Battle over state-shared taxes continues
NASHVILLE — Hiring freezes. Elimination of next year’s rookie police class. Closing a fire station. As a last resort, property tax increases.
That’s what Knoxville city officials say could happen if the state proceeds with a plan to take 9 percent of state-shared taxes from local governments to balance next year’s budget. Local governments statewide are considering similar options as they struggle to deal with the anticipated loss.
Gov. Phil Bredesen’s $21.5 billion state budget for the fiscal year beginning July 1 relies on keeping $60.7 million in tax revenue traditionally shared with cities and counties.
Knoxville finance director Randy Vineyard said Tuesday that the governor’s plan — which would mean a $2 million loss for his city, exacerbating other budget difficulties.
‘And the problem in Knoxville isn’t different from the problems of the state — declining economy, declining revenue,’ he said.
Almost a dozen local finance directors, mayors and county executives on Tuesday pleaded their case to members of the Senate’s State and Local Government Committee.
David Eichenthal, Chattanooga finance director, said his city is working to fill a budget gap of between $7.5 million and $10 million. That includes $1.8 million the city expects to lose from the state-shared taxes reduction.
He ticked off ‘serious fiscal problems’ that include increasing employee health insurance costs, a bad economy and a bad stock market.
Those concerns were echoed by representatives from Nashville, Cleveland, Dyersburg and Bristol, and Rutherford, Tipton, Marion and Hamilton counties.
Bredesen has repeatedly said his plan, which cuts almost all state agencies by an equal 9 percent, is the fairest possible because everyone is ‘sharing in the pain.’ But local governments say cutting state-shared taxes goes much deeper than a true 9 percent because reductions to state departments and agencies trickle down to them.
They have said the total impact would be $95 million because of cuts to grants for police, firefighter, teacher and election registrar pay supplements; reimbursement rates for housing state prisoners; road-building funds; family resource centers and other support for local governments.
Committee members told the local officials they ‘feel your pain’ but asked them to come up with solutions of their own if they didn’t want the money taken from them.
‘I know that a hit of 9 percent in state-shared taxes is not easy on cities, but it could have been a lot worse,’ said Sen. Joe Haynes, D-Goodlettsville. ‘… But there’s not a lot of options. We’re sick of talking about taxes, is there not a solution you could propose?’
Tipton County Executive Jeff Huffman said lawmakers could lessen state mandates on local governments to give them additional flexibility in dealing with the cuts.
‘That would help us considerably,’ Huffman said.
Sen. Ron Ramsey told Huffman he already was drafting a plan to do just that. Ramsey could present it next week as an amendment to a bill that would put in place a bundle of statutory changes sought by Bredesen to enact his budget-balancing proposal.
Ramsey’s provisions would allow counties to use education fund balances without restriction if the state cuts shared revenues and freeze the local match to education funding at current levels. It would remove a prohibition on cutting county sheriff’s personnel budgets and require state Department of Corrections to remove its prisoners from county jails within 30 days if asked to do so or to reimburse the county for the actual cost of housing the inmates.
‘It gives (local governments) some flexibility is all it does,’ Ramsey said.
Bredesen said he would be willing to consider the plan.
‘I’ve told people that if part of what we have to do to make this more workable for county and city governments is to ease off on, give some additional time for some of these mandates, I was very open to that,’ he said.
Not every local government is experiencing the depth of problems described by those visiting Nashville on Tuesday.
Pulaski Mayor Dan Speer said his city’s government would lose $75,000 with the proposed cuts, but managed to balance its budget with ‘no layoffs, no real cuts in services.’
‘We, like any other city, don’t want to lose income,’ Speer said. ‘But we understand we all have to share in Tennessee economic conditions, and we’re willing to do that.’
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On the Net:
Tennessee General Assembly, www.legislature.state.tn.us