volume 1 bill haslam, governor - tennessee · 2017. 10. 23. · bill haslam, governor cover: virgin...

STATE OF TENNESSEE

The Budget FISCAL YEAR 2013-2014

Volume 1

Bill Haslam, Governor

Bill Haslam,Governor

Cover: Virgin Falls, December 26, 1977. Virgin Falls State Natural Area, about 20 miles southeast of Sparta, White County, Ten-nessee, at the western edge of the Cumberland Plateau. Minimum temperature at Sparta on that date was 9 degrees F, with a high of 26. The mist from the falls had coated nearby trees with ice. Cover design by Tenn. Dept. of General Services, Printing and Media Services Division.

Virgin Falls State Natural Area, state-owned and managed by the Tenn. Dept. of Environment and Conservation and the Tenn. Wildlife Resources Agency (TWRA), is a 1,551 acre natural-scientific area located adjacent to the Caney Fork River and the 10,000-acre Bridgestone/Firestone Centennial Wilderness, which conserves Scott’s Gulf and also is managed by TWRA. The waterfall is on a stream which emerges from underground just above the falls, drops 110 feet, and immediately disappears un-derground. Hiking to Virgin Falls on a loop trail is a rugged five- to eight-hour walk; distance to the falls is four miles, one-way. The trail leading to Virgin Falls includes other waterfalls at Big Laurel, Sheep Cave, and Big Branch; and the Caney Fork overlook provides a dramatic view of Scott’s Gulf and the Caney Fork, 900 feet below. The second-growth forest includes hemlock, maples, oaks, tulip poplar, hickories, buckeye, basswood, cherry, yellow birch, sycamore, and other species. Several caves and sinkholes are in the natural area, including the cave into which the Virgin Falls stream disappears. Cave closures are in effect now, in order to minimize the spread of the fungus causing white-nose syndrome, which has been observed in bats occupying the caves and can be carried between caves on clothing, footwear, and caving gear. The fungus, Geomyces destructans, is harmful or lethal to hibernat-ing bats, killing 90 percent or more of some species of bats in caves where the fungus has lasted for a year or more, according the U.S. Fish and Wildlife Service.

Designated as a state natural area in 1973, the Virgin Falls area had been a privately-owned, public-use Bowater Pocket Wilderness Area. The state acquired the land and eventually all timber rights in 2006 and 2012 transactions, using state and federal funds and private gifts raised by the Tennessee Parks and Greenways Foundation.v

Section Dividers: Designed from the cover photographs and a topographic map prepared by the U.S. Department of the Interior, Geological Survey, in cooperation with the Tenn. Dept. of Conservation, State Geologist. Lonewood Quadrangle [7.5 Minute Series], White County, Tennessee, 1954.

Bill Haslam,Governor

The Government Finance Officers Association of the United States and Canada (GFOA)presented a Distinguished Budget Presentation Award to the State of Tennessee for the AnnualBudget beginning July 1, 2012.

In order to receive this award, a governmental unit must publish a budget document that meetsprogram criteria as a policy document, as an operations guide, as a financial plan, and as acommunications device.

The award is valid for a period of one year only. We believe our current budget continues toconform to program requirements, and we are submitting it to GFOA to determine its eligibilityfor another award.

INTRODUCTION ..................................................................... xiii

BUDGET OVERVIEW ............................................................... A-1

STATE REVENUES ................................................................. A-71

FINANCIAL STATEMENTS ...................................................... A-135

CAPITAL OUTLAY AND FACILITIES PROGRAM ............................. A-149

STATE TAXPAYERS BUDGET ................................................... A-185

PROGRAM STATEMENTS BY FUNCTIONAL AREA .............................. B-1

GENERAL GOVERNMENT ......................................................... B-9

EDUCATION ....................................................................... B-81

LAW, SAFETY, AND CORRECTION ............................................ B-223

RESOURCES AND REGULATION ............................................... B-287

BUDGET PROCESS ............................................................... B-379

GLOSSARY AND INDEX ......................................................... B-395

TRANSPORTATION, BUSINESS, AND ECONOMIC DEVELOPMENT ........ B-345

HEALTH AND SOCIAL SERVICES .............................................. B-151

TABLE OF CONTENTS

Table of Contents The Budget

(more detailed contents tables appear under each tab)

Introduction ................................................................................................................................................. xiii

Transmittal Letter, Governor Haslam to the General Assembly ......................................................... xvii Transmittal Letter, Commissioner of Finance and Administration to Governor Haslam ..................... xix Budget Highlights ................................................................................................................................ xxi The Budget Document: Introduction .................................................................................................. xxix

Budget Overview: Summary Statements and Charts ................................................................................... A-1 State Tax Revenues ................................................................................................................................... A-71 Financial Statements ................................................................................................................................ A-135 Capital Outlay and Facilities Program ..................................................................................................... A-149 State Taxpayers Budget ........................................................................................................................... A-185 Program Statements by Functional Area...................................................................................................... B-1

Tennessee State Government Organizational Chart ............................................................................ B-5

Recommended Budget for Fiscal Year 2013-2014 ............................................................................. B-7

General Government ........................................................................................................................... B-9

Introduction ........................................................................................................................... B-13

Total Personnel and Funding ................................................................................................. B-14

Recommended Budget for Fiscal Year 2013-2014 by Funding Source ................................. B-15

Cost Increases for Fiscal Year 2013-2014 ............................................................................. B-16

Program Statements ............................................................................................................... B-25 Legislature .................................................................................................................. B-25 Fiscal Review Committee ........................................................................................... B-28 Secretary of State ....................................................................................................... B-29 Comptroller of the Treasury ....................................................................................... B-34 Treasury Department .................................................................................................. B-41 Claims and Compensation .......................................................................................... B-44 Executive Department ................................................................................................ B-46 Human Rights Commission ........................................................................................ B-47 Tennessee Regulatory Authority ................................................................................ B-48 Advisory Commission on Intergovernmental Relations ............................................. B-49 Department of Finance and Administration ............................................................... B-50 Department of Human Resources ............................................................................... B-59 Department of General Services ................................................................................. B-62 Department of Veterans Affairs ................................................................................. B-69 Department of Revenue .............................................................................................. B-70

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(more detailed contents tables appear under each tab)

Introduction ................................................................................................................................................. xiii

Transmittal Letter, Governor Haslam to the General Assembly ......................................................... xvii Transmittal Letter, Commissioner of Finance and Administration to Governor Haslam ..................... xix Budget Highlights ................................................................................................................................ xxi The Budget Document: Introduction .................................................................................................. xxix

Budget Overview: Summary Statements and Charts ................................................................................... A-1 State Tax Revenues ................................................................................................................................... A-71 Financial Statements ................................................................................................................................ A-135 Capital Outlay and Facilities Program ..................................................................................................... A-149 State Taxpayers Budget ........................................................................................................................... A-185 Program Statements by Functional Area...................................................................................................... B-1

Tennessee State Government Organizational Chart ............................................................................ B-5

Recommended Budget for Fiscal Year 2013-2014 ............................................................................. B-7

