With America's attention diverted in the direction of Iraq, you might have missed another disaster in the making, namely, the sinking ship of the state of Tennessee.

It is hard to believe that Tennessee has reached such a critical condition in such a short time span. Our new Democrat Governor, Phil Bredesen, is facing budget shortfalls that are deeper than what his predecessor Governor Don Sundquist faced at this same time last year when our state was in the midst of tumultuous tax battles.

Bredesen has barely had time to climb out of his inaugural tuxedo before the proverbial you-know-what hit the fan. Right now, Tennessee is facing a budget shortfall of $480 million in this fiscal year that ends on June 30 and a $780 million gap in the 2003-2004 budget. And it seems that every day the gap grows larger.

Ironically, this shortfall comes on the heels of the largest tax increase ($933 million) in Tennessee history, passed in July. By raising the sales tax by one cent, the legislature hoped to buy some time. But it hasn't worked out that way.

Hit with rapidly rising medical inflation pushing TennCare costs up dramatically, an anemic economy resulting in lower-than-expected collections of sales, franchise and excise taxes, and a court-ordered teacher-pay equalization proposition that could cost from $40 to $540 million, the tax increase simply can't keep with the state's expenses.

An already dysfunctional tax structure is now even more dysfunctional. Tennessee now has the dubious distinction of having the highest sales tax rate and the third most regressive tax structure in the nation.

Gov. Bredesen, who ran on an anti-income tax platform, has boxed himself in with pledges that he won't raise taxes in his first year in office and he won't propose an income tax in his first term.

During his campaign, he touted his ability as the CEO of his private health care firm and swore he could cure TennCare's ills with his management ability. However, as he is quickly discovering, government and private business are two different animals.

As Tennessean political columnist Larry Daughtrey puts it, "TennCare is not a business. Every alternative has an unintended consequence, and none of them is good. Tens of thousands of vulnerable people will get hurt, and a huge segment of the state's economy could go belly up."

Bredesen is now calling for 9% across-the-board cuts in state departments. This means some state employees will be laid off and those remaining will be overworked and underpaid. To understand the magnitude of the problem,Tennessee has the 16th largest population in the nation but ranks 41st in the size of its state government workforce.

As Sen. Douglas Henry, Chair of the Senate Finance Committee was quick to point out, basically what Bredesen is proposing is the so-called D.O.G.S. (Downsizing Ongoing Governmental Services) budget that was roundly rejected by the legislature last session as being too radical. So now we have a Democrat instituting a fiscally conservative Republican agenda, much as Bill Clinton did during his tenure in the White House.

Sadly, the brunt of many of the cuts will fall on children, the elderly, the sick and the poor. Proposed cuts include:

• closing The Tennessee Preparatory School, a school for disadvantaged children;
• reducing the amount the state pays local jails to house inmates;
• reducing the amount of money sent to school systems with high growth in enrollment;
• eliminating positions in the agency protecting the state's air water and land;
• abolishing dietary supplements to people with kidney disease;
• cutting funding for before-and-after programs for Head Start;
• raising co-payments from parents in low-income child-care programs;
• cutting investigations of emotional and financial exploitation of the elderly;
• eliminating 71 positions from driver's license department;
• limiting the yearly number of allowable hospitalizations and office visits to doctors for people on TennCare;
• and cutting money for senior centers.

In Bredesen's favor, he has broken with tradition and is holding his budget hearings in the open. For this he is receiving high marks from members of the legislature as well as the media.

And he is putting the knife to sacred cows like the Tennessee Department of Transportation budget (TDOT), asking them to make 9% cuts just like all the other departments are being required to do.

TDOT, with its dedicated gasoline tax dollars, has long been off-limits, even when the state was crashing and burning last session. But the serfs are grumbling about TDOT's fiefdom. "We're number one in roads and last in education," says Knoxville mayor Victor Ashe who is leading the TDOT revolt.

