AP setup story on Haslam’s ‘State of the State’ speech

By Erik Schelzig, Associated Press
NASHVILLE, Tenn. — While state lawmakers come up with competing plans to carve up a projected budget surplus, Republican Gov. Bill Haslam hopes to seize the initiative at his annual State of the State address on Monday.

Haslam told reporters after a speech to the Tennessee Press Association that he wants to dedicate a sizable chunk of new revenue toward K-12 education, though he declined to elaborate on specifics in advance of the address.

“Historically, Tennessee has underinvested in education,” the governor said. “And when you have a chance to reshape a budget like we do this year, you should invest that in places that you think are strategically important.”

Official projections have Tennessee general revenues exceeding original estimates by about $350 million in the budget year ending June 30, and by the same amount again in the upcoming budget year. Both projections are widely believed to be on the low end of the range of what the state will actually collect.

Haslam acknowledged in the speech to editors and publishers that managing expectations about how to spend a healthy surplus can be “the hardest thing to do in government.”

“If you don’t hold in the reins when times are good, you will get smeared when they get bad,” the governor warned.

Other spending priorities will include a plan to begin paying back about $261 million in gas tax money that was diverted from road projects to cover general spending needs a decade ago by then-Govs. Phil Bredesen and Don Sundquist.

Haslam said replenishing that money won’t come near to solving the state’s growing backlog of road maintenance needs and new projects, which are estimated to cost several billion dollars. Nonetheless, the governor has already announced that, for the first time since 1989, he won’t propose legislation this year to raise the state’s gas tax. “The state needs to pay that back over a period of time,” Haslam said. “Will that solve our problem? No. I just want to make sure we are really clear on that.”

The governor has largely turned back demands from fellow lawmakers to use the surplus money to end the state’s Hall tax on income from earnings on stocks and bonds. Doing away with that tax is problematic because a portion goes back to the communities where it is collected, totaling $105 million in the most recent budget year.

Haslam’s legislative package includes a proposal to give a Hall tax credit to angel investors who fund projects in Tennessee, but that’s far from the bigger tax break that some Republicans want to deliver to their affluent constituents.

The governor said he wants to focus on areas where the state has underspent in the past, or make “smart investments that will save us money in the long run.”

Haslam said those could include fixing up buildings and other projects “that there is not a lot of sexiness or glamour to.”