Legislators hear multi-year Budget plan

Capitol Hill

Legislators hear multi-year Budget

Contact:  Darlene Schlicher (615) 741-6336 or email:
[email protected]

(NASHVILLE, TN), March 26, 2009 — Calling it “the most complex and difficult” budget that he has ever presented, Governor Phil Bredesen laid out his $29.3 billion plan to fund state government for the fiscal year that begins in July to a joint session of the General Assembly on Monday.  The governor also outlined a multi-year proposal that spends almost $5 billion in federal stimulus money coming into Tennessee over the next two years as a result of the American Recovery and Reinvestment Act passed by Congress in February.

The governor had been scheduled to present a budget plan for the 2009-2010 fiscal year in late January that would make cuts of up to 15 percent in spending in almost all areas of state government.  However, the passage of the Congressional stimulus bill, which added almost a trillion dollars to the more than $10.7 trillion national debt, gave states across the nation the ability to delay more painful cuts for another year.

 “This stimulus package is not a silver bullet – what it does is buy time,” said Bredesen.  He warned state and local governments, “You have a windfall for the next two years.  If you create obligations with it that go beyond two years, do not look for the state to bail you out.”

Unlike Congress, Tennessee has a constitutional requirement for a balanced budget.

“This is a good news-bad news budget in that it is good that we have more time to phase in cuts and delay lay offs at a time of high employment,” said Republican Caucus Chairman Diane Black.  “The bad news is when federal funds end in two years, leaving a huge national debt, the state will have a big gap to fill or face a tax increase to continue those services.”

Stimulus Package comes with
Congressional mandates and earmarks that limit the states’ ability to use funds
to balance budget  

Even with the influx of $5 billion, Governor Phil Bredesen’s multi-year budget plan phases in cuts of up to 15 percent for most Tennessee agencies by 2011 due to the federal mandates tied to the stimulus bill that limit how the money can be spent.  Bredesen said his administration continues to receive “guidance” directives from federal agencies detailing the mandates that states must implement in return for receiving federal stimulus dollars.  An example of this is the requirement that Tennessee must make substantive changes to its unemployment law in order to receive $141 million to extend benefits through the state’s Unemployment Fund.

Although Bredesen said $2.1 billion of the $5 billion may help Tennessee in various ways over a two-year period, only $1.6 billion of those dollars are available to help balance the our budget and assist state agencies to transition to smaller budgets in the future.  The rest of the $2.9 billion, or 58 percent, has been earmarked by Congress for increasing aid to programs such as food stamps, public housing, and road and bridge infrastructure.  Most of this money will simply pass through the state’s budget, while other funds will be paid directly to various non-state agencies.  For example, $524 million will be sent directly to local school districts based on their proportions of low income and special education students.

Because Tennessee has already stabilized its Medicaid program (TennCare), the state will be able to use some of the $1.1 billion coming to help states shoulder the cost of their health care programs for other purposes.  Tennessee already has about $450 million in TennCare reserves, of which $132.5 million will be used to help bridge the $1.2 billion gap to close the 2008-2009 budget year.  The governor also proposes to dip into $64.6 million in Rainy Day funds to close out the current budget year with cuts to various state
expenditures making up the rest of the difference.

One of the areas of state government suffering the deepest cuts to bridge the budget gap was higher education, which incurred a decrease of over $40 million to help balance out the past budget year.  The federal stimulus plan mandates that in order to receive higher education money, about $100 million must be restored in the upcoming fiscal year to receive approximately $500 million over the next two years for Tennessee’s colleges and universities.  Bredesen said, however, “When this money ends 21 months from now, our campuses will suddenly need to begin operating with about $180 million less in state funding than they had this year.”  That point was illustrated in the Senate Finance Committee on Wednesday by charts showing a “cliff-like” drop-off for state spending in higher education and many other areas of state government in the 2011-2012 budget year.  Many legislators have expressed concern about using one-time money to pay for recurring year-to-year state government expenses.