General Government ........................................................................................................................... B-9

Introduction ........................................................................................................................... B-13



Cost Increases for Fiscal Year 2013-2014 ............................................................................. B-16

Program Statements ............................................................................................................... B-25 Legislature .................................................................................................................. B-25 Fiscal Review Committee ........................................................................................... B-28 Secretary of State ....................................................................................................... B-29 Comptroller of the Treasury ....................................................................................... B-34 Treasury Department .................................................................................................. B-41 Claims and Compensation .......................................................................................... B-44 Executive Department ................................................................................................ B-46 Human Rights Commission ........................................................................................ B-47 Tennessee Regulatory Authority ................................................................................ B-48 Advisory Commission on Intergovernmental Relations ............................................. B-49 Department of Finance and Administration ............................................................... B-50 Department of Human Resources ............................................................................... B-59 Department of General Services ................................................................................. B-62 Department of Veterans Affairs ................................................................................. B-69 Department of Revenue .............................................................................................. B-70

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Program Statements (continued)

Miscellaneous Appropriations .................................................................................... B-77 Emergency and Contingency Fund ............................................................................. B-78 State Building Commission ........................................................................................ B-79

Education .......................................................................................................................................... B-81

Introduction ........................................................................................................................... B-85



Higher Education, Outcomes-Based Funding Formula: Final-Year Implementation, Fiscal Year 2013-2014 .............................................................................................. B-88

Cost Increases (K-12 Education and Higher Education) for Fiscal Year 2013-2014 ............ B-89

Program Statements ............................................................................................................... B-99 Department of Education ........................................................................................... B-99 Higher Education ..................................................................................................... B-118

Health and Social Services .............................................................................................................. B-151

Introduction ......................................................................................................................... B-155

Total Personnel and Funding ............................................................................................... B-156

Recommended Budget for Fiscal Year 2013-2014 by Funding Source ............................... B-157

Cost Increases for Fiscal Year 2013-2014 ........................................................................... B-158

Program Statements ............................................................................................................. B-165 Commission on Children and Youth ........................................................................ B-165 Commission on Aging and Disability ....................................................................... B-166 Health Services and Development Agency .............................................................. B-167 Department of Finance and Administration, Bureau of TennCare ........................... B-168 Department of Mental Health and Substance Abuse Services .................................. B-172 Department of Health ............................................................................................... B-179 Department of Intellectual and Developmental Disabilities ..................................... B-190 Department of Human Services ................................................................................ B-201 Department of Finance and Administration, Strategic Health-Care Programs ......... B-210 Department of Children’s Services .......................................................................... B-214

Law, Safety, and Correction ............................................................................................................ B-223

Introduction ......................................................................................................................... B-227





Program Statements ............................................................................................................. B-235

Court System ............................................................................................................ B-235 Attorney General and Reporter ................................................................................ B-244 District Attorneys General Conference .................................................................... B-246 District Public Defenders Conference ...................................................................... B-248 Office of the Post-Conviction Defender ................................................................... B-250 Alcoholic Beverage Commission ............................................................................. B-251 Tennessee Rehabilitative Initiative in Correction (TRICOR) .................................. B-252 Board of Parole ........................................................................................................ B-254 Department of Correction......................................................................................... B-255 Military Department ................................................................................................. B-273 Tennessee Bureau of Investigation ........................................................................... B-278 Department of Safety ............................................................................................... B-280

Resources and Regulation ............................................................................................................... B-287

Introduction ......................................................................................................................... B-291




Program Statements ............................................................................................................. B-297 Tennessee Arts Commission .................................................................................... B-297 Tennessee State Museum ......................................................................................... B-298 Department of Environment and Conservation ........................................................ B-299 Tennessee Wildlife Resources Agency .................................................................... B-320 Department of Commerce and Insurance ................................................................. B-323 Department of Financial Institutions ........................................................................ B-335 Department of Labor and Workforce Development ................................................. B-337

Transportation, Business, and Economic Development .................................................................. B-345

Introduction ......................................................................................................................... B-349




Program Statements ............................................................................................................. B-354 Tennessee Housing Development Agency ............................................................... B-354 Department of Agriculture ....................................................................................... B-356 Department of Tourist Development ........................................................................ B-363 Department of Economic and Community Development ......................................... B-365 Department of Transportation .................................................................................. B-373

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Program Statements (continued)

Miscellaneous Appropriations .................................................................................... B-77 Emergency and Contingency Fund ............................................................................. B-78 State Building Commission ........................................................................................ B-79

Education .......................................................................................................................................... B-81

Introduction ........................................................................................................................... B-85



Higher Education, Outcomes-Based Funding Formula: Final-Year Implementation, Fiscal Year 2013-2014 .............................................................................................. B-88

Cost Increases (K-12 Education and Higher Education) for Fiscal Year 2013-2014 ............ B-89

Program Statements ............................................................................................................... B-99 Department of Education ........................................................................................... B-99 Higher Education ..................................................................................................... B-118

Health and Social Services .............................................................................................................. B-151

Introduction ......................................................................................................................... B-155




Program Statements ............................................................................................................. B-165 Commission on Children and Youth ........................................................................ B-165 Commission on Aging and Disability ....................................................................... B-166 Health Services and Development Agency .............................................................. B-167 Department of Finance and Administration, Bureau of TennCare ........................... B-168 Department of Mental Health and Substance Abuse Services .................................. B-172 Department of Health ............................................................................................... B-179 Department of Intellectual and Developmental Disabilities ..................................... B-190 Department of Human Services ................................................................................ B-201 Department of Finance and Administration, Strategic Health-Care Programs ......... B-210 Department of Children’s Services .......................................................................... B-214

Law, Safety, and Correction ............................................................................................................ B-223

Introduction ......................................................................................................................... B-227





Program Statements ............................................................................................................. B-235

Court System ............................................................................................................ B-235 Attorney General and Reporter ................................................................................ B-244 District Attorneys General Conference .................................................................... B-246 District Public Defenders Conference ...................................................................... B-248 Office of the Post-Conviction Defender ................................................................... B-250 Alcoholic Beverage Commission ............................................................................. B-251 Tennessee Rehabilitative Initiative in Correction (TRICOR) .................................. B-252 Board of Parole ........................................................................................................ B-254 Department of Correction......................................................................................... B-255 Military Department ................................................................................................. B-273 Tennessee Bureau of Investigation ........................................................................... B-278 Department of Safety ............................................................................................... B-280

Resources and Regulation ............................................................................................................... B-287

Introduction ......................................................................................................................... B-291




Program Statements ............................................................................................................. B-297 Tennessee Arts Commission .................................................................................... B-297 Tennessee State Museum ......................................................................................... B-298 Department of Environment and Conservation ........................................................ B-299 Tennessee Wildlife Resources Agency .................................................................... B-320 Department of Commerce and Insurance ................................................................. B-323 Department of Financial Institutions ........................................................................ B-335 Department of Labor and Workforce Development ................................................. B-337

