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Tennessee making headlines as finances approach "critical condition"

April 22, 2002

Newspapers and higher education publications such as "The Chronicle of Higher Education" are spreading the news: "Tennessee's desperate financial condition is forcing universities to cut programs, freeze hiring, raise tuition."

Though Tennessee isn't the only state facing a budget deficit-it's one of 37-it is being spotlighted by media as a state that is "approaching critical condition" after years of falling tax revenue.

In Madison, Wis., as in Nashville, college students gathered on the steps of the state Capitol to protest proposed cuts in higher education. University of Wisconsin students delivered empty piggy banks to Senate offices. Austin Peay students held a mock bake sale in front of the capitol to "raise money" for education.

Analysts consistently blame the state's lack of an income tax for its "dreary" financial situation. "The Chronicle of Higher Education" notes that Tennessee "failed to reap most of the rewards of the late 1990s economic expansion" because it lacks an income tax, relying instead on much more variable sales tax collections for revenue.

"Sales taxes-which account for 75 percent of what Tennessee brings in-tend to grow more slowly than income taxes do in a strong economy," notes writer Jeffrey Selingo. "The deadlock over tax reform here has forced public colleges and other state agencies to cut budgets and beg for more money, while papering over problems for another day," he adds.

Adjusted for inflation, state appropriations per full-time student in Tennessee fell by more than $1,300, or 24 percent, between 1995 and 2000, the largest drop in 15 Southern states.

University officials and faculty hope that a solution will be found. But with control of the governor's office and seats on the legislature up for grabs, even those who are typically buoyant find it hard to remain optimistic.