For many legislators roads are prime pork barrel projects that fuel suburban developments and subsequent sales tax revenue. In order to change the pervasive TDOT culture, the legislature will need to do battle with the dedicated gasoline tax that now goes to TDOT. With powerful lobbyist groups like the contractors and the road builders aligned against such a change, the outcome of such a battle remains uncertain.

State-shared taxes are also falling under the ax. Bredesen is proposing that the state keep over $100 million that goes to local government, including all of the Hall Tax revenue. City and county officials say the total loss will be over $179 million because of state department budget cuts. This means property taxes will go up and services will be cut statewide.

Higher education, under funded for years, is taking a $100 million hit. This hit will not help Tennessee improve its dismal educational statistics. "Of every 100 Tennesseans who start the ninth grade, 55 complete high school, 30 actually make it to college, 21 are still enrolled by the end of their sophomore year, and 12 have obtained a bachelor's degree after six years of college. Compare this to Massachusetts where 29% of those who start the ninth grade earn a bachelor's degree," says James W. Guthrie, professor of policy and education at Peabody College at Vanderbilt University.

The lottery, the organization for which is now being debated by the legislature, will certainly put additional strain on the limited resources of Tennessee's higher education system by opening the floodgates to students who obtain a lottery-sponsored scholarship. While it is admirable that more students will be attending Tennessee institutions, lottery proceeds will not fund the additional costs this influx of students will bring.

K-12 education in Tennessee is not faring much better than higher education. Tennessee ranks 45th in the percent of high school graduates. "Tennessee has a lower than average percentage of its fourth and eighth grade students scoring at or above 'proficient' on national academic achievement tests. For example, nationwide, 26% of eighth graders are rated 'proficient' or above in mathematics. Only 17% of Tennessee's eight graders are so rated. By contrast, Connecticut has twice this number, 34% of its students score at 'proficient' or above," says Guthrie.

How can Tennessee hope to compete for jobs with other states, particularly in the hi-tech industries of the future, with statistics like these? Clearly, the state needs to put an infusion of money into education, (including pre-school education), and take a step back and reorganize the whole system, as Guthrie suggests. Given the state's ongoing fiscal crises, this is going to be a challenge.

The real 800-pound Gorilla of the state budget is TennCare, which has baffled the best minds for years. Gov. Sundquist thought he could solve the problem by throwing 150,000 people off the roles. This was supposed to save the state a bunch of money. These dis-enrolled people are now in court suing the state and the fiscal problems have still not been solved. As a matter of fact, the TennCare deficit grew by $100 million in the first month Bredesen was in office.

In frustration at a recent budget hearing, Gov. Bredesen brought up the idea of dismantling TennCare. But Manny Martins, the man who designed TennCare who is now back at the helm, reminded the Governor that the comptroller's office has calculated that staying on the old Medicaid program would have cost the state an additional $2 billion dollars more in state and federal funds between 1994 and 2000.

As the state sinks, concerned citizens need to reflect on what sort of future Tennessee is going to have. Will Tennessee slide down to third-rate status, saddled with an educational level significantly lower than the national average? Will Tennessee continue to be infamous for being a right-to-work, cheap labor state? Can Tennessee continue to provide cheap labor when competing in the global economy with countries like Mexico and China? Will high-tech industries locate in other states where the education level is higher? Will Tennessee continue to hit its most vulnerable and poorest citizens with the double whammy of paying high taxes and receiving inferior services? Will sick people lose their TennCare coverage and resort to using emergency rooms as their primary providers driving up costs to local governments? Will this additional expense plus the loss of state-shared revenue drive up local property taxes?

The way I look at it, when the ship is sinking, you can rearrange the deck chairs and deny what's happening or you can haul out the lifeboats and try to save as many people as possible. Here in Tennessee, I think we need to get out the lifeboats right away. We need to focus on a clear vision for the future of Tennessee and come together to make it a reality.

Nell Levin is the Organizer for Tennessee Alliance for Progress (TAP)