033 home loans last year for buyers whose average household income was $22,882, and that over the years assisted homebuyers had defaulted at a rate of less than 2 percent. "It doesn't make any sense," State Rep. Carol Chumney of Memphis said about the possibility of interrupting or terminating what would appear to be such a successful program.
Specifically hurt would be Memphis Mayor W.W. Herenton's much-vaunted down-payment assistance program, which provides grants averaging about $2,850 for buyers whose income is enough to meet monthly notes but who could not meet normal down-payment specifications.
Several Shelby County legislators were also irked by the fact that THDA's programs are partially funded by its own mortgage earnings and partially from real estate transfer taxes and mortgage recording fees earmarked for its programs.
As sentiment mounted in legislative quarters this week for a reconsideration of the THDA fund transfer, Ferguson conceded that other, alternative avenues were open to consideration, including use of the state's $101 million Revenue Fluctuation Fund (Rainy Day Fund), ordinarily regarded as a last recourse for severe, unanticipated revenue shortfalls.
"That's something that I and most other people would hate to see used when we have alternatives," Ferguson said.
Then there is the roughly $8 million hit the University of Memphis is currently scheduled to take over a two-year period. University officials have been forced into taking Draconian measures to compensate for it (see graphic) -- measures not limited to the process of relinquishing services which Sundquist calls "privatizing" and U of M administrators call "outsourcing."
Speaking before the regular weekly meeting of the Shelby County legislative delegation last week, U of M president Lane Rawlins summed up the university's predicament vividly. "The more times you run over a dead possum, the flatter it gets, and we're that possum," he said. Later, he used another metaphor: "What we say around campus is that we're `pruning,' and when you do that, you look real ugly for a time."
THAT THINGS LOOK UGLY AT THIS time in Tennessee's funding history is simple reality, and no matter what happens in the current budget battle -- partly partisan in nature, partly not -- there exists a state of financial emergency which has to be addressed, both in the immediate and the long-term future.
Some questions are more vexing than others. TennCare, the state's expensive substitute for federal Medicaid, will probably require years to be disentangled, probably under direct federal supervision. In particular, the mental-health-care provisions of TennCare will have to be rethought.
And the state, and its various agencies, will no doubt have to contemplate divestiture as a solution for various financial ills. (State Senator John Ford has introduced a bill that that would do just that for the U of M's Chucalissa Museum, transferring it to the Department of Environment and Conservation as a state park. Others foresee a future of turning over various state programs or property for management either by federal or private administrators.)
In the short term, help is definitely not on the way. Given the political realities of 1998, an across-the-board election year for major state offices, nobody is going to be in the mood to propose raising taxes -- least of all Governor Sundquist.
Should Sundquist be reelected, however, he would confront the precedent that his two most recent predecessor, McWherter and former Governor Lamar Alexander, each felt enabled in the first year of their second terms to ask for -- and get -- a tax increase from the legislature.
Perhaps Sundquist will win again and do the same. Or perhaps he, or some successful Democratic rival, will be so boxed in by a new anti-tax pledge as not to be able to. That would be then, this is now.
And right now, the budget battle rages on in Nashville. And not a few of its participants are holding their breath. n (This is part two of our state budget analysis.)