The last year or so has been a prolonged exercise in crisis management for the Volunteer State's Republican chief executive. Don Sundquist is battling to save financially troubled TennCare --Tennessee's $4.4 billion experiment in providing health care for 1.3 million poor state residents. At the same time, Sundquist is working to overhaul his state's tax system and plug a $342 million budget deficit. During a recent visit to Washington, Sundquist talked to Stateline.org Senior Writer Blair S. Walker about life in a gubernatorial pressure cooker.
Stateline.org: It's been said that the road to hell is paved with good intentions. Does that sum up Tennessee's experience with its TennCare health care program?
Sundquist: My predecessor (Democrat Ned McWherter) started it and I'm glad he did. It's saved our state a lot of money . . . it's six-years-old now and we're working on making some changes in it. But I'm satisfied that it's still a very good plan and will work.
Stateline.org: Do you think it's still a viable health care plan for the state of Tennessee?
Sundquist: Absolutely, absolutely.
Stateline.org: Despite the problems it's experiencing right now?
Sundquist: That's true. Despite that.
Stateline.org: Haven't a lot of major health care providers said that they're no longer going to participate? Like Blue Cross Blue Shield of Tennessee, for example?
Sundquist: Well, they made a decision to leave and we're changing the program and if they like what we're doing, then they can stay in it. I'm satisfied that we're going to make changes in it that will make it work even better. One thing that we found is people who are on TennCare -- I think over 82 percent of the people (in the program) -- like TennCare. It's going to require more money, so we're going to actuarially fund it. We're going to bring in some new health care MCOs (managed care organizations). I think you'll be pleased by the end of the year.
Stateline.org: Do you think there's a lesson for other states to learn from what Tennessee's experienced with TennCare?
Sundquist: Well, health care is costing more everywhere, and our experience is that we're covering more people. And you pay for the uninsured one way or the other. You either pay through charity care, or you do it in a way that's more effective. And TennCare seemingly does that. We are proud of the assistance we have received from the (federal Health Care Financing Administration). We're continuing to work with HCFA, and I believe TennCare is an experiment that will succeed.
Stateline.org: Switching gears a bit, will Tennessee have an income tax when this year's legislative session ends?
Sundquist: I don't know. What I've proposed is tax reform. We're 50th in per capita taxes in the country. We need to be in the lower 10 percent, but we can't be 50th. We also have a failing tax system. We have a business tax system that was created in the `20s and a lot of people aren't paying any business taxes who are in business. We can't have that. The sales tax, with all the Internet challenges, is a tax that appears to be a dying tax. So what I did is I proposed reducing the sales tax on food and reducing the overall sales tax from 6 percent to 3.75 percent, eliminating all tax on interest and dividends and having a flat (income) tax of 3.75 that is deductible. If you take all of those things as part of tax reform and put them together, you'll find a tax system where everybody pays their fair share. And you'll find that . . . it will result in $54 million less being collected in Tennessee. But the state will pick up $450 million or $500 million, and we'll have a tax system that has elasticity. What we're going through, other states will go through as sales tax dependency continues and (revenues go) down.
Stateline.org: Given Tennessee's fiscal situation, why is the Legislature so unwilling to go along with your plan?
Sundquist: Well, it's an election year. And we have a tradition of not having any form of a tax on income. A flat tax, as I've proposed, I think is fair and will save people money. I think the General Assembly is realizing, however, that there are no other alternatives. Do we want a statewide property tax? Do we want a high tax on automobiles? I don't think that makes sense -- what are the alternatives? I concluded, being against income tax all these years, that a form of an income tax called a flat tax is really the best solution.
Stateline.org: What about Internet taxation?
Sundquist: I believe that states ought to make that determination themselves and there ought to be a mechanism for collecting it. If our state wants to have a sales tax, then it shouldn't be the federal government telling us that we shouldn't have a sales tax.
Stateline.org: Should Tennessee have a sales tax on Internet sales?
Sundquist: That's up to the General Assembly and the people of Tennessee. But I think that as long as we have a sales tax for purchases in the state, then there ought to be a sales tax on purchases on the Internet. In other words, we shouldn't give an advantage to out-of-state companies over our own merchants. It ought to be consistent.
Stateline.org: Getting back to health care, how can a state get a handle on health care costs? Especially when it comes to rising prescription expenses.
Sundquist: We're working on that, and the National Governors' Association is working on what changes we need to make. Hopefully with the pharmaceutical industry. That's the fastest growing expense.