Transportation, Business, and Economic Development .................................................................. B-345

Introduction ......................................................................................................................... B-349




Program Statements ............................................................................................................. B-354 Tennessee Housing Development Agency ............................................................... B-354 Department of Agriculture ....................................................................................... B-356 Department of Tourist Development ........................................................................ B-363 Department of Economic and Community Development ......................................... B-365 Department of Transportation .................................................................................. B-373

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Budget Process ........................................................................................................................................ B-379

The Budget Process ............................................................................................................. B-383 Performance-Based Budget.................................................................................................. B-388 Basis of Budgeting and Accounting ..................................................................................... B-391

Glossary and Index .................................................................................................................................. B-395 Glossary of Budget Terms ................................................................................................... B-399 Index .................................................................................................................................... B-407 Staff List .............................................................................................................................. B-418


Budget Process ........................................................................................................................................ B-379

The Budget Process ............................................................................................................. B-383 Performance-Based Budget.................................................................................................. B-388 Basis of Budgeting and Accounting ..................................................................................... B-391

Glossary and Index .................................................................................................................................. B-395 Glossary of Budget Terms ................................................................................................... B-399 Index .................................................................................................................................... B-407 Staff List .............................................................................................................................. B-418

Introduction

Introduction Table of Contents

Transmittal Letter, Governor Haslam to the General Assembly ................................................................ xvii Transmittal Letter, Commissioner of Finance and Administration to Governor Haslam ............................. xix Budget Highlights ......................................................................................................................................... xxi The Budget Document: Introduction .......................................................................................................... xxix

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Introduction Table of Contents

Transmittal Letter, Governor Haslam to the General Assembly ................................................................ xvii Transmittal Letter, Commissioner of Finance and Administration to Governor Haslam ............................. xix Budget Highlights ......................................................................................................................................... xxi The Budget Document: Introduction .......................................................................................................... xxix

BILL HASLAMGOVERNOR

STATE OF TENNESSEE

STATE CAPITOL ASHVILLE www.tn.gov

xvii

BILL HASLAMGOVERNOR

STATE OF TENNESSEE

STATE CAPITOL ASHVILLE www.tn.gov

State of Tennessee

Budget Highlights

Recommended Budget, Fiscal Year 2013-2014

The total recommended state budget for 2013-2014 is $32.7 billion, with $15 billion from state appropriations, $12.9 billion from federal funds, and $4.8 billion from other departmental revenues, higher education student tuition and fees, and bonds for capital projects and facilities revolving fund capital outlay. Mid-year review of state tax collections and advice from economists and the State Funding Board suggest that current-year estimates of taxes collected by the Department of Revenue should be adjusted upwards. In the general fund for fiscal year 2012-2013, the revenue estimate increased by $305.9 million from the originally budgeted estimate. The revised current-year growth rate in the general fund is 2.85 percent compared with the actual 2011-20112 Department of Revenue collections. For 2013-2014, before inter-fund reallocations, general fund taxes are expected to grow by $377.7 million above the revised current-year estimate. This is a 3.89 percent general fund growth rate above the revised current-year estimate. Revenue growth rates are within the range of revenue growth recommended by the State Funding Board. The revised revenue estimates for the current year and estimates for next year are based on a slow economic recovery through fiscal year 2013-2014 and beyond.

Plan for Balancing Supplemental appropriations in 2012-2013 total $150.1 million, including $46.3 million for the Department of Correction, $66.1 million for the Department of Economic and Community Development, and $7.6 million for the Department of Safety. In fiscal year 2013-2014, the budget is balanced, with recurring revenues fully supporting recurring appropriations. This is accomplished by additional budget reductions in fiscal year 2013-2014. Base budgets in general fund programs throughout state government have been reduced by $48.8 million and certain programs have been decreased by $13.3 million for a net recurring base reduction of $62.1 million in the general fund. The average general fund reduction is 0.8 percent. Reductions in programs supporting public safety are minimal or non-existent. (The reductions are detailed in Volume 2: Base Reductions.)

Federal and State Mandates State expenditures in the TennCare program are matched according to a rate set by the federal government known as the Federal Medical Assistance Percentage (FMAP). The federal government determines this rate for all states based on changes in per-capita income. For fiscal year 2013-2014, federal participation in health care programs is decreasing from 66.188% to 65.500%. This means an increase of $46.3 million in state funding to TennCare and $511,400 to

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State of Tennessee

Budget Highlights

Recommended Budget, Fiscal Year 2013-2014

The total recommended state budget for 2013-2014 is $32.7 billion, with $15 billion from state appropriations, $12.9 billion from federal funds, and $4.8 billion from other departmental revenues, higher education student tuition and fees, and bonds for capital projects and facilities revolving fund capital outlay. Mid-year review of state tax collections and advice from economists and the State Funding Board suggest that current-year estimates of taxes collected by the Department of Revenue should be adjusted upwards. In the general fund for fiscal year 2012-2013, the revenue estimate increased by $305.9 million from the originally budgeted estimate. The revised current-year growth rate in the general fund is 2.85 percent compared with the actual 2011-20112 Department of Revenue collections. For 2013-2014, before inter-fund reallocations, general fund taxes are expected to grow by $377.7 million above the revised current-year estimate. This is a 3.89 percent general fund growth rate above the revised current-year estimate. Revenue growth rates are within the range of revenue growth recommended by the State Funding Board. The revised revenue estimates for the current year and estimates for next year are based on a slow economic recovery through fiscal year 2013-2014 and beyond.

Plan for Balancing Supplemental appropriations in 2012-2013 total $150.1 million, including $46.3 million for the Department of Correction, $66.1 million for the Department of Economic and Community Development, and $7.6 million for the Department of Safety. In fiscal year 2013-2014, the budget is balanced, with recurring revenues fully supporting recurring appropriations. This is accomplished by additional budget reductions in fiscal year 2013-2014. Base budgets in general fund programs throughout state government have been reduced by $48.8 million and certain programs have been decreased by $13.3 million for a net recurring base reduction of $62.1 million in the general fund. The average general fund reduction is 0.8 percent. Reductions in programs supporting public safety are minimal or non-existent. (The reductions are detailed in Volume 2: Base Reductions.)

Federal and State Mandates State expenditures in the TennCare program are matched according to a rate set by the federal government known as the Federal Medical Assistance Percentage (FMAP). The federal government determines this rate for all states based on changes in per-capita income. For fiscal year 2013-2014, federal participation in health care programs is decreasing from 66.188% to 65.500%. This means an increase of $46.3 million in state funding to TennCare and $511,400 to

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Budget Highlights

the Department of Children’s Services for foster care and adoption assistance to maintain the existing level of service in those programs. A similar change in what is known as the Enhanced FMAP that covers health services provided to children will require $447,700 in state funding to maintain the existing level of service. The Federal Communications Commission has required that all states conform to new narrow banding requirements for radios by January 1, 2017. To make the Department of Corrections compliant with this mandate, $6.3 million is recommended. A total of $5.3 million in state funding is required to pay salary increases mandated by state law for certain job classifications within state government. These jobs and the state dollars necessary to fund the required increase include: judges ($758,500), the Attorney General ($4,600), assistant district attorneys and criminal investigators ($1,101,800), assistant public defenders and criminal investigators ($588,900), assistant post-conviction defenders ($31,200), trooper step increases ($776,600) and border-state survey ($864,200), and wildlife officer step increases ($678,100) and survey ($451,800). State law requires annual payments of $600 to local police officers after they complete at least 40 hours of in-service training and an increase in the number of officers eligible for the payments under this state mandate is funded with $34,400. State statutes mandate that teachers at the state’s youth development center schools must be compensated based on their training and experience. To fund this state mandate, $36,900 is provided to the Department of Children’s Services.

