November 4, 2003

Governor Already Making Plans to Spend Tennessee's Surplus

If you ever wanted more proof that Tennessee needs the basic protections afforded by a Colorado-style Taxpayers Bill of Rights, just read this news analysis by columnist and former AP statehouse reporter Phil West. Tennessee Gov. Phil Bredesen's top budget chief says that, on the one hand, the state's $30 million surplus after two months "does not a year make," but on the other hand he ticks off a list of things the Bredesen administration apparently is planning to spend it on.

For those of you who don't know, the Colorado Taxpayers Bill of Rights requires surplus revenue to be returned to taxpayers via direct rebates or tax rate reductions. The government can't spend it unless it first gets voters' permission in a statewide referendum on a plan that outlines specifically how the money would be spent.

You can learn a lot more about the Taxpayers Bill of Rights here.

Here's an excerpt from West's column...

Just two months into the 2003-04 fiscal year, Tennessee's tax collections are more than 8 percent higher than expected. At this rate, Gov. Phil Bredesen could send us a nice little tax refund next July. Of course, Tennessee's fiscal structure doesn't allow for tax refunds to individual taxpayers, but wouldn't that be nice?

So why is Bredesen asking his department heads to prepare budget requests that are 5 percent lower that what they're getting in this year's $21.5 billion spending plan?

Bredesen has to deal with the usual, nagging commitments like the $100 million contribution to the state employees' retirement fund that is financed by taxpayer dollars. Then there's $57 million to fund growth in the Basic Education Program, the 1992 law that overhauled Tennessee's education system.

Settling the teacher pay equity lawsuit is expected to cost around $50 million a year, from this point forward.

"When you pile up all the new things we need to pay for this year, the amount outstrips the amount of new revenue we have coming in," Finance Commissioner Dave Goetz says.

Despite a weak economic recovery, state tax collections in the first two months of the 2003-04 fiscal year are well ahead of projections.

"Two months of revenue does not a year make," Goetz warns. "People who have money are spending, but there's not that many jobs being created. People have given up looking for work. It's not like we've entered a full-blown economic expansion."

That's true. But two months of tax collections accounts for more than 16 percent of the tax collection year. That's a pretty good trend.

The previous administration called surplus revenue "unbudgeted dollars" and promptly spent them. This administration hasn't gone that far - but Goetz is trying to blur the line between fiscal years.

The increased spending Goetz listed is for the next fiscal year's budget, and should be paid for out of the next fiscal year's tax revenue. Implying there's no surplus this year because we have more expenses next year is disingenuous. There IS a surplus. You ARE paying more taxes than the state really needs. And until Tennessee has a Taxpayers Bill of Rights, bureaucrats WILL find reasons to spend it, and WILL come up with rhetorical tricks to pretend the surplus doesn't exist.

UPDATE: Michael Williams blogs about the distinct possibility that Gov. Schwarzenegger will propose a spending cap for California, with links to an item at Sacramento Bee blogger Daniel Weintraub's blog, which itself links to a Sacramento Bee story about the proposed spending cap that says, accurately, "The mechanism is intended to prevent the state from committing revenue windfalls to ongoing programs, one of the causes of the current fiscal crisis."

Williams says: "If you're familiar with the California budget debacle, you'll know that the cause of our shortfall wasn't a lack of revenue, but reckless spending. There are only 3 numbers you need to know to back up this assertion." And then he gives you those three numbers.

By the way, reckless spending was the cause of Tennessee's budget problems in the past four years too. And it will be again in the future if Tennessee doesn't adopt some sort of cap on governmental spending growth.