It’s all over on Capitol Hill again, and nothing has happened. Therefore, it is clear that it is not all over.
To be over, there would have had to be a resolution of some kind. There wasn’t. A resolution would have meant that the General Assembly concluded that more tax money was needed to fund the state government’s operations, and some form of tax increase would have been passed. Or, a resolution would have meant that the General Assembly had concluded that the state must live within its current means under the tax codeand approved a budget to reflect that decision.
But the Legislature didn’t do either of those things. It found a way to put off the day of reckoning for one more yearspending at a level more luxurious than the current revenue structure would justify, while declining to adjust the revenue mechanisms upward to make the spending decisions responsible. So, come next January, the lines probably will be forming again. At that point, that great Shakespearean thespian, House Speaker Jimmy Naifeh, probably will say to his colleagues, “Once more into the breach, dear friends, or fill out the Capitol wall with our income-taxer dead.”
The anti-tax forces clearly achieved tactical victory with the override of Gov. Don Sundquist’s veto, putting the Legislature’s somewhat scaled-down budget into place despite concerns over the reliance on one-time tobacco money for recurring expenses. Sundquist also conceded that there was no point in trying to call the lawmakers back into special session until a few of the “key leaders”a term he apparently was using ironically with regard to Lt. Gov. John Wildergot on board with the objective of straightening out the state’s finances.
But, if the honkers won the day, the victory may be short-lived. When the General Assembly returns in January, Sundquist will be entering his final year as governor and, as such, will be seriously diminished in power. (Yes, it’s possible.) However, the state’s financial situation will continue to rumble ahead. Last week’s final outcome merely represented the Legislature’s decision to tighten the vise on itself.
Various fiscal maneuversincreasing revenue estimates and using one-time tobacco settlement moneyhave allowed the state to avoid the final reckoning, but each too-clever artifice only leaves the state in a deeper hole for the following year.
Indeed, if the goal of the anti-tax forces was to prevent tax increases in this year or any reasonably foreseeable future year, they may have made a serious strategic error.
While beating up on Sundquist may have been spiritually satisfying, the no-pain austerity budget that the veto override represented may have made future tax increases more likely. In that regard, tax opponents would have put themselves in a better position for next year’s fight by supporting the governor’s position, which would have put a more painful budget with severely curtailed spending into place and created less pressure for tax changes next year.
In other words, if the Legislature had enacted the governor’s budget, then many of the tough choices would have been made by now. As it is, the Legislature passed a budget that increased spending by 5 percent and creates an expectation that the state will continue to fund services at such a level.
The notion wasn’t lost on Curtis Person, a Memphis Republican, during the budget debate. “It terrifies me to think of what will happen next year if we don’t sustain the governor’s veto,” he told his colleagues. “Overriding the veto will put us closer to tax reform and possibly an income tax.”
Or, as Sundquist may have said in the privacy of his own imperial mansion, “Br’er Gill, please don’t throw me in that briar patch.”
During the six months before the Legislature reconvenes, opponents of further tax increases need to put together a credible budget plan, which is much harder than it looks. About half the state’s budget goes to education, mostly in the form of payments to local governments under the Basic Education Plan. While it is fashionable in some circles to bash public schools, most of the money is going for core activities, like paying teachers and administrators and keeping up buildings.
Another rough sixth of the budget goes to roads from dedicated funds raised through fuel taxes. Politically, this money is also fairly untouchable, given the power of the road builders and the sharing of the revenue with local governments.
Health care claims about another sixth of the budget, primarily through the Tenn- Care program. TennCare is also fashionable to bash, especially given the anecdotal tales of waste. While such problems do need to be resolved, on the whole, TennCare is a very efficient program, given the amount of federal money that it brings to the state and the amount of care that each state dollar buys. Much of the TennCare criticism focuses on who it covers; they will continue to get sick and get care at the state’s medical facilities regardless of the fate of the program. Cutting it back simply reduces the federal contribution to the cost of their carewhich will otherwise show up in everyone’s health insurance premiums through hospital cost shifting.
That leaves about a sixth of the budget for things like prisons, regulation, and basic administration. There just aren’t many places to find more economies, meaning the pressure will tighten again for tax increases.
Of course, there was one outcome from the whole showdown that was positivethe use of the tobacco money for general government purposes. The unusual nature of the tobacco settlement had always made it a special case in the state budget, and various special interest groups had targeted it for their own purposes. As such, it represented an unhealthy temptation to fund programs of dubious need. That temptation has been put to rest.
The best use of the tobacco money would have been to simply retire existing state debt, but rolling it up into general spending has a similar effect.
So, we now have a political calendar that looks like this: almost six months of quiet followed by three months of political dithering. At that point, the budget will hit the fan again, the crisis will resume, and the honkers will be back.
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