Customer Focused Government

This recommended budget funds several projects to make state government more customer-friendly, efficient, and effective. These projects are part of the Customer Focused Government initiative. In the Department of Finance and Administration, $2.5 million recurring and $8.3 million non-recurring are provided to standardize all state agency information technology operations through third party assessments and new training opportunities. Also in Finance and Administration, $1.8 million is recommended to create a centralized accounting unit that will provide accounting services to 13 small agencies. In the Department of Mental Health and Substance Abuse Services, $1.6 million recurring is provided to fund eight additional drug courts and four juvenile drug courts in judicial districts across the state. Contract employees will be hired to reduce wait times at certain high volume driver license stations with $1 million recurring provided to the Department of Safety.

Budget Highlights

Education

For K-12 education, the cost to maintain full funding of the Basic Education Program (BEP) formula, which provides an equitable state share of K-12 public education funding to local education agencies (LEAs), is $43.2 million. The capital outlay component of the BEP, which was reduced in fiscal year 2010-2011, is restored with $33.7 million recurring. In total, the state funding for the operations of local school systems will increase by $137.5 million after salary and insurance adjustments. Upgrades to the technology infrastructure of the LEAs are funded with a non-recurring appropriation of $51 million. These upgrades will improve educational and instructional opportunities for students with new hardware and software and with expanded connectivity. The Department of Education estimates that an additional 12 schools will be operated by the department as part of the Achievement School District and $40.1 million from BEP funds and 154 teachers and support staff positions are recommended to operate those schools. For higher education, $35.5 million recurring is requested to reflect greater institutional productivity, such as increases in student progression, degree production, research and service, efficiency metrics, and other outcome measures related to institutional mission. A total of $5 million non-recurring is appropriated to institutions that are losing recurring funding due to the implementation of the Complete College Tennessee Act of 2010, which created an outcomes-based funding formula for higher education. Fiscal year 2013-2014 is the last year that these hold harmless funds will be recommended. Need-based student financial aid through the Tennessee Student Assistance Awards program is increased with an additional $5 million. The third year of what is anticipated to be a five-year project to expand the University of Memphis to the campus of what was formerly Lambuth University is funded with a recommendation of $3 million. Technology Centers and Community Colleges will receive $16.5 million non-recurring funds to upgrade or replace equipment used in programs such as service delivery, allied health, health informatics, and advanced manufacturing. A Western Governors University program designed to assist adults with previous academic credits to complete their degrees on-line is funded with $5 million non-recurring. Medical programs at the University of Tennessee and the Board of Regents will receive a total of $5.9 million. A joint effort between the University of Tennessee Health Science Center and St. Jude’s Hospital to recruit pediatric physician scientists is funded with $3 million non-recurring. This is the first year of what is expected to be a five-year commitment to this recruiting effort. An additional $3 million recurring is recommended to the University of Tennessee for a pilot program to increase the number of College of Engineering graduates. Six million dollars in existing University of Tennessee funds will be matched with $5 million non-recurring from the general fund to compete for a National Science Foundation grant to build a Cray supercomputer.

xxiii

Budget Highlights

the Department of Children’s Services for foster care and adoption assistance to maintain the existing level of service in those programs. A similar change in what is known as the Enhanced FMAP that covers health services provided to children will require $447,700 in state funding to maintain the existing level of service. The Federal Communications Commission has required that all states conform to new narrow banding requirements for radios by January 1, 2017. To make the Department of Corrections compliant with this mandate, $6.3 million is recommended. A total of $5.3 million in state funding is required to pay salary increases mandated by state law for certain job classifications within state government. These jobs and the state dollars necessary to fund the required increase include: judges ($758,500), the Attorney General ($4,600), assistant district attorneys and criminal investigators ($1,101,800), assistant public defenders and criminal investigators ($588,900), assistant post-conviction defenders ($31,200), trooper step increases ($776,600) and border-state survey ($864,200), and wildlife officer step increases ($678,100) and survey ($451,800). State law requires annual payments of $600 to local police officers after they complete at least 40 hours of in-service training and an increase in the number of officers eligible for the payments under this state mandate is funded with $34,400. State statutes mandate that teachers at the state’s youth development center schools must be compensated based on their training and experience. To fund this state mandate, $36,900 is provided to the Department of Children’s Services.

Customer Focused Government

This recommended budget funds several projects to make state government more customer-friendly, efficient, and effective. These projects are part of the Customer Focused Government initiative. In the Department of Finance and Administration, $2.5 million recurring and $8.3 million non-recurring are provided to standardize all state agency information technology operations through third party assessments and new training opportunities. Also in Finance and Administration, $1.8 million is recommended to create a centralized accounting unit that will provide accounting services to 13 small agencies. In the Department of Mental Health and Substance Abuse Services, $1.6 million recurring is provided to fund eight additional drug courts and four juvenile drug courts in judicial districts across the state. Contract employees will be hired to reduce wait times at certain high volume driver license stations with $1 million recurring provided to the Department of Safety.

Budget Highlights

Education

For K-12 education, the cost to maintain full funding of the Basic Education Program (BEP) formula, which provides an equitable state share of K-12 public education funding to local education agencies (LEAs), is $43.2 million. The capital outlay component of the BEP, which was reduced in fiscal year 2010-2011, is restored with $33.7 million recurring. In total, the state funding for the operations of local school systems will increase by $137.5 million after salary and insurance adjustments. Upgrades to the technology infrastructure of the LEAs are funded with a non-recurring appropriation of $51 million. These upgrades will improve educational and instructional opportunities for students with new hardware and software and with expanded connectivity. The Department of Education estimates that an additional 12 schools will be operated by the department as part of the Achievement School District and $40.1 million from BEP funds and 154 teachers and support staff positions are recommended to operate those schools. For higher education, $35.5 million recurring is requested to reflect greater institutional productivity, such as increases in student progression, degree production, research and service, efficiency metrics, and other outcome measures related to institutional mission. A total of $5 million non-recurring is appropriated to institutions that are losing recurring funding due to the implementation of the Complete College Tennessee Act of 2010, which created an outcomes-based funding formula for higher education. Fiscal year 2013-2014 is the last year that these hold harmless funds will be recommended. Need-based student financial aid through the Tennessee Student Assistance Awards program is increased with an additional $5 million. The third year of what is anticipated to be a five-year project to expand the University of Memphis to the campus of what was formerly Lambuth University is funded with a recommendation of $3 million. Technology Centers and Community Colleges will receive $16.5 million non-recurring funds to upgrade or replace equipment used in programs such as service delivery, allied health, health informatics, and advanced manufacturing. A Western Governors University program designed to assist adults with previous academic credits to complete their degrees on-line is funded with $5 million non-recurring. Medical programs at the University of Tennessee and the Board of Regents will receive a total of $5.9 million. A joint effort between the University of Tennessee Health Science Center and St. Jude’s Hospital to recruit pediatric physician scientists is funded with $3 million non-recurring. This is the first year of what is expected to be a five-year commitment to this recruiting effort. An additional $3 million recurring is recommended to the University of Tennessee for a pilot program to increase the number of College of Engineering graduates. Six million dollars in existing University of Tennessee funds will be matched with $5 million non-recurring from the general fund to compete for a National Science Foundation grant to build a Cray supercomputer.

