State of the State Address
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Over the past several years, I have clearly pursued a strategy of constraining the growth of TennCare so that we can fund education at acceptable levels; put simply, doing a better job of balancing our investments in our two major line items: TennCare and Education. We have been very successful at this. Since its inception in the mid 1960s, Medicaid for many years had been a smaller part of our total budget than K-12 education. In 1981, the cost of Medicaid was about half of what we spent on K-12 education. However, Medicaid passed K-12 education in total funding in 1992. After that, it exploded; in the 2004 budget, TennCare was 34% and K-12 was 15%, a ratio of 2¼ to 1 in favor of TennCare. In the budget you have before you, TennCare is 24% and K-12 education 19%, back to a ratio of about 1¼ to 1. It is my hope in the years ahead we can continue to improve this balance.
In addition to the BEP, we have also put an absolute priority on our pension system, and once again we have fully funded the increased contribution that was recommended by our actuaries and adopted by the treasurer. The soundness of Tennessee's pension system is something we can be rightfully proud of.
Outside of these areas, what you will see are budget reductions that average about 6%. This year it was not feasible to make these reductions across the board, and there are a number of departments that have contributed a full 9% and others much less. Higher education, Mental Health, and the Division of Intellectual Disabilities Services are at 6%, and Children's Services is at 5%. In the Department of Correction, the only plausible way to get to anything approaching 9% would be to close one or two prisons; I've declined to do that, and so their reduction is just 1%.
In the Department of Safety, the proposed reductions would have meant the elimination of 85 filled trooper positions and 56 filled positions in the driver's license stations. Rather than do this, we have proposed a revenue measure to prevent this: an increase in the driver's license fee from $3.90 to $5.75 annually, the first increase since 1988. We have also extended the license term from five years to eight. This will have the added benefit of partially funding the much needed digital upgrade to their radio system as well.
With these reductions, we had a budget that was consistent with the four-year plan I presented last year. To achieve these reductions in their entirety required the elimination of a variety of programs that are of real value. It's not a pleasant list. It also would require additional layoffs of 1,363 people in addition to the elimination of 456 unfilled positions.
That brings me to the third aspect of this budget, the use of some reserve funds to soften its effects.
The problem that we were faced with it this: we were looking at some very difficult cuts. At the same time, our reserves are strong, and the prospects for a return to growth in the months ahead look far better today than they did a year ago. In this environment, should we go all the way with these cuts, or should we make some judicious use of our reserves to soften their effect?
We decided to present a plan that uses reserves to fund the continuation of a number of programs for a two-year period. The reason for funding for two years instead of one was to give a new governor some breathing room at the beginning of his or her term and to give additional time for the economy to recover and perhaps make the cuts a moot point. The programs that we have protected in this manner include:
- in the Department of Education, the Coordinated School Health Program, the Career Ladder extended contracts, and family resource centers;
- in the Department of Health, Safety Net Grants to the Federally Qualified Health Centers and the Diabetes Prevention Program;
- in the Department of Mental Health, Community Mental Health Recovery Services and Alcohol and Drug Services;
- in the Department of Children's Services, the home visitation programs and the Juvenile Justice Prevention Grants;
- in the Division of Intellectual Disabilities Services, the Family Support Services Program; and
- in the Department of Human Services, the grants to Human Resource Agencies and Community Action Agencies.
In addition, we propose to preserve a portion of the filled positions that would be subject to layoffs to meet our budget requirements. Of the 1,363 total layoffs, slightly over a thousand are for good business reasons — bringing staffing ratios in line, for example, or closing an unneeded facility — and we should go ahead under any circumstances. However, there are 314 positions that we would strongly prefer not to lose. We are proposing to carry forward for two years those positions along with 80 others scheduled for layoff this spring. At the end of the two years, the economy may have made the layoffs unnecessary, and further it has been our experience that people in those positions are likely to have found other jobs making any involuntary action unnecessary.
Finally, I know our state employees are glad to be working, but they have been without raises since 2007 and I would like to recognize their dedication by using some of our reserves to continue the enhanced 401k match at its current level and also pay them a 3% bonus.
What you have in front of you is a straightforward budget, although putting it together this year was difficult. In its base form, it corresponds closely to the four-year plan you were presented last year, suitably reduced to reflect further revenue shortfalls. It then proposes to use $202 million of reserves to preserve some particularly important programs and several hundred jobs for two more years, in the hope that the economy will render cutting them not needed. If you adopt all of these suggested enhancements, the state's reserves in its Rainy Day Fund and TennCare will still remain above the 5% target. I believe it is a commonsense family budget in a very difficult time, and I hope you will consider and enact it promptly.
This is likely my final time to address you as governor. We still have a lot of work to do, and it's far too early for farewell remarks. I do want to say, however, a most sincere thank you for the way you have treated me and worked with me and my administration these past years. I have never had a job I enjoyed as much or that gave me as much satisfaction as serving as governor. It has been a humbling experience. To those of you who have helped me, my sincere thanks. For those of you who have not, all is forgiven now!
I know how much so many of you care for our state and its people, and it has been an honor to work with you on their behalf. Thank you and Godspeed.