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Haslam budget proposal a mix of cuts and spending

Tom Humphrey, The Knoxville News-Sentinel • Dec 17, 2015 at 5:55 PM

NASHVILLE (MCT) – Gov. Bill Haslam's proposed state budget for the coming year involves a mix of cutting and new spending that – combined with an anticipated reduction in federal money flowing to the state – nets out to $32.6 billion, about $600 million less than in the current fiscal year.

The cutting includes a 1 percent reduction in payments to health care providers under TennCare, coupled with an increase in co-pays for those on the program, and elimination of 664 state job positions – all but about 100 currently vacant.

The Haslam budget-balancing act also calls for raiding reserve funds. The biggest is a $302 million dip in to state lottery reserves to endow a new community college scholarship program.

There's also a $25 million extraction from TennCare reserves and a move to take about $11.2 million from two funds created from the fees charged for handgun carry permits and used to cover the cost of conducting criminal background checks and issuing the permits.

Spending increases include money to provide a 2 percent pay raise for teachers and a 1 percent salary increase for other state employees, including those in higher education. There is also new spending in two departments charged with carrying for some of the state's most vulnerable citizens – both subject to substantial criticism in the past year.

The Department of Intellectual and Developmental Disabilities would get $7 million for improvements in services. The Department of Children's Services would receive $6.4 million, including money for 40 new field services workers and 45 child abuse investigators.

State revenue in recent months has fallen below projections used in writing the current year's budget and it's now calculated that revenue growth this year will be only about $260 million above last year.

Haslam said that increased TennCare costs will require spending about $180 million – despite his proposed reduction in provider payments and other cost-cutting measures – while state employee health insurance costs are up $40 million and $120 million is proposed for increases in education.

"So, if you're doing the math at home, before putting anything toward employee salaries, higher education, social services for our most vulnerable citizens, or anything else, we are already $80 million in the red," he said.

Much of the increase in TennCare costs is projected to come from the so-called "woodwork effect" of people realizing they are eligible for TennCare and signing up because of media attention given to the federal Affordable Care Act. That alone is projected to add about $80 million to spending of state dollars on TennCare – which would trigger federal matching funds of about twice as much.

Haslam has refused to accept a major expansion of Medicaid, as authorized by the Affordable Care Act but not required, that would be fully funded by the federal government for three years. The governor reiterated Monday night his belief that any expansion of Medicaid must be coupled with reforms.

"This issue of accepting federal dollars to cover more Tennesseans has been politicized on both sides," he said. "Doing so ignores what's at stake. This is about insuring more Tennesseans in a sound way that the state can afford. ... For Tennessee to be America at its best, we must get health care right – for those who need health care coverage and for the long-term fiscal health of our state."

He also defended tax cuts enacted in the past with his support that mean less revenue for the coming year, insisting that the biggest tax cut – a phased-in repeal of the state's inheritance tax – will "actually create more revenue in Tennessee over time." Projections are the state loses at least $20 million in revenue from the inheritance tax under the phase out that takes effect July 1.

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