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Budget Highlights

Health Care An additional $94 million in recurring state funding is recommended for the TennCare program to off-set the costs of medical utilization and inflation. Increasing pharmacy costs are funded with a recurring $22.6 million. The cost of Medicare dual-eligible TennCare enrollees is funded with $29 million in recurring funds and the Standard Spend Down Program is funded with $11.1 million recurring. These general fund amounts total to $156.7 million and are matched with $296.8 million in federal funds for a total of $453.5 million provided for existing TennCare enrollees. Similar enrollment and inflation increases in the CoverKids program are funded with $8.2 million recurring and $21 million federal for a total of $29.2 million. Enrollment in the TennCare program is expected to increase by 46,700 people beginning January 1, 2014, as people currently eligible but not enrolled in the program attempt to get insured. To cover the cost of serving these new individuals and the associated changes to drug rebates, pharmacy expenditures, and the coverage of foster children, $121 million is recommended as well as $230 million in federal funds for a total of $351 million. An additional 96 enrollees in the Home and Community-Based Services waiver programs are funded with a recurring $4.4 million. Services provided to clients of the Departments of Intellectual and Developmental Disabilities and Children’s Services are funded with $12.4 million and $1.8 million respectively. Reductions to programs funded by TennCare in the past are restored with $7.6 million recurring. These programs include: Meharry Medical College ($2.3 million), Nashville Metro General Hospital and The Med Regional Medical Center in Memphis ($2.8 million), and emergency room physician reimbursement ($2.6 million). Contingent on sufficient funds being received from Tobacco Master Settlement Agreement (MSA) arbitration, an estimated $67.6 million will be available in fiscal year 2012-2013. From that settlement, the first $5.7 million is appropriated in fiscal year 2012-2013 to support the Tobacco MSA revenue estimate. The next $24 million is appropriated for capital outlay to convert the UT Knoxville coal-fired steam plant to natural gas and the balance, estimated at $37.9 million, will be used for other health and wellness initiatives. The Administration intends to introduce legislation that changes the evaluation and inpatient treatment of mentally ill individuals; and to off-set the loss of revenue to the mental health institutes as a result of that legislation, $4.4 million recurring is recommended to the Department of Mental Health and Substance Abuse Services. Two existing crisis stabilization units previously funded with federal funds will be funded with a total of $2.1 million in general fund appropriation to strengthen access to community treatment and decrease the need for institutionalization. Non-recurring funds of $525,000 will be provided to the Department of Mental Health and Substance Abuse Services for Lifeline programs to help individuals in recovery locate support and recovery services and will be used to establish group programs in communities that do not have them. A new health and wellness initiative is funded with a non-recurring appropriation of $1.2 million to the Department of Health.

Budget Highlights

Child Welfare To provide recurring funds for expenditures related to the Brian A. Settlement Agreement, $6.7 million in recurring appropriation is recommended. With this amount and $3.6 million in federal revenue and $5.2 million in TennCare reimbursement, the Department of Children’s Services will: upgrade the salaries of child protective services case managers, add 29 positions for investigation and assessments, add 20 family social worker case manager positions, increase the number of attorneys by 13 to terminate parental rights, increase reimbursement rates for residential and foster care, and address the growth in the adoption assistance caseload. Also in Children’s Services, funding for the statewide Child Advocacy Centers is restored with $250,000. Recurring funding in the amount of $95,000 for the Council on Children’s Mental Health is recommended. Mentoring services for the children of state inmates is provided for with $250,000 to the Department of Correction.

Safe Communities To fund an increasing number of felons in local jails, $48.1 million is recommended. Contracts with non-state service providers are funded with $21.9 million. These contract increases include Hardeman County – Whiteville ($742,800), South Central Correctional Center ($599,300), health and mental health contract services ($20.1 million), and the Hardeman County agreement ($482,800). The Southeastern Tennessee State Regional Correctional Facility is expanded with an appropriation of $9.6 million that is off-set by a corresponding reduction in the Sentencing Act of 1985 allotment. Proposed legislation to change the funding of the Davidson and Shelby County Public Defender offices is funded with $1.8 million recurring.

Business Development An appropriation of $30 million is recommended for the Jobs4TN program to continue the state’s investment in creating new opportunities for Tennessee’s workforce and to support the growth and retention of the state’s traditional jobs base. Of that amount, $5 million is recurring funding and $25 million is non-recurring. A non-recurring supplemental of $35 million is recommended for the current year for Fast Track infrastructure and job training assistance. Efforts to recruit new projects and develop Tennessee’s film and television industries are funded with $11.4 million non-recurring and $2 million recurring for a total of $13.4 million. A new Tourism marketing task force is funded with $8 million and the new Interstate 40 welcome center in Haywood County will be staffed with ten positions in the Department of Tourist Development and $518,400 provided by the Department of Transportation.

