State spending up 16 percent under Haslam, but budget cuts loom

By Erik Schelzig, Associated Press
NASHVILLE, Tenn. — Another state spending plan, another set of dire predictions of budget cuts.

In each year of Gov. Bill Haslam’s term in office, the Republican has warned that budget cuts are necessary to cope with projected shortfalls. And yet, each year, state spending has increased.

The low-end projection for the state’s share of the upcoming spending plan is $12.2 billion. That’s $1.65 billion, or about 16 percent, more than the state collected under the last spending plan of Haslam’s predecessor, Phil Bredesen, in 2011.

But a sluggish state economy has caused revenue projections to be adjusted downward, and Haslam has once again asked each of his departments to prepare for spending cuts in the upcoming budget year.

The governor has argued that the annual growth in Medicaid spending has put the squeeze on other programs the state would like to spend money on.

“Medicaid takes up all of our new dollars, and that’s just the hard fact,” the governor told reporters after a Rotary Club speech last month.

And that struggle to control health care costs is a factor in the state’s reluctance to agree to Medicaid expansion under the federal health care law, even though the federal government would pick up all or most of the costs in the next few years.

“I think we’re being wise in saying we’re not going to expand this without thinking about the long-term ramifications,” he said.

Other budget items taking a bite out of any potential surplus include growth and inflation in the state’s K-12 education funding formula and state employee compensation. That leaves little money left over to boost state spending on higher education, which would be necessary to avoid tuition hikes at public college and universities.

Meanwhile, the governor defended recent tax cuts on inheritance, gifts and income from interest and dividends. He argues those will pay off over the years as more affluent people choose to retire or remain in the state — even if the lost revenue puts pressure on the budget now.

“Short term, would you like to have that money? Sure,” Haslam told reporters after recent budget hearings at the state Capitol. “Long term, is it the right thing for the state in terms of attracting capital to Tennessee? I honestly think it is. So I don’t have any regrets about that.”

The budget struggles could also affect one of the governor’s signature goals. Haslam, who is running for re-election this fall, has announced that by the time he leaves office he wants Tennessee’s teacher salaries to have grown more than those in any other state.

According to the latest data from the National Education Association, the average salary for classroom teachers nationwide is $56,383, compared with $48,289 in Tennessee. The governor hasn’t said when he will begin to boost teacher pay, or by how much.

Dick Williams, the chairman of Tennesseans for Fair Taxation, said the annual budget squeeze is due to the state’s heavy reliance on sales taxes and federal money. Williams’ group opposes a proposed constitutional amendment going before voters in November to ban an income tax in Tennessee.

“With the state not accepting federal funds to assist many of our uninsured and reducing existing state taxes additional ‘bone’ will need to be cut from the budget,” Williams said in an email. “This will only be made worse if our constitution is amended to preclude even consideration of a balanced system that lowers sales taxes and includes a modest income tax.”