TN & VA budget battles: Tennessee, Virginia governors share insights into states' budget woes

Va. Gov. Mark Warner, left, and Tenn. Gov. Don Sundquist took part in the Wellmont Foundation Governor's Cup. David Grace photo. By MIKE STILL

KINGSPORT - Tennessee's and Virginia's chief executives agree that tight revenues are the immediate cause of their states' budgetary woes.

Don Sundquist and Mark Warner each are overseeing state governments faced with millions or even billions of dollars in declining revenues this year.

Sundquist, finishing his second term as Tennessee's governor, has wrangled with the General Assembly over reforming the state's tax framework.

Warner, as a freshman governor, is joining his state's General Assembly in trying to stem the tide of a $5.3 billion revenue shortfall that he and several lawmakers agree could result in the elimination of some state agencies and consolidation of functions.

Sundquist and Warner assessed their state's fiscal futures Friday while participating in the Wellmont Foundation Governor's Cup.

"The basic problem in Tennessee is we have a failed tax structure, and it's going to have to be addressed in some way," Sundquist said when asked about the state's budgetary future.

Sundquist said Tennessee's loss of sales tax income from Internet sales alone will reach $365 million in 2002 and possibly reach $1 billion by 2006, according to University of Tennessee projections.

Sundquist noted that, despite several cuts in state programs and expenditures, Tennessee still has about the same number of state employees as it did eight years ago.

"I'm not talking about what they should do or how they're going to do it," Sundquist said of the Tennessee General Assembly's actions in the face of shrinking revenues. "I've given it my best shot. ... There's only one thing that's more irresponsible than not voting for anything, and that is to roll back what somebody tried to do as an alternative - the only solution.

"When they come up with some proposal to restructure taxes then, in my opinion, they'll have a right to talk about what they cut."

Sundquist said the state's tax system has resulted in too-high corporate taxes that leave companies looking for and using loopholes to avoid those tax rates.

"You can't blame them for that - trying to find a way to pay less taxes," Sundquist said. "So that has to happen, to close some loopholes, and there has to be some more income. The one that's out there that's hanging over everybody's head is the reduction or elimination of the local share. I didn't support that, but that is a way of picking up some money. That means property taxes are going to have to be raised."

Sundquist said he has focused his attention on managing state government rather than on the gubernatorial race between Republican Van Hilleary and Democrat Phil Bredesen, but he offered a different view of TennCare than held by the two candidates.

"After this year, we have put into place all the things that people complained about - making sure people from out of state didn't come in, making sure that the employers' verification is good," said Sundquist. "So the next governor will have all that going for him, and basically the choice they'll have is at what level do they want to fund it?

"TennCare costs this year so far are less than they were last year at this same time. There are always changes in TennCare, but what we've all been able to do is take it from what was a financial correction system in 1995 to a health care solution. ... I hope they'll come in and listen and learn a little bit about what we did and how we did it on a bipartisan basis with the General Assembly."

Warner attributed Virginia's revenue crunch to a combination of factors, including concurrent tax cuts and spending increases in the 1990s, the slowed national economy, a car-tax cut plan that continues to cost the state more annually than originally projected in reimbursements to local governments, and shrinkage of revenue sources such as contract housing of federal and out-of-state prisoners in Virginia's excess prison space.

"The revenue projections, which have been very conservative - even in February - weren't going to be conservative enough," Warner said of executive and legislative budget-cutting efforts earlier this year.

That re-forecast boosted the state's $3.8 billion shortfall - addressed in the General Assembly and Warner's 2002-2004 budget - by another $1.5 billion. Warner on Friday acknowledged that the latest figure will climb, even as state agencies move to develop and submit three-option spending cut plans that offer 7 percent, 11 percent and 15 percent cuts in agency spending.

"There will be some agencies that will physically disappear," said Warner. "I really think, though, that we can find some long-term and substantial savings. What we have in Virginia is a structural budget imbalance."

Removing that imbalance, Warner said, will depend a lot on finding functions duplicated among state agencies and consolidating those functions. He specified items such as separate human resources departments for each state agency, purchasing supplies from multiple vendors, duplication of information technology services, and even worker training and retraining programs.

"Virginia's overall economy is structurally sound," said Warner. "We are blessed with a diverse economy that ranges from defense, tourism, to high-tech, broad-based and traditional industries. I think you'll see Virginia's economy - while at this point it's lagging the national economy - by the first or second quarter will really be picking up steam."

Sundquist said Tennessee's loss of sales tax income from Internet sales alone will reach $365 million in 2002 and possibly reach $1 billion by 2006, according to University of Tennessee projections.

What is fundamentally wrong with Sundquist and so many of the government bureaucrats and politicians is their viewpoint that any money the people keep is a loss to government, and further that government with less money is an evil or at least an undesirable situation.

This news is positive. The people were allowed to make direct choices regarding the expenditure or investment of $365 million. On a daily basis individuals decided how money would be spent as if engaged in daily referendum on spending.

Who is more accountable for the prevention of waste, the person directly affected or the bureaucrat whose primary consideration is self-preservation of the bureaucracy (i.e. his/her job)? Who is motivated to ensure adequate, effective purchases are made? The person directly affected.

Obviously I could go on for pages, especially by citing examples. On these pages I would probably be preaching to the choir about church attendance. But consider this, if the $365 million did not go to the government on Internet sales tax then what did Tennesseans do with the money? Are not Tennesseans $365 million dollars richer?

A BLOATED spending system of TN government is the problem...with Tenncare the lead horse in pulling the wagon of glut! Building grand bulidings on college campuses while TN college enrollment is declining. Working from last years budget for every line item, rather than doing as the law requires and proving the need for this line item! The list is endless, but Taxquist would rather say the tax structure is failing than to admit the real culprit is overspending! I'll be soooooo glad when he is history!

All of the budget problems in America could be settled very easy. Politicians should cut out all pork barrel spending and all foreign aid should be stopped even from what is called humanitarian.The human thing to do is correct Americas problems first and stopp funneling all that money to leaders like Arafat who put it away for self.Government fraud consimes 90% of all tax money,directly or indirectly and there is no accountability whatsoever within and from the government.

Get our your handkerchiefs. The plight of the VA and TN administrators and bureaucrats has reached serious depths, according to two liberal governors. So just how much will be their pay raise for the year? And how many more administrators will be added in both states? And considering the faith that "the people" have in bureaucracy, I think "the people" should demand tax hikes to take care of their needed administrators and bureaucrats. After all what's a state without its administrators and bureaucrasts!

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