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Budget Highlights

Health Care An additional $94 million in recurring state funding is recommended for the TennCare program to off-set the costs of medical utilization and inflation. Increasing pharmacy costs are funded with a recurring $22.6 million. The cost of Medicare dual-eligible TennCare enrollees is funded with $29 million in recurring funds and the Standard Spend Down Program is funded with $11.1 million recurring. These general fund amounts total to $156.7 million and are matched with $296.8 million in federal funds for a total of $453.5 million provided for existing TennCare enrollees. Similar enrollment and inflation increases in the CoverKids program are funded with $8.2 million recurring and $21 million federal for a total of $29.2 million. Enrollment in the TennCare program is expected to increase by 46,700 people beginning January 1, 2014, as people currently eligible but not enrolled in the program attempt to get insured. To cover the cost of serving these new individuals and the associated changes to drug rebates, pharmacy expenditures, and the coverage of foster children, $121 million is recommended as well as $230 million in federal funds for a total of $351 million. An additional 96 enrollees in the Home and Community-Based Services waiver programs are funded with a recurring $4.4 million. Services provided to clients of the Departments of Intellectual and Developmental Disabilities and Children’s Services are funded with $12.4 million and $1.8 million respectively. Reductions to programs funded by TennCare in the past are restored with $7.6 million recurring. These programs include: Meharry Medical College ($2.3 million), Nashville Metro General Hospital and The Med Regional Medical Center in Memphis ($2.8 million), and emergency room physician reimbursement ($2.6 million). Contingent on sufficient funds being received from Tobacco Master Settlement Agreement (MSA) arbitration, an estimated $67.6 million will be available in fiscal year 2012-2013. From that settlement, the first $5.7 million is appropriated in fiscal year 2012-2013 to support the Tobacco MSA revenue estimate. The next $24 million is appropriated for capital outlay to convert the UT Knoxville coal-fired steam plant to natural gas and the balance, estimated at $37.9 million, will be used for other health and wellness initiatives. The Administration intends to introduce legislation that changes the evaluation and inpatient treatment of mentally ill individuals; and to off-set the loss of revenue to the mental health institutes as a result of that legislation, $4.4 million recurring is recommended to the Department of Mental Health and Substance Abuse Services. Two existing crisis stabilization units previously funded with federal funds will be funded with a total of $2.1 million in general fund appropriation to strengthen access to community treatment and decrease the need for institutionalization. Non-recurring funds of $525,000 will be provided to the Department of Mental Health and Substance Abuse Services for Lifeline programs to help individuals in recovery locate support and recovery services and will be used to establish group programs in communities that do not have them. A new health and wellness initiative is funded with a non-recurring appropriation of $1.2 million to the Department of Health.

Budget Highlights

Child Welfare To provide recurring funds for expenditures related to the Brian A. Settlement Agreement, $6.7 million in recurring appropriation is recommended. With this amount and $3.6 million in federal revenue and $5.2 million in TennCare reimbursement, the Department of Children’s Services will: upgrade the salaries of child protective services case managers, add 29 positions for investigation and assessments, add 20 family social worker case manager positions, increase the number of attorneys by 13 to terminate parental rights, increase reimbursement rates for residential and foster care, and address the growth in the adoption assistance caseload. Also in Children’s Services, funding for the statewide Child Advocacy Centers is restored with $250,000. Recurring funding in the amount of $95,000 for the Council on Children’s Mental Health is recommended. Mentoring services for the children of state inmates is provided for with $250,000 to the Department of Correction.

Safe Communities To fund an increasing number of felons in local jails, $48.1 million is recommended. Contracts with non-state service providers are funded with $21.9 million. These contract increases include Hardeman County – Whiteville ($742,800), South Central Correctional Center ($599,300), health and mental health contract services ($20.1 million), and the Hardeman County agreement ($482,800). The Southeastern Tennessee State Regional Correctional Facility is expanded with an appropriation of $9.6 million that is off-set by a corresponding reduction in the Sentencing Act of 1985 allotment. Proposed legislation to change the funding of the Davidson and Shelby County Public Defender offices is funded with $1.8 million recurring.

Business Development An appropriation of $30 million is recommended for the Jobs4TN program to continue the state’s investment in creating new opportunities for Tennessee’s workforce and to support the growth and retention of the state’s traditional jobs base. Of that amount, $5 million is recurring funding and $25 million is non-recurring. A non-recurring supplemental of $35 million is recommended for the current year for Fast Track infrastructure and job training assistance. Efforts to recruit new projects and develop Tennessee’s film and television industries are funded with $11.4 million non-recurring and $2 million recurring for a total of $13.4 million. A new Tourism marketing task force is funded with $8 million and the new Interstate 40 welcome center in Haywood County will be staffed with ten positions in the Department of Tourist Development and $518,400 provided by the Department of Transportation.

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Budget Highlights

The Department of Labor and Workforce Development will receive $4 million from the general fund to off-set temporarily the impact of declining federal revenue in the unemployment insurance program. The department will provide a plan to operate within recurring federal revenues beyond fiscal year 2013-2014. Administration legislation that proposes to shift adjudication of claims from the courts to an administrative system is funded with $1.8 million. Of that amount, $1.2 million is from workers’ compensation fees paid by employers and $600,000 is from the general fund.

State Employee Workforce Development A 1.5 percent salary increase for state employees is recommended and funded with a $22.1 million appropriation. Additional funds are recommended to fund the state’s portion of increases for teachers through the Basic Education Program formula ($35.8 million) and higher education ($18.6 million). The total cost of the 1.5 percent salary increase is $76.5 million. A market salary study of state employees was funded in the fiscal year 2012-2013 budget and a recurring $30 million was provided to fund the results. An additional $27.9 million is recommended in fiscal year 2013-2014, bringing the total amount available to fund the salary study to $57.9 million. A 5.5 percent increase in the cost of the state’s group health insurance program beginning January 1, 2014 is funded with a total appropriation of $24.4 million. This cost increase includes funds for state employees ($7.1 million), teachers and other licensed K-12 employees ($11.3 million), and higher education employees ($6 million). The state portion of the January 1, 2013 group health insurance rate increase is annualized with $2.6 million for state employees and $13.5 million for teachers. Medicare supplement costs for both teachers and state employees are funded with $1.6 million. Increases in membership and claims in the retired teachers’ insurance plan are funded with $2.1 million. Increases in postage are funded with $1 million and increased risk management premiums are funded with $2 million. Non-recurring funds of $2.4 million are recommended for severance packages for state employees consisting of a base payment of $3,200 and college tuition assistance for two years to be capped at the average of the highest four-year public Tennessee college undergraduate level.

Information Technology The Office of Information Resources requires a rate increase to support its current operations and a recurring $4.9 million is recommended to fund that rate increase. The Enterprise Resource Planning system needs $3.4 million recurring for data growth, software maintenance, storage, business intelligence, and management. A new Enterprise Resource Planning financial module for budget planning, modeling, reporting, and publishing is funded with $1.8 million, of which $1.6 million is non-recurring. Additional security for the state’s computer systems is provided with $1.4 million and two additional positions in the Office of Information Resources. Non-

Budget Highlights

recurring funds of $1.3 million are provided to implement a data repository system for General Sessions Court cases. Non-recurring funds in the amount of $3 million are provided for higher education initiatives that will combine on-line coursework and research how students learn.

Capital Outlay Capital outlay in fiscal year 2013-2014 totals $443.250 million, including $160.8 million in non-recurring current funds and $97.5 million from federal and other sources. A bond authorization of $185 million is also requested. An appropriation of $35.8 million is recommended for statewide capital maintenance, including $13 million for general government, $15.9 million for the Board of Regents, $7 million for the University of Tennessee, and $28.5 million for the Department of Correction from Sentencing Act funds. The facilities revolving fund (FRF) capital budget provides an additional $133.9 million for projects and maintenance of state office buildings and similar facilities maintained through agency rent payments. This is funded by a transfer of $133 million in state appropriation from the general fund and $930,000 from FRF current funds, provided from FRF through agency rent payments.

Revenue Fluctuation Reserve The revenue fluctuation reserve allows services to be maintained when revenue growth is slower than estimated in the budget, mainly during economic downturns. The revenue fluctuation reserve was $306 million on June 30, 2012. The 2012 appropriations act set the reserve at $356 million. A recommended deposit to the fund of $100 million in fiscal year 2013-2014 will have the total revenue fluctuation reserve at $456 million on June 30, 2014.

