Governor Phil Bredesen today recommended to the General Assembly a balanced, $21.46 billion budget for the 2003-04 fiscal year that requires no new taxes and trims actual state appropriations—something that happened only twice in the past 30 years.

In delivering a televised 12-minute budget address to State Senators and Representatives meeting in a joint convention, Bredesen said the State of Tennessee must learn to live within the realities of its sluggish revenue growth in the wartime economy. He likened the state’s budget situation to that of a typical family needing to make adjustments in household expenditures.

“I am simply asking us to do the same thing that every family in our state has to do,” Bredesen said. “That is: Figure out how much money we have coming in, and then plan to spend that much and no more. This is our family budget.”

The Governor acknowledged having to make a number of painful choices in assembling the new budget, including 9% across-the-board reductions in state agencies and departments, the state highway fund, higher education and shared revenues with local governments. As a result, he said, layoffs of state employees will be required.

The Department of Finance and Administration estimates that 207 employees will lose their jobs before the next fiscal year begins July 1. In all, 845 positions—more than 75% of which are unfilled—will be eliminated from a range of departments. Following the cuts, the state’s work force will stand at roughly 44,000 full-time positions.

In all, Bredesen and his finance team had to identify more than $355 million in cuts in order to attack the looming budget shortfall. During open budget hearings, Bredesen said his chief concern was to make sure that reductions occur even-handedly. “We had to be fair to everyone and accept no sacred cows,” Bredesen said.

Despite the reductions, the Governor pointed out that his proposed budget also contains several key improvements—most notably, full funding of Tennessee’s Basic Education Program. “I am proud to say that Tennessee is protecting our public schools,” Bredesen said.

He also called for a $27 million “downpayment” that will help small, mostly rural school districts bring teacher salaries more in line with larger school districts. The downpayment will mean pay raises for roughly 17,000 low-paid teachers in 75 school districts across the state.

Other key improvements include funding to cover old commitments for state employee pay raises and increases in employee health benefit costs. Bredesen’s budget also includes more than $8 million for Tennessee’s Homeland Security Emergency Fund and a variety of other public-safety programs.

As part of continued efforts to better manage state government, Bredesen pledged to take a comprehensive look at each department’s mission and priorities in the coming weeks and months. “Let me assure you the process of setting priorities and running state government more efficiently is not in any way completed with this budget,” he told lawmakers. “It is just beginning.”

In particular, Bredesen said he will begin this spring overhauling TennCare, the state’s $6 billion program that provides health care to sick and uninsured Tennesseans. One strategy he will pursue is placing reasonable limits on the use of costly prescription drugs—currently one of the biggest cost pressures in TennCare. He also said TennCare’s management structure could change by summer.

He promised lawmakers and the people of Tennessee that he would continue working to ensure that taxpayer dollars are used wisely in the operation of programs such as TennCare.

“My grandmother used to tell me that if I watched the pennies, the dollars would take care of themselves,” he said. “That advice has served me and my family well over the years. I intend to bring that same discipline to TennCare and the rest of state government.”

'The Family Budget'

Here is the transcript from the Governor's televised address last night to the 103rd General Assembly in Nashville.

Governor Phil Bredesen:Governor Wilder, Speaker Naifeh, Members of the 103rd General Assembly, friends, guests and my fellow Tennesseans: I stand before you to fulfill my obligation as Governor to recommend to the General Assembly a budget prepared according to the provisions of our Constitution.

This evening, I’m submitting to you such a budget. It is a responsible, balanced budget. And it requires no new taxes.

I am delivering to you a complex document. But underneath it all, I am simply asking us to do the same thing that every family in our state has to do. That is: Figure out how much money we have coming in, and then plan to spend that much and no more. This is our family budget.

Just like many Tennessee families, we face painful choices. I am proposing cuts that no one likes—including me. But that is what families do: Face up to their situations, be realistic, pick the best course of action, and move ahead.

It is important to keep this budget in perspective. We are in a wartime economy. And I am presenting our budget at a time when states across our nation are encountering the most difficult fiscal crisis since the Second World War.

What we are experiencing in Tennessee is not unique, by any means. In most places, across-the-board cuts are the rule, not the exception. Higher education is being hit virtually everywhere. Already this year, 18 states have reduced or are planning to reduce aid to local governments. Next year, more will do it—including Tennessee.

The situation is so difficult that even K-12 education is being targeted in some places. In the current fiscal year, nine states including our neighbor, Georgia, are planning to cut K-12 spending. More will do so in the upcoming fiscal year. In seven states, some rural school districts are shifting to a four-day week.

In this budget, however, I am proud to say that Tennessee is protecting its public schools.

Our Basic Education Program is being fully funded, including the increases called for next year under the funding formula. In addition, we are making a $27 million downpayment to help small, mostly rural school districts address issues related to equity in teacher pay.

This downpayment will mean pay raises for roughly 17,000 of our lowest-paid teachers in 75 school districts across the state. I am proud to recognize two of them who are here with us tonight in the Gallery.

Donna Jerden teaches at Central High School in Morgan County and Sheila Teasley teaches at Sycamore High School in Cheatham County. These are both school systems that will benefit from better teacher pay. These are educators who are on the front lines. Thank you and your thousands of colleagues who recommit yourselves every day to teaching the children of Tennessee. Please recognize them.

In the years ahead, we are going to do much more for public education. Moving forward, we are undertaking a comprehensive review of our formula for funding basic education. Next year, I will propose a long-term strategy for improving teacher pay. For now, in this difficult year, we should be pleased that we are making modest progress and not losing ground.