“This budget offers much needed, but short term assistance to higher education,” said Speaker Pro Tempore Jamie Woodson.  “This temporary relief is not a cure to the challenges we face.  Our higher education systems must continue a thoughtful process of reviewing programs, operations, and missions to improve educational outcomes for Tennesseans.”

Tax Increases part of Bredesen
budget plan

The governor’s budget proposal includes a plan to raise premium taxes on Health Maintenance Organizations (HMOs) to draw enough in federal matching funds to avoid a $300 million cut to TennCare, according to Finance Commissioner Dave Goetz.  Approximately 85 percent of income received by HMOs in Tennessee comes from TennCare.  The administration maintains that the $139.3 million raised by increasing the tax would benefit the HMOs due to increased TennCare funding that would be gained under federal matching funds.

The second tax included in the budget is a plan to repeal the current business tax exemption on family-owned, non-corporate entities, known as “FONCEs.”  These are  certain family-owned limited liability corporations and partnerships that derive passive income through commercial property.   The proposal, which would raise $25 million, failed in the General Assembly last year due to concerns about the negative impact the tax increase on small family-owned businesses would have on jobs, especially in a time of economic decline.

In addition, the administration has proposed increasing unemployment insurance by raising the taxable wage base to $9,000 from $7,000 and adopting a 0.6 percent premium charge.   Many employers with little or no previous history of paying high premiums recently experienced increases in their unemployment tax through a law already in place that triggers higher premiums when the state’s unemployment funds go down to insure solvency.

With unemployment at 9.1 percent in Tennessee, there is a tremendous increase in benefit claims that threaten the solvency of the state’s Unemployment Fund by the fourth quarter of 2009 if no action is taken.  Insolvency would mean federal control of the state’s fund, meaning Washington could dictate future tax rates and wage base thresholds.  It would also mean mandatory borrowing with interest from the federal government that could cost businesses more in the long run according to the administration.

Budget Plan calls for state to
incur bond debt for capital projects and transportation funds

The Bredesen budget presented on Monday also calls for the state to incur general obligation bond debt for infrastructure needed to bring jobs to Tennessee through the Volkswagen, Hemlock and Wacker plants; and to develop a megasite in Haywood County in West Tennessee.  About $262 million was approved earlier this year to provide infrastructure funds for Volkswagen plant in Chattanooga and the Hemlock plant in Clarksville.   The budget proposal includes $62.9 million in bonds and $7.3 million in state funds to complete obligations and provide infrastructure for the Wacker plant in Bradley County.  In addition, the budget contains $ 27.3 million for developing a megasite in West Tennessee.

Tennessee has the lowest debt per capita of any state in the nation.  Plans to float bonds for these economic development projects will continue to be a topic for debate as the budget bill comes before the Senate Finance Committee.

In addition, the budget calls for a departure in Tennessee’s current “pay-as-you go” system for building roads in the state for one that would incur general obligation bond debt.  The administration estimates that about $12.3 billion is needed for road projects for the next 10 years.  The budget calls for borrowing $350 million in general obligation bonds to repair structurally deficient bridges.

Over the last five or six years, $280 million in road funds have been funneled from the gas tax to meet other state government expenditures.  This diversion, along with declining state revenues, sharply rising constructions costs, and a shaky Federal Highway Trust Fund, has caused grave concerns about the state’s ability to keep up with transportation

Tennessee must compete in a very competitive economic climate.   Erosion of needed road money could hamper this effort.  However, incurring debt to pay for Tennessee’s road needs is a departure from the “pay as we go” system the state has used for the past 31 plus years.   Legislators will carefully weigh the “pro’s and con’s” of such a proposal over the next several months.

