Governor Haslam discusses budget challenges

Gary B. Gray • Feb 4, 2014 at 9:18 PM

Tennessee Gov. Bill Haslam’s proposed $32.6 billion 2015 fiscal budget is balanced, but general fund collections are projected to come in below the current year by $126 million at a time when every dollar counts in his push for education and health care reforms.

Haslam said Tuesday during a visit with the Johnson City Press Editorial Board that a nearly $133 million “adjustment” would be necessary to fund the new initiatives and address inflationary growth in TennCare, the Basic Education Program formula for K-12 education, and the state’s cost of employee retirement and health insurance.

The proposed budget is based on a 2.9-percent growth rate in total taxes. The Republican governor also has recommended the rainy day fund reserve be increased by almost 9 percent to more than $496 million. State employees will get a raise, albeit a minimal 1-percent increase.

Haslam, who gave his fourth State of the State address Monday to the 108th General Assembly, said state taxes have been held in check and Tennessee has the lowest debt of any state in the country. Still, this year’s budget is a very conservative one.

That said, the governor proposed using $260 million in new revenue this year on increased TennCare costs, education spending and employee health care costs.

TennCare — the state’s Medicaid program — is largest driver of the budget by far, consuming nearly $10 billion.

“In essence, when you talk about managing the state budget, you’re talking about managing TennCare costs,” Haslam said.

Though TennCare is “one of the best-managed Medicaid programs in the country,” according to the governor, costs for the program rise annually at about 3.5 percent. Nonetheless, Haslam said the average national increase is 6.6 percent, resulting in a savings for the state of about $60 million a year.

“Despite strong management, TennCare costs are always going to be a challenge,” he said. “When you look back 10 years, TennCare had grown to be about 35 percent of our overall budget. Then, after the state went through the painful process of cutting 170,000 people from the rolls in 2007, it hit a low of almost 25 percent in 2009. Today, it has already grown back to be more than 30 percent of our budget, squeezing out critical needs.”

Haslam expressed concern that the federal government isn’t giving Tennessee the tools to allow more people statewide to benefit from health care. He also acknowledged that accepting federal dollars to cover more Tennesseans has been “politicized” on both sides and that the implementation of Obamacare has caused concerns.

“I think the U.S. needed health care reform, but the plan was pushed through and did not have bipartisan support,” he said. “A lot of people one year ago would have said, ‘We’ll consider the plan.’ But a lot of that passed after the roll out, and it shows.”

For the last 15 years, Tennessee was under a court order known as the “John B. case,” which was filed against the state and its managed care contractors. The lawsuit claimed TennCare had failed to meet federal standards for children.

Last March, the U.S. Court of Appeals for the 6th Circuit dismissed the lawsuit saying that TennCare had, “vastly improved its delivery of services to enrollees and indeed has become a national leader in its compliance with the Medicaid statute.”

Meanwhile, with revenues coming in below expectations, some have questioned whether cutting taxes was the right thing to do. Haslam was quick to respond in the affirmative, and he continues to use the business term “customer-focused” when referring to the state’s mantra, especially when it comes to returning taxpayer money when possible.

He also wasted no time in rejecting the idea of his support of a state income tax.

“Ultimately, it’s up to the voters,” he said. “I think not having an income tax is a real bonus for us, and it’s a real attention-getter. I can point you to certain companies who said that was a deciding factor in why they came to Tennessee.”

State taxes that have been cut or that are being phased out will actually create more revenue in Tennessee over time, according to the governor. For example, the Gift Tax was eliminated last year, and both the Hall Income Tax and the Death Tax are being phased out.

In his State of the Sate address, he also made clear that Tennessee is ranked the third best managed state in the nation, and said the accolade is due largely to the various departments and state employees being diligent and efficient in their work habits. Haslam said he has visited state employees in all departments. Again, he reiterated it was good to see employees working to be more customer-focused.

Finally, the governor praised the state’s 41 drug courts — including one starting up in Washington County — which work to treat substance abusers that want help in a way that is more productive than simply putting them behind bars and looking the other way. The FY 15 budget includes funding for a new statewide residential drug court in Middle Tennessee modeled after an existing court in Morgan County.

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