Sunday column: TN balances its budget, but not like a family

While it has become a political cliche to call for running government budgets like family budgets, it is submitted that most frugal families would not voluntarily cut back on their income while expenses are increasing — and that’s the path Tennessee state government seems to have taken.

Gov. Bill Haslam began department-by-department budget hearings last week by noting that spending on education and TennCare will have to be raised next year, an increase in expenses that state government has no more control over than a family does over the cost of school supplies, college tuition or medical care and insurance costs. And the governor has promised to make a priority of increasing teacher pay, something he and legislators do have some control over in the education arena.

At the same time, Haslam observed that during the past three months state income, also known as revenue or tax collections, ran more than $100 million below estimates made when the current year’s budget was enacted this spring. Ergo, he said, the coming budget is going to be the hardest he’s ever faced.

This is a reduction in income that the state has no more control over than a family has over husband losing his job and taking another at lower pay or the wife’s employer announcing a salary reduction.

Of course, as state budgets go, the governor has faced only three previously, and the first — the most uncomfortable so far — was largely put into place by his predecessor, and its shortcomings, as well as those in the following year, could be substantially attributed to the federal government cutting back on what it sends to Tennessee and similarly uncontrollable factors. About 40 percent of Tennessee’s overall state budget traditionally comes from the feds.

The budgets enacted by the General Assembly in 2012 and 2013, in fact, were happy-times-are-here-again affairs, in retrospect — at least in comparison to some of the grim budget situations his two predecessors, Democrat Phil Bredesen and Republican Don Sundquist, had to deal with. For that matter, the 2014 budget will be, too, but does raise some uncomfortable matters.

Times were better back in 2012. So much so that state government’s political family, including most of those black-sheep Democrats as well as the majority Republican herd, decided to cut income from four sources — the state inheritance tax, the state gift tax, the state sales tax on groceries and the Hall income tax on some stock and bond dividends and interest. Collectively, they total about $165 million in lost annual income. The biggest chunk of that, about $100 million, comes from repealing the state inheritance tax, and that was done on the easy installment plan.

In family budgeting terms, the reduction in the sales tax on groceries and the tiny cut in the Hall tax might be compared to increasing the kids’ allowance and maybe going overboard on Christmas presents. Repealing the gift tax that most typical family folks never heard tell of — about $15 million a year in lost revenue, about half that of the food tax cut and 10 times the Hall revenue loss — is perhaps the equivalent of sending your rich uncle a really nice birthday present, hoping he’ll remember when he sends gifts.

The installment-plan repeal of the inheritance tax is phased in, becoming completely effective in 2016, with payments in lost income to continue forever after that. It’s maybe the equivalent of a family deciding to lease a cottage on the beach in Florida and give residential rights to the rich uncle’s best friend and his heirs for the next 99 years, expecting that the uncle will surely remember when writing his will.

It is submitted that not many typical families would do anything of the sort after a good kitchen table discussion.

Maybe a family would, on the other hand, decide to squeeze a few dollars out of the budget to help a relative who has come upon hard times. Tennessee’s political family, on the other hand, has not budgeted funds even in relatively good times to cover help for 7,100 people in real families who are on a waiting list with the Department of Developmental Disabilities, for one of many examples.

Tennessee does balance its budget, as mandated by the state constitution. But it does not do so in the way many real families would.

Note: This is also available on the News Sentinel website, HERE.