TennCare Reserve The TennCare reserve consists of prior-year unspent funds appropriated to the TennCare program. The unobligated reserve as of June 30, 2012, is estimated at $115.6 million. A deposit of $123.7 million is expected on June 30, 2013. No transfers from the TennCare reserve are anticipated in fiscal year 2013-2014, so the balance is projected to be $239.3 million on June 30, 2014.

Conclusion The budget document includes narrative program statements for each of the line-item programs for which funds are recommended. In addition, detailed statements explain the recommended cost increases. Volume 2: Base Budget Reductions, describes the reductions in recurring funding by program.

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Budget Highlights

The Department of Labor and Workforce Development will receive $4 million from the general fund to off-set temporarily the impact of declining federal revenue in the unemployment insurance program. The department will provide a plan to operate within recurring federal revenues beyond fiscal year 2013-2014. Administration legislation that proposes to shift adjudication of claims from the courts to an administrative system is funded with $1.8 million. Of that amount, $1.2 million is from workers’ compensation fees paid by employers and $600,000 is from the general fund.

State Employee Workforce Development A 1.5 percent salary increase for state employees is recommended and funded with a $22.1 million appropriation. Additional funds are recommended to fund the state’s portion of increases for teachers through the Basic Education Program formula ($35.8 million) and higher education ($18.6 million). The total cost of the 1.5 percent salary increase is $76.5 million. A market salary study of state employees was funded in the fiscal year 2012-2013 budget and a recurring $30 million was provided to fund the results. An additional $27.9 million is recommended in fiscal year 2013-2014, bringing the total amount available to fund the salary study to $57.9 million. A 5.5 percent increase in the cost of the state’s group health insurance program beginning January 1, 2014 is funded with a total appropriation of $24.4 million. This cost increase includes funds for state employees ($7.1 million), teachers and other licensed K-12 employees ($11.3 million), and higher education employees ($6 million). The state portion of the January 1, 2013 group health insurance rate increase is annualized with $2.6 million for state employees and $13.5 million for teachers. Medicare supplement costs for both teachers and state employees are funded with $1.6 million. Increases in membership and claims in the retired teachers’ insurance plan are funded with $2.1 million. Increases in postage are funded with $1 million and increased risk management premiums are funded with $2 million. Non-recurring funds of $2.4 million are recommended for severance packages for state employees consisting of a base payment of $3,200 and college tuition assistance for two years to be capped at the average of the highest four-year public Tennessee college undergraduate level.

Information Technology The Office of Information Resources requires a rate increase to support its current operations and a recurring $4.9 million is recommended to fund that rate increase. The Enterprise Resource Planning system needs $3.4 million recurring for data growth, software maintenance, storage, business intelligence, and management. A new Enterprise Resource Planning financial module for budget planning, modeling, reporting, and publishing is funded with $1.8 million, of which $1.6 million is non-recurring. Additional security for the state’s computer systems is provided with $1.4 million and two additional positions in the Office of Information Resources. Non-

Budget Highlights

recurring funds of $1.3 million are provided to implement a data repository system for General Sessions Court cases. Non-recurring funds in the amount of $3 million are provided for higher education initiatives that will combine on-line coursework and research how students learn.

Capital Outlay Capital outlay in fiscal year 2013-2014 totals $443.250 million, including $160.8 million in non-recurring current funds and $97.5 million from federal and other sources. A bond authorization of $185 million is also requested. An appropriation of $35.8 million is recommended for statewide capital maintenance, including $13 million for general government, $15.9 million for the Board of Regents, $7 million for the University of Tennessee, and $28.5 million for the Department of Correction from Sentencing Act funds. The facilities revolving fund (FRF) capital budget provides an additional $133.9 million for projects and maintenance of state office buildings and similar facilities maintained through agency rent payments. This is funded by a transfer of $133 million in state appropriation from the general fund and $930,000 from FRF current funds, provided from FRF through agency rent payments.

Revenue Fluctuation Reserve The revenue fluctuation reserve allows services to be maintained when revenue growth is slower than estimated in the budget, mainly during economic downturns. The revenue fluctuation reserve was $306 million on June 30, 2012. The 2012 appropriations act set the reserve at $356 million. A recommended deposit to the fund of $100 million in fiscal year 2013-2014 will have the total revenue fluctuation reserve at $456 million on June 30, 2014.

TennCare Reserve The TennCare reserve consists of prior-year unspent funds appropriated to the TennCare program. The unobligated reserve as of June 30, 2012, is estimated at $115.6 million. A deposit of $123.7 million is expected on June 30, 2013. No transfers from the TennCare reserve are anticipated in fiscal year 2013-2014, so the balance is projected to be $239.3 million on June 30, 2014.

Conclusion The budget document includes narrative program statements for each of the line-item programs for which funds are recommended. In addition, detailed statements explain the recommended cost increases. Volume 2: Base Budget Reductions, describes the reductions in recurring funding by program.

State of Tennessee

The Budget Document Introduction

Tennessee Code Annotated, Section 9-4-5106, requires that the financial plan of Tennessee's state government be presented in four parts:

1. Financial Policy – The state’s financial policy, contrasting the relationships between expenditures and revenues from all sources that are estimated for the ensuing fiscal year, with the corresponding figures for the latest completed fiscal year and the fiscal year in progress; and a budget summary;

2. State Appropriations and Taxes, Excluding Dedicated Funds – Appropriations and tax estimates from general state tax sources, excluding appropriations from dedicated tax sources; this is the so-called "State Taxpayers Budget";

3. Detailed Budget Estimates – Estimates of expenditures and revenues, including all funding sources; program statements and performance measures; statement of the state's bonded indebtedness, detailing redemption requirements until retirement, the net and gross debt of the state, and condition of the sinking fund; and

4. Appropriations Bill and Other Budget Bills – The General Appropriations Bill, through which the General Assembly gives legal sanction to the financial plan it adopts. Upon passage, this bill appropriates by agency and fund the expenditures for the ensuing fiscal year. The revenues by which these expenditures are financed also are detailed in this bill. In addition, other bills required to give legal sanction to the financial plan must be filed.

Parts one, two, and three are included in the Budget Document. The format of the Budget Document is reviewed annually for clarity and content. Part four, the Appropriations Bill and other budget legislation, such as the Bond Authorization Bill, are separate documents. The "Introduction" section of the Budget Document begins with transmittal letters from the Governor to the General Assembly and from the Commissioner of Finance and Administration to the Governor. These letters and the following budget highlights summarize the policy and financial recommendations included in the document.

The next section of the Budget Document, entitled "Budget Overview," is a brief summary of the total budget.

This overview is a series of charts and schedules that summarize the Budget. The total state budget and the general fund budget are represented by pie charts that detail each major tax and each functional area for the recommended budget. Tennessee's current tax structure has the majority of its tax revenue coming from the sales tax, the largest portion of which funds K-12 education.

