To make its budget requirements for the coming fiscal year, Tennessee's government needed revenue growth of $913.5 million during the past fiscal year. What the state actually got was $86.5 million worth of growth, hardly enough to stay even. That led to a projected record deficit for Tennessee of almost $1 billion as it prepares to enter the 2009 budget process (under an unyielding constitutional mandate to make the books balance).
That was the nut of the message delivered to members of the Memphis Rotary Club Tuesday by state senator Jim Kyle, the Memphian who heads what is now a Democratic minority in the state's senior legislative body. About as categorically as he could, Kyle went on to aver that the citizens of Tennessee have spoken on the matter of an income tax: There won't be one.
Where else might such a record deficit be made up? There are only three sources of revenue, Kyle pointed out: income, property, and consumption. With the first of these ruled out in the wake of the nearly ruinous income-tax battles of the late '90s and with the property tax, itself maxing out in most places, being the major recourse of local governments, that leaves only the sales tax — already at the 10 percent threshold.
What then can the state do? What it will have to do is cut a state budget — already severely stripped down after several relatively lean years — by another 10 percent. That's the consequence of the inflexibility that met calls for a state income tax (from a conservative Republican governor, Don Sundquist, it needs to be remembered). As far as basic services go, the state's ever-worsening predicament means that services already cut to the max must cut even deeper — into the very marrow of state services. Want further bad news? Tennessee's expected financial shortfall is third worst among the states. That's a distinction not to be coveted.
Kyle had no magic solutions to offer to this sobering predicament. His message was rather one of preparing the constituency he addressed for conditions of unprecedented — and, thus far, unimaginable — severity.
One ray of light: the mammoth federal stimulus program being advocated by President-elect Barack Obama and likely to be passed by Congress. This could mean as much as $500 million to Tennessee for each of the next two fiscal years, Kyle said. And we remember the old classroom moral: Half a loaf is better than none.
That's the good news. The bad news? Two years from now, when this year's anticipated two-year outlay of emergency appropriations runs out, there will be nothing to replace it. Tennessee, like all the other states, must then fly on its own. It won't be easy. It may not even be possible. But the state will damn sure have to try. That's the inspiring outlook for the Volunteer State as Tennesseans head into the morass of 21st-century finances. How we get there from here is thus far unknowable. And answering the question probably means redefining what "there" is in the context of diminishing resources.