by Joe Sullivan
Gov. Phil Bredesen's state budget cuts are setting the tone for fiscal austerity locally as well. "No new taxes" has become the watchword for both city and county governments as they prepare their budgets for the fiscal year ahead. Not only expected cuts in funding from Nashville but also built-in cost increases that have pushed city and county outlays higher will be absorbed through belt- tightening, officials say.
Such resolve is no doubt what most taxpayers want to hear. And Bredesen's well-received proposal to cut state spending by nine percent almost across the board makes it all the more difficult for Mayor Victor Ashe and County Executive Mike Ragsdale to tell taxpayers anything different. After all, if the governor can cut his way out of a budget crisis, why can't they, especially at a time when a faltering economy and the prospect of war give rise to high anxiety?
Still, there are important differences between the state's fiscal circumstances and those facing the city and the county. Last year, the state Legislature enacted a $930 million tax increase, the largest in history, that was supposed to meet state needs for several years to come. Yet an egregious underestimation of the cost of TennCare coupled with revenue shortfalls and other factors confronted Bredesen with a $629 million deficit that could only be eradicated with spending cuts or else cost Bredesen the trust of the citizenry who elected him on a "no new taxes" platform.
By contrast, the city of Knoxville hasn't had a tax increase in three years, and the last Knox County increase was in 1999. Nor have Ashe or Ragsdale taken any pledges. City revenues have been exhibiting very little growth, but costs keep escalating due to such factors as a mandatory 2-1/2 percent annual pay raise for the city's 1,600 employees and ballooning costs of health insurance. In the county's case, there has been a tradition of a property tax increase in the first year of a county executive's term followed by three years of holding the line until the next election. Former County Executive Tommy Schumpert adhered to this tradition in 1995 and 1999; so did his predecessor, Dwight Kessel, even during the recession year of 1991.
One might have expected Ashe and Ragsdale to cite impending cuts in revenues from the state as an impetus for raising local taxes to offset them. This holds all the more true in the city's case where these cuts are expected to leave a $2 million hole in the city budget that totaled $195 million for the current fiscal year. Knox County only stands to lose about $800,000 in relation to its much larger $496 million current-year budget. (The $117 million that county schools receive under the state's Basic Education Program is exempt from Bredesen's budget cuts.)
The $2 million hole left by the state is only part of a much bigger gap that Ashe must fill in order to balance the budget he will present on April 30. In addition, he cites $4 million in obligatory spending increases. These include $1.3 million to cover the city pay raise, a 35 percent increase in health insurance costs, and a $1.3 million first installment to make up for deficiencies in the city's pension fund caused by a precipitous decline in the value of its stock holdings. And how does the mayor propose to avert a budget deficit?
"We cut," he answers tersely. His list of "a number of options, none of them very pleasant" includes 50 to 60 layoffs, cuts in street paving and in the $1.9 million that the city granted this year to some 50 cultural and social service organizations. Surprisingly, suspension of the long-standing ordinance that requires the city employees' pay raise is also on the list. But Ashe also allows that "the Bredesen model of across-the-board cuts has a lot to recommend it," and he doesn't categorically rule out a property tax increase. "A tax increase is a final resort, and it's more likely we won't have one than we will," he says.
County Executive Mike Ragsdale is categorical in rejecting all the precedents for a tax increase during the first year of his term. "I think we can make our budget work [without one] without reducing services," he says, adding that "in a recession a tax increase is an unnecessary burden on many people." His finance director, John Werner, elaborates on how the Ragsdale administration intends to balance its budget by holding the line on expenses without even assuming any growth in revenues from existing taxes.
For starters, Werner says, the administration has started cutting costs by imposing a hiring freeze, outsourcing maintenance services and printing and economizing on its telecommunications system. Werner reckons that resultant savings from these steps will just about offset the foregone $800,000 in state revenue.
In addition, Werner believes that $1 million or more can be shifted out of the county's operating budget by starting to treat outlays for procurement of things like fleet automobiles and computers as capital expenditures. "Money is so darn cheap right now that it makes great sense to finance their purchases over the duration of their life and thus spread that cost over time," he says.
But these types of savings are little more than drops in the bucket in contending with a $496 million budget that is subject to a lot of upward pressures. The major thrust of the county's cost containment effort is a directive to all departments to set budgets based on the assumption that they're not going to be getting any more money and may get less. "We're asking all departments to lift their priorities and start cutting those priorities to the point where they say, 'I can't cut back any more,' or there's no point in me flipping on the switch and saying Knox County is open for business," Warner says.
The acid test of this draconian-sounding mandate is the school system. Its $295 million budget this year dwarfs all other arms of the county. And that budget has risen by about $10 million in each of the past two years, primarily for increases billed as needed just to continue operating on the same footing as the year before. According to school officials, a further $8.6 million "continuation" increase is in the prospect for the fiscal year ahead to cover such exigencies as health insurance cost escalation and what are known as step raises, to which teachers are entitled based on their years of experience. But Werner insists, "The message [to the school board] remains the same: Do not expect additional money, realign your priorities and let's fund your priorities."
At a school board budget workshop on Monday, Superintendent Charles Lindsey dutifully, but painfully, presented proposed cuts to cover the $8.6 million of what he called "no choice" increases if no new funds become available.
"In my career, this is one of the hardest events that I've been part of," Lindsey told the workshop before looking to his deputies to detail the cuts. The list started with the elimination of 180 positions including 78 teachers—three from each of Knox County's 12 high schools and 14 middle schools. It also spelled the virtual elimination of driver education and of the Discovery Center, which has been dependent on the school system for its staffing. Bus transportation for magnet school students was another casualty, along with cutailment of other transportation services.
An additional $5.8 million in cuts were also presented as a way to free up enough money to cover a $1,000 pay raise for teachers and commensurate 2.6 percent raises for the rest of the school system's 7,500 employees. These cuts centered on the elimination of elementary school teaching assistants and personnel for dealing with disruptive students. Even as she presented them, Assistant Superintendent for Instruction Sarah Simpson said, "It will absolutely devastate us."
School board Chairman Sam Anderson made it clear, however, that the board isn't necessarily buying into any let alone all of the above. "This budget was put together assuming a worst case scenario, he stressed. "We really need at least a continuation increase." For all their efforts to prove themselves tight-fisted, both Ashe and Ragsdale still profess commitment to goals that involve major new outlays. The mayor says his budget message will "continue the momentum we've started on downtown redevelopment," and that "I hope a new convention center hotel can go forward." Ragsdale, for his part, advocates pay raises for classroom teachers and the sheriff's patrol officers.
How on earth our elected officials intend to achieve these laudable objectives without a tax increase is beyond this columnist's comprehension.
March 20, 2003 * Vol. 13, No. 12
© 2003 Metro Pulse
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