Budget calls for phase out of Hall Income Tax and increased property tax relief for 100 percent service-related disabled veterans and elderly disabled
NASHVILLE, (April 14, 2016) – The Tennessee Senate and House of Representatives passed several key bills this week, including the state budget, as the 2016 session of the Tennessee General Assembly draws to a close. The $34.9 billion debt-free budget proposes state government spending for the next fiscal year that begins July 1, 2016 and extends to June 30, 2017.
“Senate Bill 2653 is the Balanced Budget Act of 2016,” said Senate Majority Leader Mark Norris (R-Collierville), sponsor of the legislation. “It focuses on the ‘four Es’ of Tennessee – employment, education, economic opportunity and enforcement of the law. The balanced budget is ‘job one’ because it not only demonstrates our stewardship of the taxpayers’ property, but it reflects upon our ability to assure the best return on their investment of precious resources and undergirds our constitutional responsibility to provide for the peace, safety and happiness of the people of Tennessee.”
Among two key provisions in the budget is one which calls for the phase out of Tennessee’s Hall Income Tax on interest and dividend income from investments. Since enactment of the Hall tax in 1929, the use of investment savings has grown as a primary source of retirement income. The current tax rate is six percent applied to all taxable interest and dividend income over $1250 per person and $2500 for married couples filing jointly. The legislation calls for cutting the tax by one percent this year, with the legislative intent to eliminate it by 2021.
In addition, the budget provides for increased property tax relief for 100 percent service-related disabled veterans by repealing the income cap that was put in place last year and raises the property value limit for the elderly disabled. Norris said there are currently 21 counties which are making up any differentials that are helping to even the tax relief that can be given.
On K-12 education, the budget makes the largest investment without a tax increase in Tennessee’s history by providing an additional $261 million for Tennessee’s public schools. Significant K-12 increases include $104.6 million for teacher salaries, $29.5 million to fund 12 months (up from 11) of health insurance for teachers, $13.9 million for additional English Language Learning teachers (ELL) and translators, and $3.6 million for training teachers and principals.
In higher education, the budget totals $1.7 billion, including $50 million recurring for the outcomes formula productivity increases at the University of Tennessee (UT) and Tennessee Board of Regents (TBR) institutions. Similarly, it provides additional funds of almost $9.2 million for operating increases at UT and TBR non-formula institutions. In addition, the appropriations bill provides a one-time influx of $297.8 million for capital improvements and maintenance at the state’s higher education institutions.
The budget also provides $10 million in non-recurring funds for the Labor Education and Alignment Program (LEAP) program which was very successfully funded with an initial $10 million several years ago. The LEAP program, sponsored by Leader Norris, enables students in Tennessee Colleges of Applied Technology and community colleges to participate in technical training developed with input from area employers. The cooperative training counts as part of an approved curriculum toward a meaningful certificate or degree.
The Senate’s amendment to the budget bolsters job creation by adding $4.25 million to the governor’s proposed $20 million for the Drive to 55 capacity fund. The Drive to 55 initiative aims to get 55 percent of Tennesseans equipped with a college degree or certificate by the year 2025.
Other key budget improvements include:
• $100 million for the state’s Rainy Day Fund, bringing it to an estimated $668 million;
• $142 million for transportation to restore money taken from the state’s road fund under the previous administration;
• $20 million to help keep communities safe and prisons secure, including about $18 million for the “Public Safety Act” which will help reduce the recidivism rate in Tennessee and more efficiently sentence violent offenders;
• $1.2 million for 12 new highway patrol officers;
• $1 million for communications systems improvements in the Department of Safety;
• $4.1 million for salary adjustments for commissioned officers in the Department of Safety;
• Funds for four additional forensic technical service agents in the Tennessee Bureau of Investigations to help analyze and process cellular data confiscated in the course of investigating crimes including sex trafficking;
• Funding for support staff in training for elder abuse to the District Attorneys General Conference;
• $1.1 million for rural communities by increasing producer grants and $10 million for the Rural Economic Opportunity Propelling Rural Economic Progress” (PREP) program fund;
• $18.2 million to restore the TennCare provider rate reduction and $6 million to restore the TennCare Pharmacy rate cut;
• $193 million in TennCare reserves;
• $3.2 million for federally qualified health care and community health services; and,
• $500,000 for perinatal services statewide.
“It matters who governs,” Leader Norris added. “I often say, ‘the best is yet to come so long as we make the best of what comes our way.’ I believe that working together for Tennessee we will.”