Ashe, Haslam, Ragsdale: A Study in Budgeting Contrasts

There is a natural tension between an officeholder and his predecessor. You run for office and govern with the idea you will make things better. The guy who used to have the job thinks he did well and doesn't want his legacy trashed.

As Knoxville Mayor Bill Haslam travels around the state, he often gets the question in interviews: Why did you raise property taxes 15 percent your first year in office?

His response is to say some unflattering things about his predecessor. Former Mayor Victor Ashe has arrived back in town from being ambassador to Poland just in time to hear all about it. Friends say he has been incensed at some of the comments. Thus far he had declined to respond to reporter queries; he knows a public spat with Haslam is not good for either of them. Ashe and the Haslams have been political allies for decades and have many mutual friends.

Ashe forgets that one of his favorite talking points as mayor was that when he came into office, the city had to borrow money to make payroll and the city's fund balance—its rainy day fund—was under $1 million. When Ashe left office, 16 years later, the fund balance was about $19 million. He created parks, spent money on downtown development, and provided the annexations and infrastructure to create Turkey Creek—a cash cow for city sales tax revenue.

In a gubernatorial forum in Wilson County, Haslam noted that his predecessor "had built a convention center" and spent $5 million more than they brought in his last year in office.

Of course, Ashe built the convention center in response to a campaign by the business community led by Jim Haslam—the current mayor's father. The convention center was never one of Ashe's priorities. When I was his deputy, I can tell you that unless the issue was a park, a greenway, or annexation his eyes tended to glaze over.

The city fund balance fluctuates up and down. Tax revenue is not consistent, month to month and year to year. The "rainy day fund" is just the money in the bank to cover expenses and even out spending until it is replenished by additional revenue. During Ashe's tenure, the fund generally ranged from $19 million to a high of $25 million. Money from the fund was spent on occasion for capital projects—one-time expenses, not as part of a continuing budget expense. Rather than raise taxes on his way out of office, Ashe used the reserves to balance the budget.

In his budget address last week and in his campaign commercials, Haslam notes that he has tripled the fund balance. It is now at $52 million. The 35-cent property tax increase when he came into office has served Haslam well. He has not had any budget problems and he has been able to put the city on a firm financial footing. It is a good fiscal record to run on.

You could argue that building a reserve of $52 million during a recession demonstrates that the 35-cent tax increase was a lot higher than necessary, but that's a discussion for philosophers.

Ashe's fund balance equaled about two months of city spending. In other words, there was enough money to operate the city for two months without any revenue. When County Executive Tommy Schumpert left office, the county had a fund balance to cover 66 days of expenses, according to an analysis by Lewis Cosby. Cosby, a candidate for county mayor and a retired CPA, says County Mayor Mike Ragsdale has the county reserves down to less than a month's worth of expenses.

On a $165 million budget, Haslam's fund balance covers city expenses for four months.

So there you have it. Ragsdale profligate spendthrift, Ashe balanced approach, Haslam fiscal conservative.

It must have been uncomfortable for Ragsdale to sit at Haslam's budget address last week and hear the city mayor say, "I want to make sure the next mayor takes over a city with a strong financial position, with low debt, a healthy fund balance, and strong infrastructure..."

The next county mayor could only wish he were following Ashe or Haslam.