Tennessee could be facing a $1.4 billion budget deficit this year and tough decisions are on the horizon as the General Assembly looks to start another session later this month.
“The budget is, if anything, worse than anything we have ever see,” State Rep. Kent Coleman (D-Murfreesboro) said to the Rutherford County Commission Steering Committee on Monday night. He added the state is on track to collect 10 percent less in revenue this fiscal year compared to last year.
State Sen. Bill Ketron (R-Murfreesboro) said the lack of funds may result in departmental budget cuts and furloughing state employees.
“But hopefully that will be a last ditch effort,” he said.
The deficit comes from the dire economy, which has seen lower revenue from falling sales tax and other fees. State Sen. Jim Tracy attributed the problem to lower sales of big-ticket items, like cars, appliances and homes.
“That’s been slow for 2009 and hopefully those will turn around,” he said. And Ketron puts faith in a revenue bump from Christmas sales, but those numbers haven’t been released yet.
The group promised to look closely at the number of unfunded mandates passed along to counties and municipalities.
But they warned some tough choices will have to be made for the third year in a row.
Rutherford County’s legislative delegation promised to protect the county’s state-shared revenue, as well as education and transportation funding in the coming budget.
The Basic Education Program (BEP 2.0), which provides state funding to local public education, should be safe, they said.
“I promise you that will be the last thing I vote for is to take away BEP funds,” Ketron said.
But other things may not weather the storm.
Legislation passed last year that increases the amount of time violent offenders spend in jail may result in some early releases.
The new law requires offenders who commit aggravated robbery with use of a deadly weapon to serve at least 85 percent of the sentence imposed before becoming eligible for release status.
Because of the tight budget and more violent offenders staying in jail longer, some nonviolent offenders may be pushed out of local prisons, Coleman said.
“The change for nonviolent offenders is to pay the fiscal cost of keeping an armed robber in the jail because that armed robber is more likely to harm society as the felon who smokes a joint,” he said.
In another effort to save money for local governments, Ketron noted the Voter Confidence Act, which requires all Tennessee counties to switch to optical scan ballots in all elections in 2010, will come up early in the state Senate’s session.
“It not that it’s a bad bill but there are some unfunded mandates attached to that bill that could be costly,” Commissioner Jeff Phillips said.
Ketron agreed, saying the change is needed because no voting machines meet the guidelines in the bill and counties can’t afford to buy new voting machines this year, only to turn around and buy new ones in two years.
Last year a bill to delay the law until 2012 passed the House and failed in the Senate, Ketron said.
Some commissioners, like Jeff Jordon, were looking for alternative revenue sources to boost state and local revenue.
Last year the commission sought to close gaps in the wheel tax by making catching scofflaws and making them pay easier.
But Jordan has his eyes on a big pie: online sales tax.
He cited sources that place the Internet tax leakage between $20 billion and $25 billion.
“Now there’s a revenue source,” he said.
Ketron said the issue isn’t up to the state, but instead come through the Federal Communications Commission.
Both he and Coleman have looked into the leakage and found the state has no authority to tax online sales. When Coleman looked into it eight years ago, Tennessee could have raised $600 million per year, and online sales have risen since then.
“There was a group of states that went together as a group to solve the problem,” he said, adding the issue is more complicated than appears, because a uniform tax rate for online sales would have to be developed.
“But if we could get that in Tennessee that would be great,” Coleman added.
Michelle Willard can be contacted at 615-869-0816 or firstname.lastname@example.org.