Senate approves Constitutional
Amendment Resolution as first step to restore commonsense protections on

The Senate voted 24 to 8 this week to give Tennesseans the opportunity to restore their voice in determining what state law should be regarding commonsense protections for abortions.  The resolution, SJR 127, addresses a State Supreme Court decision in 2000 that struck down provisions in Tennessee law allowing women to receive “informed
consent” information about the surgery and to wait 48 hours before they receive an abortion. The court also ruled against a state requirement that all abortions after the first trimester be performed in a hospital. That ruling made Tennessee more liberal than the U.S. Supreme Court required in Roe v. Wade and made the right to abortion a “fundamental right” in Tennessee.

“I am very pleased that this resolution has been approved by our State Senate,” said Senator Diane Black (R-Gallatin), sponsor of the resolution.  “This would enable Tennessee to begin the process to restore the right of the people to decide through their elected legislature what protections should be in place regarding abortions.  The only way to restore these protetions is to change the Constitution and give the legislature authority to write commonsense laws.”

The resolution, which has now been voted on in the Senate five times,  must be approved by the legislature this year and by a two-thirds majority in the next General Assembly, before citizens could expect to see the resolution on the ballot in November 2014.  It is expected to be debated in a House Subcommittee, where it has been defeated in the past, as early as next week.  The membership of that Subcommittee has changed, however, under the new leadership put into place earlier this year to one that is more likely to approve the measure.  The resolution is expected to win approval in the House of Representatives, upon advancing through the committee system.

Legislation advances in Senate
Commerce that protects “English-in-the Workplace” /
Judiciary Committee
approves bills cracking down on use of false id for illegal

The Senate Commerce Committee approved legislation sponsored by Senator Jack Johnson (R-Franklin) this week clarifying that Tennessee employers have a right to institute an English-in-the-workplace policy.  The bill, SB 469, makes it clear that an English-in-the-workplace policy is not considered discrimination on the basis of national origin while the employee is engaged in work.

“This is simply a common sense bill which says that it is not discrimination under state law to require English in the workplace,” said Johnson.  “There are many occupations, whether it is an operating room or a factory, where there could be a real safety concern if there are court rulings that other languages are the ‘civil rights’ of workers while on the job.”

Protection of employer rights in instituting English-in-the-workplace policies has increased both in the states and on the national scene since the United States Equal Employment Opportunity Commission (EEOC) began prosecuting employers who required that English be spoken while conducting business.  One notable case involved a Salvation Army thrift store in Framingham, Massachusetts, where two employees refused to learn English and were subsequently fired after being given a year’s notice to learn the language.

“Employers should have the right to require that employees speak English while on the job,” Johnson added.  “I am pleased the Senate Commerce Committee has voted to protect an employer’s right to have an English-in-the-workplace policy, and I look forward to seeing the full Senate follow suit.”

Johnson also won approval of Senate Judiciary Committee members for SB 294 that  would make it a Class A misdemeanor offense to knowingly provide, transfer or submit a  fake identification for the purpose of obtaining or maintaining employment.  The legislation would make the production or use of each false identification document a separate offense under Tennessee law if it is determined that any person in connection with the violation is not legally present in the United States and requires the court to notify the U.S. Department of Homeland Security.

“We must begin a comprehensive approach to attack illegal immigration in Tennessee,” said Senator Johnson.  “This bill addresses a growing problem we have seen in our state with the production of fake identification for illegal aliens in the workplace.”

Judiciary Firearms Subcommittee
recommends several bills to full committee as it concludes its

Several bills were recommended for passage in the Judiciary Committee’s Firearms and Ammunition Subcommittee as the panel concluded its business this week, including one to allow citizens with handgun permits to carry their weapons into establishments that sell alcohol.   The bill, SB 1127, allows law-abiding handgun permit holders to “carry” into restaurants or other establishments serving alcohol as long as the owners of the premises have not posted notification that they are banned.

“This bill does not allow you to consume alcohol while you are carrying in these establishments,” said Senator Mike Faulk (R-Church Hill), Chairman of the Subcommittee. “Permit holders have a strong track record of being responsible.  This bill simply lets legal permit holders carry in restaurants as long as the owner or manager has not banned them.”

