State Advisory Commission Helps Tennessee Earn "A" for Budget Transparency

Tennessee is one of only three states to receive an A for Transparency in State Budgeting from the prestigious Volcker Alliance in its second annual report on Truth and Integrity in State Budgeting: PREVENTING THE NEXT FISCAL CRISIS.  That’s up from a B the previous year thanks to the work of the Tennessee Advisory Commission on Intergovernmental Relations (TACIR).

The Commission’s annual report on Tennessee’s public infrastructure needs, titled Building Tennessee's Tomorrow:  Anticipating the State’s Infrastructure Needs, is the nation’s most comprehensive, statewide assessment of the cost to build or upgrade publicly-owned capital facilities and land assets like highways, water treatment plants, industrial sites, landfills, libraries, courthouses, and parks.  Commission staff have produced the report since 1996 to support development by state and local officials of goals, strategies, and programs to

• improve quality of life,
• support livable communities, and
• enhance and encourage overall economic development.

TACIR’s infrastructure project is used to produce the capital improvement plans of many of the state’s small cities and counties.  Its significance and utility earned an Innovation Award for creative approaches to regional community and economic development from the National Association of Development Organizations (NADO) in 2009.  Tennessee’s nine development districts, governmental agencies that provide economic development assistance to local governments, do the field work necessary to complete the annual inventory that supports the project.

The Volcker Alliance report rates states’ success in pursuing transparent and fiscally sustainable procedures with grades of A to D-minus, the lowest possible mark, for their practices in the five areas it considers the building blocks of budgeting nationwide:

•  budget forecasting—how and whether states estimate revenues and expenditures for the coming fiscal year and the long term;
•  budget maneuvers—dependence on one-time actions to offset recurring expenditures;
•  legacy costs—how well states are funding promises made to public employees to cover retirement costs, including pensions and retiree health care;
•  reserve funds—the condition of general fund reserves as well as rainy day funds and rules governing their use and replenishment; and
• budget transparency—disclosure of budget information, including debts, tax expenditures, and the estimated cost of deferred infrastructure maintenance.

The Alliance also compared states’ budgetary grades to marks given the year before and offered best practices in each of the five budget categories.

Tennessee earned As for avoiding budget maneuvers and for maintaining adequate reserves as well as for transparency in budgeting.  The report gave Tennessee a B for legacy costs and a C for budget forecasting.

About transparency, the Volcker Alliance said, “Budget information is worth little to elected officials, policy advocates, and the public if they can’t find it.  Yet only three states won top average A grades for fiscal 2016 through 2018 for budget transparency.  The lack of comprehensive budgetary information on the cost of deferred infrastructure maintenance in forty-six states explains part of the result . . . While federal standards for reporting highway and bridge deferred maintenance costs are being upgraded, Hawaii, which received a grade of B, and the three states receiving top average scores of A—Alaska, California, and Tennessee—are the only ones making a clear effort to disclose these costs in budgetary or related documents.”

“The Tennessee Advisory Commission on Intergovernmental Relations, created by statute in 1978, handles that state’s deferred maintenance cost disclosures.  We gave Tennessee a three-year average of B in transparency in our 2017 report because of a lack of deferred infrastructure maintenance disclosure in budget documents.  However, we have found that [TACIR’s] reports are equivalent to budgetary disclosures.”

Why is this important?  “The absence of deferred maintenance cost information in most states is a critical shortcoming in a nation in which the word “infrastructure” is frequently preceded by “crumbling.”  Unfunded infrastructure maintenance is akin to underfunded pensions; the total liability for each may grow every year that spending is short of what is required.  A road needing only partial resurfacing in a given year may be costlier to repair—and result in congestion and higher car and truck maintenance expenses—if work is repeatedly put off.  Similarly, the usefulness of buildings and other public assets declines, and long-term costs rise, if the state does not provide necessary upkeep.”

The mission of the Volcker Alliance, launched in 2013 by former Federal Reserve Board Chairman Paul A. Volcker, is to advance effective management of government to achieve results that matter to citizens.  The nonpartisan Alliance works toward that objective by partnering with other organizations—academic, business, governmental, and public interest—to strengthen professional education for public service, conduct needed research on government performance, and improve the efficiency and accountability of governmental organization at the federal, state, and local levels.

For more from the Volcker report, see https://www.volckeralliance.org/truth-and-integrity-state-budgeting-preventing-next-fiscal-crisis.  For more about TACIR’s annual report on Tennessee’s public infrastructure needs, see https://www.tn.gov/tacir/infrastructure.html.  For more about the State’s budget, see https://www.tn.gov/finance/fa/fa-budget-information.html.  For more about the State’s development districts, see https://www.tennesseedevelopmentdistricts.org/.

TACIR Mission

TACIR’s mission is to serve as a forum for the discussion and resolution of intergovernmental problems; provide high quality research support to state and local government officials in order to improve the overall quality of government in Tennessee; and to improve the effectiveness of the intergovernmental system to better serve the citizens of Tennessee.