Tenn. gov: Stimulus has 'concealed' budget woes

Tennessee's budget woes will likely make layoffs of state employees unavoidable, Gov. Phil Bredesen said Tuesday.

"This will be my toughest budget year," said the Democratic governor whose term ends in January 2011. "I hate to go out that way, but that's the way it is."

Bredesen has asked state agencies to prepare for 6 percent cuts from their spending plans - along with an additional 3 percent in cuts in case poor economic conditions persist - when they make their budget presentations later this month.

"It would be impossible to imagine they could do that without putting layoffs on the table," Bredesen said.

Democratic lawmakers earlier this year used savings to delay about 700 planned layoffs until the end of the current budget year on June 30.

House Democratic Caucus Chairman Mike Turner, who was a main architect of the move to prevent layoffs earlier this year, said he is working with the Tennessee State Employees Association to find ways to prevent layoffs.

Turner said he had a meeting with Bredesen on Tuesday to discuss the budget.

"It's going to be a devastating budget," said Turner of Nashville. "But we're going to put forth a responsible budget."

Bredesen said he will wait until after the budge hearings to determine how many further cuts are needed.

"I hate to do it. We've got some great employees and this would be the worst time to be looking for a job," Bredesen said. "But I hope as the economy comes back it becomes easier."

The governor's comments came a day after he said the influx of federal stimulus money has obscured the extent of Tennessee's budget woes.

"The political problem is that last February, I probably could have passed any known cut because everybody knew we were in the middle of a major crisis," Bredesen told reporters after a speech to the Nashville Health Care Council on Monday. "The stimulus has kind of concealed what's been going on in terms of the revenues."

Lawmakers this year passed a $29.6 billion budget for the budget year that began July 1, including $2.2 billion in federal stimulus money. The state share of the spending plan - $12.1 billion - represented a more than 10 percent reduction from the previous budget year.

Bredesen said the new round of cuts will be tough because agencies are already operating under last year's reductions.

"These are very painful cuts, but we've got to get through this," Bredesen said. "There's no alternative to it."

Officials project the state's tax base won't return to 2008 levels until at least 2014, Bredesen said. He presented a grim picture of Tennessee's finances until revenues recover.

"At that point we will have given state employees no raises for five years, we will have drawn down our reserves substantially, our pension fund will be very frayed around the edges," said Bredesen. "We will have made no major investments in new initiatives for five or six years."

"There's an enormous hole to dig out of," he said.

Cuts will be made all the more difficult as good economic news begins to supplant the bad, he said.

"I'm kind of in the unpleasant position of asking for even more major cuts at a time when hopefully the economy is coming back," he said. "But we're a long way underwater with the stimulus holding us up at the moment. It's going to be a tough year."