The overview schedules clarify and detail the expenditures, revenue sources, and personnel requirements of state government.

The Budget Document has several total budget schedules comparing programs by funding source and showing how those funds are derived.

Also included are tables that list, by department, the cost increases proposed for the next fiscal year. A separate table lists, by department, proposed base budget reductions, indicating the percent of reduction compared with general fund state appropriations and with so-called discretionary appropriations. The discretionary appropriations exclude appropriations from all dedicated taxes and

xxix

State of Tennessee

The Budget Document Introduction

Tennessee Code Annotated, Section 9-4-5106, requires that the financial plan of Tennessee's state government be presented in four parts:

1. Financial Policy – The state’s financial policy, contrasting the relationships between expenditures and revenues from all sources that are estimated for the ensuing fiscal year, with the corresponding figures for the latest completed fiscal year and the fiscal year in progress; and a budget summary;

2. State Appropriations and Taxes, Excluding Dedicated Funds – Appropriations and tax estimates from general state tax sources, excluding appropriations from dedicated tax sources; this is the so-called "State Taxpayers Budget";

3. Detailed Budget Estimates – Estimates of expenditures and revenues, including all funding sources; program statements and performance measures; statement of the state's bonded indebtedness, detailing redemption requirements until retirement, the net and gross debt of the state, and condition of the sinking fund; and

4. Appropriations Bill and Other Budget Bills – The General Appropriations Bill, through which the General Assembly gives legal sanction to the financial plan it adopts. Upon passage, this bill appropriates by agency and fund the expenditures for the ensuing fiscal year. The revenues by which these expenditures are financed also are detailed in this bill. In addition, other bills required to give legal sanction to the financial plan must be filed.

Parts one, two, and three are included in the Budget Document. The format of the Budget Document is reviewed annually for clarity and content. Part four, the Appropriations Bill and other budget legislation, such as the Bond Authorization Bill, are separate documents. The "Introduction" section of the Budget Document begins with transmittal letters from the Governor to the General Assembly and from the Commissioner of Finance and Administration to the Governor. These letters and the following budget highlights summarize the policy and financial recommendations included in the document.

The next section of the Budget Document, entitled "Budget Overview," is a brief summary of the total budget.

This overview is a series of charts and schedules that summarize the Budget. The total state budget and the general fund budget are represented by pie charts that detail each major tax and each functional area for the recommended budget. Tennessee's current tax structure has the majority of its tax revenue coming from the sales tax, the largest portion of which funds K-12 education.

The overview schedules clarify and detail the expenditures, revenue sources, and personnel requirements of state government.

The Budget Document has several total budget schedules comparing programs by funding source and showing how those funds are derived.

Also included are tables that list, by department, the cost increases proposed for the next fiscal year. A separate table lists, by department, proposed base budget reductions, indicating the percent of reduction compared with general fund state appropriations and with so-called discretionary appropriations. The discretionary appropriations exclude appropriations from all dedicated taxes and

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The Budget Document

fees, federal aid, and other departmental revenue; and general fund appropriations for the K-12 Basic Education Program (BEP), pre-kindergarten appropriations, constitutionally and statutorily required salaries of judges, 31 district attorneys general, 31 public defenders, and certain programs affecting indigent or low-income persons.

There are two charts that provide the total fund balance available, indicating the appropriation requirements and the general fund and education fund revenues and reserves available to meet that need: “General Fund and Education Fund, Comparison of Appropriation Requirements and State Revenues” for the current year, and next (or recommended budget) year. The two charts show how the budget is balanced against general fund and education fund tax revenues for the two fiscal years. Because of its dedicated funding sources, the Department of Transportation’s appropriation requirements and revenue sources are stated on a separate chart.

All agencies and departments are included in the summary comparison schedules by program and funding source.

Other schedules provide detail on the supplemental appropriations required to maintain programs in the current fiscal year, the Constitutional spending limitation requirement, a summary of personnel and funding for all state agencies and higher education institutions, and Tennessee characteristics, which include demographic and other information on the state.

Two charts in the overview summarize base budget reductions and base budget adjustments (increases). The charts reflect changes from the current-year work program recurring state appropriations.

The overview also includes charts summarizing the lottery for education revenue estimates, program requirements funded from the lottery revenue, and lottery reserve fund balances.

The section entitled "State Tax Revenues" presents state tax revenue estimates for the ensuing fiscal year, compared with actual collections for the previous year and the revised estimate for the current year. This section explains the various sources of revenue, by collecting agency, and the statutory apportionment among the various funds: the general fund, education fund, highway fund, sinking (or debt service) fund, and cities and counties fund.

Included in the "Financial Statements" section are the comparative balance sheets for the general fund, education fund, and highway fund.

This section is followed by the expenditures and requirements of the debt service fund for the previous, current, and subsequent fiscal years. A debt service fund comparative balance sheet also is included.

The status of the various authorized and unissued bonds is given in a schedule of bonds and appropriations made for capital purposes in lieu of bond issuance. The statement of bonded indebtedness presents the retirement schedule for the state’s bonded debt. The cost of outstanding bonds is reflected as principal and interest.

The proposed capital outlay for the ensuing fiscal year is included within the "Capital Outlay and Facilities Program" section. Specific projects are shown for each department impacted, along with capital maintenance. Whether from current funds of the general fund, the sale of general obligation bonds, or from other sources, the proposed funding for each project is indicated.

The "State Taxpayers Budget" section is included to distinguish between state appropriations from general state taxes and appropriations from dedicated taxes and fees, which are narrowly levied and earmarked for specific purposes. The "State Taxpayers Budget" excludes the dedicated funds, federal revenues, and other departmental revenues; it

The Budget Document

reports only appropriations from general state tax sources, along with estimates of the general taxes.

Except for the "State Taxpayers Budget," all of the other summary charts and program statements in this Budget Document include appropriations from all state sources, both general taxes and dedicated taxes and fees.

The major portion of the Budget Document is "Program Statements by Functional Area." For presentation in the Budget Document, departments and agencies with related missions, programs, goals, and objectives are grouped, resulting in six functional areas. This enables legislators, policy-makers, and citizens to have a better concept of the magnitude and costs of services provided through the various functional areas of state government.

At the beginning of each functional presentation is an introduction to the associated agencies, followed by a list of the cost increases that are recommended for that area of state government. The cost increase list is followed by tables that show the total expenditures, funding sources, and personnel of each functional area.

The activities and responsibilities of the departments and agencies are explained through narrative descriptions of each program.

Following this narrative, fiscal and personnel data are provided for the last completed year, the current year, and the next year.

The next-year estimates include the level of funding and number of positions for the recommended base budget, program cost increases, and the total recommended. Program performance measures also are provided for executive branch programs, operating under the performance-based budget law.

Base budget reductions necessary to balance general fund appropriations are included in the recommended base budget of this document by program. The specific base reductions by program are itemized in a separate Volume 2, Base Budget Reductions.

Following the “Program Statements by Functional Area,” the next-t

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