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Published in Print: June 19, 2002, as Tenn. Budget Crisis Is Lawmakers' Pet Project

Tenn. Budget Crisis Is Lawmakers' Pet Project

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Tennessee's budget may go to the dogs—or cats—depending on which legislators have their way this week.

Protesters express their views about the state budget in front of the Capitol in Nashville last month. With the July 1 start of the new fiscal year looming, Tennessee lawmakers are sparring over competing proposals to deal with a growing deficit. Two plans are dubbed DOGS and CATS.
—Photo by Mark Humphrey/AP

In what has become one of the nation's most dramatic budget showdowns, lawmakers will debate whether to raise new taxes, including a first-ever statewide income tax, or make deep cuts in the state's fiscal 2003 budget that surely would include reductions in education services.

Leaders met last week in closed sessions to study conflicting plans. The last day of the two-year legislative session is June 19.

The first plan is a governor-supported, flat 4.5 percent income tax that supporters say would sustain education funding levels. Then there is the "Downsizing Ongoing Government Services," or DOGS, plan that would avoid new taxes but would likely lead to layoffs of thousands of teachers and force local districts to shoulder more education costs.

In a development later in the week, a bipartisan group of legislators also put forth the "Continuing Adequate (but not excessive) Taxes and Services," or CATS, budget, which they say would maintain precollegiate and higher education funding without adopting a new income tax. It would, however, cut $500 million from other areas of the $19 billion state budget and "temporarily" raise taxes on businesses and alcohol.

Under the DOGS plan, lawmakers would cut about $400 million from the state's $2.5 billion pre-K-12 budget. It's a budget that already has seen numerous cuts in recent months. In addition, the state has largely flat-funded schools for the past several budget cycles, as the state struggled to manage a deepening budget hole.

Just how bad might things get?

Commissioner of Education Faye Taylor says the bite of the DOGS budget would be as bad as its bark. She contends that, if ratified, that plan would set public education back 20 years, eliminating strides that have been made in reducing class sizes and improving academic accountability.

"We're not willing to unravel public education in this state," she declared.

Tennessee has faced revenue shortfalls in recent years, but has squeaked by from year to year by relying on budget maneuvers and tobacco-settlement revenue. ("Education Funding Looms Large in Tenn. Budget Fight," Aug. 8, 2001.)

Speaker's Efforts

The income-tax proposal, pushed by Speaker of the House James O. Naifeh, a Democrat, was defeated by four votes in the House last month, and its future in the Senate is uncertain. Still, Mr. Naifeh believes he can rally enough support to pass a revamped version this month.

His plan would institute a flat 4.5 percent tax on income and reduce other taxes, eliminating the sales tax on groceries, prescription drugs, and clothing purchases of less than $500.

Gov. Don Sundquist, a two-term Republican who leaves office in January, supports the income-tax plan. In recent years, he has proposed and supported similar moves to revise the state's tax structure, which currently has no income tax and relies heavily on sales taxes.

"We were already having hard times before hard times hit, and we're going to have a hard time coming out of this if the state does not reform its tax structure," said Alexia Levinson, Mr. Sundquist's press secretary. The governor, who has been dubbed "Spendquist" by tax opponents, is adamantly opposed to the DOGS budget because that "would be devastating to K-12 and higher ed," Ms. Levinson added.

Tax Conspiracy?

Tennessee's tax fight spilled out of the aisles of the legislature.

A steady hoopla outside the Capitol in Nashville has pitted income-tax and other tax-overhaul advocates—who include many educators—against a staunch group of anti-tax protesters.

Some lawmakers and other citizens believe the state constitution bars a statewide income tax and argue that such a proposal would die in the courts.

One grassroots group, Tennessee Tax Revolt, contends that there is a conspiracy to force Tennesseans to pay income taxes.

The group contends that the state budget is not in such dire shape, and that pro-tax legislators crafted the DOGS budget as a scare tactic. Several gubernatorial candidates claim the budget can be managed without an income tax.

But the Tennessee School Boards Association believes schools will be shortchanged unless the tax system is overhauled, either through the income tax or some other new revenue source.

"We've got to prevent the cuts," said Stephen Smith, the group's director of government relations. "We're terrified of the DOGS."

Vol. 21, Issue 41, Page 21

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