Feds warn Tenn. huge funding cuts possible

By: Mario Boone Email
By: Mario Boone Email

KNOXVILLE, Tenn. (WVLT) -- Facing massive debt of its own, the federal government warned states the budget ax is about to fall. That triggered the watchful eye of credit rating agencies. "They were at least considering the notion of downgrading Tennessee," said UT economist Dr. Bill Fox.

Hoping to avert this, Tennessee budget officials ordered every state agency to identify where they could cut up to an additional 30%. "The commissioner of Finance and Administration is being very clear that yes we can accomodate it, and we'll even have plans," said Fox.

That much was confirmed on Friday when the finance department released a statement reading in part, "what we don't want to do is wait until we get the notice of fewer federal dollars and panic. We'll be ready." But the mere idea of more cuts has some concerned it could spark a deeper recession at the state level.

"That might mean some people lose their jobs, or there will be smaller payments to doctors and hospitals from the Medicaid program, or that there's less money to build roads in Tennessee."

Fox was quick to point out these are hypothetical cuts so far. He says he fully expects Tennessee to retain its AAA bond rating. But he agrees, the federal debt must be reduced, just executed over several years.
"That allows us to balance economic growth with reductions in the size of the federal government," Fox said.

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