|FOR IMMEDIATE RELEASE
MONDAY, MAY 4, 2009
CONTACT: LOLA POTTER
NASHVILLE, Tenn. - Finance and Administration Commissioner Dave Goetz today provided an overview of the administration budget amendment that will be filed later this week. Goetz delivered the overview in meetings of the Tennessee General Assembly’s House and Senate Finance Committees.
“As revenues have continued to deteriorate, we’ve had to identify an additional $112 million in savings from the current year’s budget and $161 million in savings for the FY 2009-2010 budget,” said Goetz. “However, under this proposal, we can still forestall some of the most painful reductions in state services and delay the immediate implementation of some of the planned staffing reductions. For example, the amended budget will allow us to restore key positions in the Department of Children’s Services and provide recurring funds for safety net services in the Department of Mental Health.”
The restoration of planned cuts to the Department of Children’s Service’s preserves 361 full-time employees in group homes and youth developmental centers. In the Department of Mental Health and Developmental Disabilities, $10 million in recurring funds will provide mental health safety net services, including crisis stabilization and mobile crisis units.
The restorations to the Children’s Services and Mental Health budgets will be offset by $38 million generated through changes proposed in the administration’s technical corrections bill. The majority of the funds – $21 million – would be realized by improved efficiency of local gross receipts business tax collections.
“We’ve studied the effectiveness of this business tax administration closely, and we project a significant increase in collections, increasing both the state and local government shares, while holding county clerks, who realize fees from the collections, harmless with no loss of revenue,” said Goetz. “This would result in an additional $21 million in collections for the state and an additional $25 million for local governments with absolutely no change in the tax rate.”
Other aspects of the technical corrections bill that would offset the restoration of cuts to Children’s Services and Mental Health would close loopholes for national companies that sign hardware and software maintenance and warranty agreements out of state to avoid taxes; remove the exemption that currently allows cable companies to avoid paying taxes on cable boxes; and make business long distance tax rates equitable to the rates already paid by individuals.
Goetz said the state’s workforce will be reduced by approximately 700 currently filled positions over the next fiscal year. The positions are among those previously identified by state agencies in preparing the proposed budget that was presented to the legislature in March. Approximately 700 additional positions previously identified but currently unfilled would also be eliminated.
Other priorities funded in the budget amendment include an allocation of $13 million to assist in the acquisition and development of the West Tennessee Megasite in Haywood County, $5 million to convert the Saturn Northfield administration building into an advanced manufacturing technology education center.
In addition to the revenues generated by closing tax loopholes, the state anticipates approximately $16 million in increased TennCare federal matching dollars due to the state’s current unemployment rate.
The budget plan calls for drawing from the state’s reserve accounts while preserving sufficient cash to help ensure Tennessee can manage through the current national economic recession. The state’s Rainy Day fund, currently at a balance of $750 million, would decrease by $180 million to help close the current budget year and decrease by an additional $50 million in FY 2009-2010 to a balance of $520 million. Reserves from TennCare, currently at $474 million, would decrease to $347 million at the end of the current fiscal year and to $341 million in FY 2009-2010.
Additionally, as state agencies begin preparing their FY 2010-2011 budgets this fall, the state will be looking for even further budget reductions. Goetz said the cuts that will be made in the next budget are those for which state agencies have already planned and prepared.
“We know we’ll have to make more reductions as we prepare the next budget later this fall, but we believe this approach resolves the current budget challenges,” said Goetz. “The amended budget for FY 2009-2010 will allow us to reduce state spending according to department-prepared plans while restoring some of the most painful planned cuts in key areas like Children’s Services and Mental Health. It will also preserve the significant reserves that will be required if revenues continue to deteriorate.”