Senate Republicans are promising to unveil deep new cuts in state spending this week as part of an alternative budget plan that’s certain to touch off an acrimonious election-year debate with Democrats.
Senate speaker Ron Ramsey said “everything’s on the table” — except pay cuts for state employees.
For two weeks in the media, Ramsey has been trading jabs with Gov. Phil Bredesen over how to bridge a $105 million gap between the administration’s February budget proposal and slumping revenue projections.
The governor is touting his proposal to lift the state sales tax cap on purchases of more than $3,200. That would raise the tax from 7 percent to 9.75 percent and bring in $85 million. The administration would exempt automobiles, manufactured homes and boats.
Democrats would like to portray it as a “luxury tax” on furs, jewelry and the like. But Ramsey, who quickly shot down the idea, called it a tax on “backhoes and Bobcats” aimed primarily at small businesses.
“It couldn’t be worse timing,” he said. “We don’t need to be taking $85 million out of small businesses’ back pockets when they’re struggling right now.”
Bredesen countered by demanding that Republicans offer their own alternatives, suggesting Ramsey is politicizing the issue to benefit his campaign for governor.
Without a tax measure, Bredesen contends a 5 percent state employee pay cut would be needed. Ramsey disputes that. “That’s never legitimately been on the table,” he said.
Ramsey has declined to discuss in any detail what is on the table. Republicans have been working with the state’s constitutional officers and finance committee staffs to develop their plan. One likely possibility is the cancellation of construction bonds that have been authorized but not issued. Democrats say they suspect Republicans might target funding for the governor’s pre-kindergarten program.
Democrats and some House Republicans — including Speaker Kent Williams — favor digging deeper into the state’s $900 million reserve funds to help make up the shortfall. Bredesen already proposed allocating $202 million from those accounts. Senate Republicans are against spending more.
“The worst thing we can do is take money out of our savings account to pay for our house payment,” Ramey said. “The savings account disappears, but the house payment keeps going. We need to make sure we spend recurring money for recurring expenses.”
Bredesen’s $28 billion budget recommendation already contains 9 percent spending cuts for some departments. It also includes $50 million in new revenue — $21 million by ending a sales tax exemption for cable TV customers.
Republicans are against that tax too, as well as another one the governor has proposed. It would raise $2 million by forcing hotels to pay the sales tax on the free continental breakfasts they serve.
That makes the budget hole as high as $150 million by Ramsey’s own estimation. The governor clearly is frustrated by all the Republican objections to his spending blueprint.
“My question is for anybody, ‘OK what’s your solution?’” Bredesen asked. “It may well be one that I’d be perfectly comfortable with. But this is the point where the legislature has got to stop saying, ‘I don’t like this, and I don’t like this, and I don’t like this’ and come forward with what it is they want to do to solve the problem if it’s something different than what I’ve proposed.”
To which, Ramsey responds: “… Governor Bredesen is always welcome to veto the budget and argue to the people of the state as to why our small businesses need to be paying more in taxes when they should be growing jobs."
“I think he realizes that I’m going to be constructive,” Ramsey added. “I’m going to come up with an alternative proposal that includes cuts. I think that’s what the general public wants us to do as legislators. Don’t be raising taxes in economic times like this, especially on the people who are trying to provide jobs.”