Tennessee Will Weather Current Economic Storm 10/22/2008 Of late we’ve seen the nation’s economy continue to worsen and seen those struggles spread to the world’s financial markets. These economic conditions continue to affect us here in Tennessee with revenues from tax collections dipping below expectations. These are tough times and, like many families across Tennessee, we in state government are taking the necessary steps to reduce spending to ensure we weather the current economic storm. This downturn is significant. Revenues have been less than projected since last November, and we’re collecting fewer dollars this year than we did last year. That means state government must adjust its spending to ensure we continue to live within our means. As this downturn continues, making reductions will become more difficult, but it’s our job to manage the state’s finances responsibly in challenging times as well as good ones. This downturn is different from others in recent years because it is largely driven by a lack of consumer confidence. Families are being more selective about where they spend their money, focusing on necessities and cutting extras from their budgets. Since last year we’ve seen a steep decline in auto and boat sales, and the slowdown in the housing market means fewer people are buying furniture and home appliances. The situation today is quite different than when I took office in 2003 in one important aspect. Our state faced that financial crisis with basically no reserves, no savings. We managed through by making common-sense decisions about how we use state taxpayer dollars. Since then we’ve experienced several years of significant economic growth, making wise investments in education, health care and economic development and building our reserves. Now, as we address the current national downturn, we must again roll up our sleeves and make the right decisions to get us through these tough times. We’ve done it before, and we’ll do it again. Earlier this year, I asked the legislature to approve a revised budget that included nearly $500 million in spending cuts. We offered buyout packages to about 1,500 employees who volunteered to leave state jobs to decrease the size of our payroll. We also instituted a hiring freeze and limited travel for state employees. While these efforts have helped, revenue collections continue to lag, so we recently asked state agencies to cut an additional $106 million in spending this year. Higher education has been asked to reduce spending by an additional $42 million as well. Even with these efforts, most economists believe the downturn will continue through 2009, so we are prepared to make additional reductions in coming months. Despite these challenges, Tennessee is in a very good financial position to address the current economic downturn. We’ve grown our savings accounts to nearly $1.3 billion. We will likely have to tap into those funds this year, but my goal is to limit the amount we draw from our savings and instead adjust our spending to live within our means. We’re also looking to the future, especially in the area of job creation. In July, Volkswagen Group of America selected Chattanooga as the site for its new U.S. automotive production facility. The new plant will bring about 2,000 direct jobs and add a significant number in related sectors. This month, I’m leading a trade mission to Germany to visit Volkswagen’s global headquarters and hold briefings for the automaker’s supplier community. I’m convinced that if we make suppliers aware of our nationally-recognized business climate, we can bring them here and create even more good paying jobs for Tennesseans. In early October, former Senator Howard Baker and I hosted the first Governor’s Summit on Clean Energy Technology in Knoxville to develop strategies for making Tennessee a leader in the clean-energy technology sector. Last year, global investments in clean-energy technology, which includes everything from energy-efficient lighting to alternative fuels and renewable sources like solar and wind, topped $148 billion. The current economic downturn not withstanding, that number will be going up – if not today, then tomorrow. Meanwhile, we’re watching China add more than one coal-fired power plant each week, and other fast-growing nations will be adding energy production capacity as well. So what does all this mean? To me, it means that we’re in an increasingly strong position to make the U.S a leader in clean technology development. Some day soon, I’m convinced we’ll be selling the Chinese our cleaner-coal technology, and selling other countries our solar panels, wind turbines, alternative fuels and other products. And while the U.S. is poised to lead the charge globally, I’m convinced Tennessee can be at the vanguard. The same things that make us attractive for general manufacturing and distribution – our geography, skilled labor, low cost of doing business – will help open new lines of business and bring new jobs in the clean energy sector. Just like taxpayers across Tennessee, state government must live within its means. I’m committed to steering us through these rough waters. We’ve shown that we can manage well through good economic times, and together we’ll show that we’re just as capable of managing through difficult times. If you have questions or comments about this issue or any other, please email me at phil.bredesen@state.tn.us.