Now, let me describe to you how we prepared next year's budget. We approached it much like a family approaches a household budget. First, we looked at what we are spending this year. Then, we added to that a very few items that we felt were absolutely necessary.

These items include honestly recognizing rising costs in TennCare. They include the education funding that I described, and vital dollars for our Homeland Security initiatives. They also include increases in the cost of health benefits for our state employees, as well as the cost of pay raises that were awarded last year but only partially funded.

In all, these items added up to $629 million—more than half of which will go to TennCare.

Next, we arrived at a realistic estimate of what our tax collections will be, and found that we needed to identify about $355 million in cuts in order to balance our budget.

As we looked for cuts, we applied three basic principles. Number One: We had to be fair to everyone, and ask everyone to share the pain; no sacred cows. Number Two: The reductions had to be real; they could not be made using one-time money. Number Three: We would make cuts openly and let the public see the process, even though we knew it would be messy. And it was.

At the core of this process was a request for everyone in our government family to step up and do their part by cutting 9% across the board.

Our state agencies and departments are cutting 9%. The highway fund is cutting 9%. Higher education is cutting 9%. We are asking local governments to accept a 9% reduction in tax revenues that we share with them. We are cutting grants to a wide variety of organizations and projects by 9%. I am grateful that the legislature has volunteered to cut their budget by 9%. There are other cuts as well.

The net effect of all this, I’m proud to say, is an actual decrease in state appropriations of $132 million. This is only the third time that state appropriations have gone down in 30 years.

Now, I know that you'll hear a lot of special pleading in the weeks ahead. But it is important that we plan conservatively for the upcoming year.

While we hope for good economic news, this is an uncertain time. We still face a deficit in the current fiscal year of a half-billion dollars. To get through it, we are going to have to use up our reserves, including the rainy day fund. It is vital that we not overspend our budget next year. And it is important that we do better than our budget so that we can begin the process of building our reserves back to a safe level.

Now, let me assure you the process of setting priorities and running state government more efficiently is not in any way completed with this budget. It is just beginning.

In the coming months, we will take a comprehensive look at each department's mission and where it spends money. This is essential if we are going to change the way state government works, but it simply wasn't possible to do responsibly in the scant few weeks that we had to prepare a budget.

In particular, you will be hearing a lot more from me about TennCare in the next few months. In the short term, we are going to have to substantially reduce benefits before the end of the current fiscal year. This will include placing reasonable limits on the use of costly prescription drugs—one of the biggest reasons for our TennCare overruns.

And by this summer, we will begin making fundamental changes in the structure of TennCare. This program is innovative and it is helping hundreds of thousands of Tennesseans. It is also deeply troubled and it is one of the most significant sources of our fiscal woes. Its problems are structural, not superficial. It requires major surgery, not Band Aids.

There is still a lot of work to do on a detailed and comprehensive plan. And we will communicate with you about it shortly.

My grandmother used to tell me that if I watched the pennies, the dollars would take care of themselves. That advice has served my family and me well over the years. I intend to bring that same discipline to TennCare and the rest of state government.

Let me take a moment to say that, without a doubt, the hardest part of this budget for me is the fact we will have to lay off employees. I grew up in a family where my mother had a steady job in a small local bank, and my life would be different without the stability that job provided our family.

It is a personal pain for me to see anyone lose their job, and it is painful to watch that happen in state government. But I have tried my best to hold job losses to a minimum. And I have asked our departments to make sure these transitions occur as smoothly as possible for the employees who are affected. I ran for this office promising to captain the ship, and this part of the job is among the most unpleasant.

Ultimately, some of what affects us is national and international in scope. The business cycle, terrorism, the likely war in Iraq.

Nothing brings that home more clearly than the fact that, as we convene here tonight, more than 3,000 members of the Tennessee National Guard have been called up to protect America.

Last week, I visited with some of them as they were preparing to leave. One of those guardsmen, Doug Warren, a navigator in the 118th Airlift Wing, could not be here tonight because he is in another part of the world serving and defending our nation. But I asked his wife, Jennifer, and their children, to join us in the Gallery. Jennifer, we appreciate your family's sacrifice. And we pray that Doug—and all of our brave servicemen and women—come back to us quickly and safely.

While outside factors affect our situation, much of our destiny is still very much in our own hands. In this time of fiscal challenge, I want us to keep our eyes outward and to stay firmly focused on growing our economy.

We need to create the high-quality jobs that we are capable of achieving in our state. We need to get the talk right about our state. We need to find new and innovative ways to recruit business and investment. We need to find new and innovative ways to help the businesses already here to remain here, and to prosper and grow.

I learned in my career that it's a lot easier to keep a customer you already have than it is to recruit a new one. Just this past week, we created a Jobs Cabinet to bring together in one room the people who have the experience and control the resources that it will take to be effective.

The wealth of our state is not in the State Capitol. It is in the many businesses that employ our citizens and pay taxes. It is in the hardworking Tennesseans who have good-paying jobs with good futures.

If we grow their number, and if they prosper, we will have the resources it takes to educate and protect, and to help those who are less fortunate. If they don't prosper, no amount of new taxes or trips to Washington will protect us from being left behind.

Members of the General Assembly, I believe the family budget that I am presenting to you here tonight is the first step in what I know will be a long, successful partnership between us. Upon due consideration, I hope that you will agree with the steps that we have proposed and approve this budget.

I am looking forward to working with all of you—and the people of Tennessee—to make our great state even greater in the years to come. Thank you and good night.