Those who are in possession of a handgun are already prohibited from consuming alcohol or face a Class A misdemeanor, which carries a $2,000 fine and up to 11 months and 29 days in jail.  The bill contains carefully crafted language to try to assure that bars are not included under the legislation.

Among other bills approved by the Subcommittee this week was SB 19, sponsored by Senator Dolores Gresham (R-Somerville) which authorizes current and retired judges who possess handgun carry permits to carry a firearm during judicial proceedings.

In addition, the committee approved SB 275, by Senator Bill Ketron (R-Murfreesboro) which allows retired full time commissioned police officers access to law enforcement
shooting ranges when they are not being used by personnel.

Finally, the Subcommittee approved SB 1908 to prohibit the sale of “micro-stamped” firearms or ammunition in Tennessee.  Although micro-stamping legislation supporters claim it will help police solve crimes, many believe their real purpose is to price handguns beyond the reach of many Americans, by requiring firearms to be made with the gadgetry necessary to create the markings or to ban handguns by requiring that they “micro-stamp” more consistently than is technologically possible.

Bill approved by Senate targets
professional shoplifters

The State Senate voted 31 to 0 this week to approve legislation sponsored by Senator Doug Overbey (R-Maryville) that would create a new Class A misdemeanor criminal offense for possession of shoplifting tools used to disable store security systems.  The legislation, SB 437, comes after malls in Tennessee have seen a large increase in a product that is used to line shopping bags that allow criminals to take thousands of dollars of merchandise without setting off store alarm systems.

“We are not talking about $10 or $30 worth of merchandise being taken utilizing this kind of shoplifting tool,” said Overbey.  “These are organized professional shoplifters who use these tools to steal thousands of dollars before a store knows it has even been hit.”

Overbey represents Sevier County which has five malls within a three mile radius.  Sevierville Police Department Sergeant Rebecca Cowan, who testified before the Senate Judiciary Committee in favor of the legislation, told lawmakers that last year Sevier County apprehended a professional shoplifter who utilized the device to steal $10,000 in a four-hour time period.  Cowan said these instruments, which are purchased on the Internet with instructions on how to use them, are not illegal under current Tennessee law.

“They tend to pick on malls,” said Cowan.  “They hit stores with alarms system and can get DVDs out of the doors before you know they are gone.  We are talking about mounds and mounds of property and sometimes we can’t even find the owner because they have stopped at several malls on our way.”

 “Professional shoplifters are becoming more and more technologically savvy,” added Overbey.  “This new law targets the tools of their trade to protect store owners from being victims of theft.”

Issues in Brief

Wine sales – Legislation sponsored by Senator Doug Overbey (R-Maryville) advanced in the Senate Finance Committee on Tuesday that would allow citizens in the state to purchase up to five cases of wine from out-of-state wineries who have a Tennessee license and transport them back across state lines.  The legislation, SB 944, would correct the constitutional issues set forth by the federal court case that threatens to end the sale of wine from Tennessee wineries.   Wineries are a significant agricultural industry in Tennessee with $139 million in sales in 2007.

A separate bill, SB 166, approved by the State and Local Government Committee was approved this week to allow consumers to ship wine from wineries to their homes.  Currently, it is a felony under Tennessee law to transport wine across state lines.  This legislation, sponsored by Senator Paul Stanley (R-Germantown) allows wineries to ship up to 12 cases of wine to Tennessee consumers upon purchase of a $300 license.

Parental Consent for Mental Health Screening — The full Senate has approved legislation sponsored by Senator Diane Black (R-Gallatin) that places restrictions on universal mental health testing or social emotional screening of juveniles.  The bill, SB 850, would prevent the screening from being done without the parent’s consent.  It also prohibits a local education agency from using a parent’s refusal for medication or screening as grounds for not allowing the child to participate in class or other school activities.


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