The 106th General Assembly resumed normal business last week, as legislators adjourned the Extraordinary Session on Monday. Committees held organizational meetings, heard testimony from department heads, and completed unfinished business held over from study committees. The Governor’s budget was to be submitted Monday. The Finance, Ways and Means Committee and Budget Subcommittee will hold budget hearings Tuesday and Wednesday to update legislators on the newest numbers.

The state is facing an unprecedented projected revenue deficit of roughly $1 billion. Because the Tennessee General Assembly is constitutionally mandated to pass a balanced budget, lawmakers will face extraordinary challenges. In October, Tennessee fiscal analysts said $1.1 billion in baseline budget reductions will likely need to be made in order to keep the state finances afloat.

The 2009-10 budget, passed in June of 2009, anticipated revenue growth of approximately one percent, but revenues have been falling short of that mark. The most recent revenue numbers show a continual decline, meaning that for a record 19 months, Tennessee has seen negative revenue growth. Economists are saying that general fund tax revenues could be down to about $8.5 billion for this year, compared to $10.3 billion in the 2008-2009 fiscal year.

When the Governor presents his budget to the legislature next week, we expect to hear a call for departments to make 6 to 9 percent more in reductions. Overall, cuts of approximately $500 million to $750 million will need to be made in order to balance the budget.

Education and corrections will probably not be on the chopping block, and departmental reserve accounts should not be tapped to cover recurring expenses. Most legislators do not want to drain the entire Rainy Day Fund, which currently stands at approximately $525 million.

The State Funding Board recently adopted preliminary budget estimates in December, and legislators will likely hear them next week during budget hearings giving lawmakers a better snapshot of the budget hole it is facing. The Board will likely revise the estimate in late March or early April, as opposed to its practice of meeting in May, hopefully allowing the General Assembly to finish earlier in the year.

The Unemployment Trust Fund will once again be a significant issue early in the 2010 legislative session. Despite a $140 million infusion of federal stimulus funds into the system in 2009, the fund continues toward insolvency. If the state incurs a deficit, it will likely require a bridge loan from the federal government until the legislature can make other provisions in the Unemployment Trust Fund.

The legislature voted last year to save Tennessee's Unemployment Trust Fund from federal intervention, saying that the move was necessary to keep the federal government from completely taking over the nearly insolvent fund. The fund was approaching insolvency after the state unemployment rate jumped to 10 percent in 2009, and with the continuously rising percentage of Tennesseans out of work, the fund is being drained of resources.  

Last week, the House Transportation Committee passed a bill that places certain contractual restrictions on local governments who utilize traffic cameras. The move comes after months of study committee meetings examining the use of traffic cameras in communities across the state. The committee voted unanimously this week requiring contracts between local governments and companies operating the traffic cameras to contain a provision that requires the contract to be changed when state law is changed. Lawmakers are anticipating legislation this year that will restrict the use of traffic cameras in some way, or at least lessen their impact. Several legislators have already filed bills on the subject, ranging from the elimination of the cameras to reductions in fee payments.