The text of the NY Times article cited yesterday follows.
The article cited by Prof. Dumas uses the phrase "government school"
which is usually used by those opposed to public education.
This should not be the stance of anyone employed by UTC.
Jim Hiestand
August 23, 2001
Fiscal Stature of Tennessee Slips in War Over Taxes
By DAVID FIRESTONE
ASHVILLE, Aug. 21 — It was only two years ago that Tennessee was
considered a model of good financial management, one of only
nine
states whose governments had top-drawer credit ratings from all
the
rating agencies and the envy of Southeastern states struggling
to
modernize.
But that was before a slowing economy gutted its revenue, which
was
vulnerable because of an almost total reliance on the volatile
sales
tax. Now Tennessee's fiscal reputation has fallen even further
than
those of the large group of other states struggling to balance
their
budgets, and deep rifts have been exposed among residents and
legislators over the proper role of state government in lean
times.
Two weeks ago, after yielding to large crowds at the Capitol
here
protesting a proposed income tax, legislators could balance the
budget only by spending all the state's remaining $560 million
share
of the national settlement with the tobacco industry; most other
states are using their settlement windfalls for health purposes
and
preventing tobacco use.
Almost immediately, the rating agencies sharply downgraded the
state's credit, warning that Tennessee must plot a course back
to
fiscal responsibility if it expects to borrow money in the
future.
Schools now worry about finding money for building projects, and
a
few districts were so short of cash they had to open several
days
late this year. Money for health care and mental health programs
is
likely to be slashed, and state colleges and universities have
raised their tuition 15 percent
"We are suddenly in a very precarious position," said C. Warren
Neel, the state commissioner of finance. "The revenues of this
year's budget could fall short, and our rainy-day fund needs to
be
much higher. If we don't change the structure of our tax system,
we
are going to be at the mercy of lawsuits from people who need
our
services, and we'll gradually lose our ability to govern
ourselves.
We'll be like Alabama."
Being like Alabama, frankly, is not the way Tennesseans have
traditionally seen themselves. The state always had a reputation
for
being better educated and more economically vibrant than its
neighbors farther south. But now, with dozens of states
struggling
to balance their budgets, it has found itself hit even harder
than
most, because, unlike 41 states, it cannot rely on the cushion
of an
income tax.
Nearly three-fourths of its revenue comes from its 6 percent
sales
tax. This was enough in the days when Tennessee had a mostly
manufacturing and agricultural economy, with actual goods to
tax.
But as the state moved more heavily into untaxable services,
sales
tax revenue began to slip, particularly with so much commerce
taking
place on the Internet, where taxes cannot reach.
The slowing of the economy has magnified the effect. State sales
tax
collections last month were 2.6 percent lower than at the same
time
last year, and Mr. Neel's office said that even the current
budget,
patched together with tobacco-settlement money, was likely to
fall
short of its goals if the economy remained anemic.
Opponents of the income tax say the sales tax would be perfectly
adequate if the state simply cut back on spending for social
purposes, particularly the expensive TennCare health insurance
program.
"I know that we can find a way to run this state and deliver
services in such a way that we remain a low-tax state," said
State
Senator Marsha Blackburn, a Republican from the Nashville suburb
of
Brentwood. "All we have to do is hold the line on growth, and
that
will take care of our budget problems."
The state's aversion to the income tax dates from 1931, when the
Tennessee Supreme Court ruled that an income tax enacted not
long
before was unconstitutional. The State Constitution does not
specifically prohibit a personal income tax, but neither does it
list one among the several taxes it says the state can levy. (It
does allow a tax on interest and dividends, which is in effect.)
While a succession of five state attorneys general have said
that an
income tax would be legal if the legislation was properly worded
to
comply with the court's concerns, the decades without such a tax
have created an immensely passionate popular opposition to it.
Gov. Don Sundquist, who won office in 1994 as a conservative
Republican opposed to an income tax, changed his position after
his
re- election, citing a need to preserve high-quality education
and
health care programs.
"I did not run for governor to preside over Tennessee's descent
into
the ranks of the least, the lowest and the last of the 50
states,"
he said in 1999, after announcing that he would sign an income
tax
bill if it came to his desk.
But no such bill came, even as Tennessee slid to 48th in the
nation
in the average amount that residents pay in state taxes, and
48th in
per- pupil spending for education.
This year the Democratic-controlled legislature seemed only a
few
votes shy of passing an income tax plan that would have also
reduced
the sales tax, but as a vote neared on July 12, Senator
Blackburn's
office sent an e-mail message to the hosts of a radio talk show,
who
were quickly able to produce a large anti-tax rally at the
Capitol.
While lawmakers were in session, protesters honked horns and
banged
on the statehouse doors, and one woman broke a window with her
fist.
Negotiations on the tax fell apart, and the legislature passed a
budget that required using the tobacco money.
Calling the budget bill irresponsible, Governor Sundquist vetoed
it
on July 26. "I believe that this bill is certain to cause our
great
state irreparable injury," he said, "and puts our state on the
path
toward disaster."
But less than two weeks later the legislature overrode his veto,
and
the budget took effect. Many of the protesters claimed victory.
Their comments reflect a profound suspicion of those in power,
and a
reluctance to trust them with a new tax.
"This state has a spending problem, and the budget just keeps
growing every year," said David Ivy, a resident of suburban
Mount
Juliet who was among the crowd at the Capitol in July. "We
understand that you have to have taxes to operate this society,
but
there is a huge amount of waste, and all they say is, `It's for
the
children,' and expect us to throw money at it."
But a recent analysis by The Commercial Appeal, the Memphis
daily,
showed that most of the growth in state spending was mandated by
the
courts or the federal government and so was outside the
discretion
of the state. Given that continuing pressure on the budget, many
supporters of the income tax believe its adoption is only a
matter
of time, particularly now that there is no tobacco money left to
plug holes.
"It used to be an obscenity to talk about an income tax, and now
at
least it's a policy choice," said Senator Bob Rochelle, a
Democrat
from nearby Lebanon who was a leading proponent of the tax in
the
legislature. "Once people understand the implications of having
an
unhealthy state government — fewer people with diplomas, with
health
care — I think things will change when this comes up again."
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