Tennessee’s economy worsens as lawmakers get ready to consider 2009-10 budget

Capitol Hill Week

Contact:  Darlene Schlicher (615) 741-6336 or email:
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Tennessee’s economy worsens as lawmakers
get ready to consider 2009-10 budget

(NASHVILLE, TN), May 7, 2009 –   The State Senate tackled a number of important issues this week as several more committees closed for the 2009 legislative session. Several important issues still remain on the General Assembly’s agenda before it adjourns, including the state’s budget, which received a grim forecast this past week.

The State’s Funding Board, comprised of Tennessee’s top economists, met on Thursday to re-evaluate the state’s revenue picture.  The meeting is held each year after receipt of the state’s April revenues.  April is a key month in projecting the health of the state’s franchise and excise taxes.  The board then gives lawmakers and the governor their forecast on both how much Tennessee will need to close out the current fiscal year, and what to expect as far as revising projections for the 2009-10 budget year.

Although April’s outlook on franchise and excise taxes fared better than anticipated, the state’s sales tax collections have deteriorated at a greater rate than expected, deepening the gap in how much is needed to close out the current fiscal year.  Sales taxes make up about 60 percent of the state’s money.  The preliminary sales tax numbers from April showed a 10.5 percent drop in collections, causing the state’s economic prognosticators to predict a $99 million to $122 million shortfall.

Finance Commissioner Dave Goetz says the administration plans to propose reaching into the state’s reserves to fill this gap.  The state has $750 million in its Rainy Day Fund and approximately $500 million in TennCare Reserves, for a total of over $1.2 billion.  The state would tap into about $290 million from these reserve accounts, including the earlier budget proposal that called for utilizing $190 million to balance the budget for the current fiscal year.  Unlike Congress, Tennessee must balance the state’s budget under a Constitutional Amendment passed in 1977.

The forecast for the 2009-10 year which will start in July is also grim.  The state will start out with a $1.1 billion base reduction due to adjustments made in the 2008-09 budget year.  The economic experts presented predictions to the Funding Board that collections will continue to deteriorate into the next budget year, adding on an additional loss in revenues of between $130 to $273 million.  This means the state could be looking at a $1.3 billion reduction in the state budget over the current budget year.

Adding to the state’s budget woes is deterioration in Tennessee’s net lottery proceeds.  Lottery proceeds fund the state’s Hope Scholarship and other education-related programs.  The General Assembly’s chief economist has predicted a shortfall for the current year of at least $8 million, in addition to the $5 million already budgeted.  He predicted that next year the shortfall could be up to $13 million, in addition to the $14 million shortfall already recognized in the budget.  The state has a Lottery Reserve Fund of approximately $381 million to protect students from losing their scholarships.

The downturn in the state’s economy has also given lawmakers more concerns about meeting the interest payments on Governor Phil Bredesen’s plans to incur $701 million in general bond obligation debt. This is in addition to the $262 million in bond indebtedness authorized earlier this year for infrastructure for the Volkswagen and Hemlock plants, pushing the total bond authorization request to $963.1 million.

Interest on the $701 million of general obligation debt, under SB 2358, is $76.6 million for the first year of debt service and $438.2 million in interest over the life of the bonds.

The state expects to receive over $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.  Although the funds will soften the blow of cuts by boosting spending in targeted state programs temporarily, Tennessee must chart a course to balance the budget by paying for programs on a recurring to recurring basis after the stimulus money dries up in 2011.

These are a few of the budget challenges that legislators will discuss in the remaining weeks of the legislative session.

Firearms bills advance in State

Several bills involving firearms met approval this week, including one bill that sets forth a process for surrender of a firearm in cases where an order of protection has been granted in domestic violence cases.   The legislation, SB 314, sponsored by Senator Diane Black (R-Gallatin), aims to prevent further violence by setting up a procedure for the person to hand the gun over to a third party.

“The possession of a firearm while under an order of protection is an offense under federal law,” said Black.  “However, currently there is no procedure for the respondent to surrender a firearm while the order is in effect.”

Under the bill, the respondent must terminate physical possession of firearms by any lawful means within 48 hours or face a Class A misdemeanor offense.  They would then complete an “Affidavit of Firearms Dispossession” form and return it to the court.  The legislation allows the respondent to lawfully regain possession of the firearms without going back to court when the Order of Protection is lifted.

In other Senate floor action involving firearms this week, legislation limiting the power of government to confiscate firearms and restrict the sale of ammunition during martial law was approved on Thursday.  The bill, SB 1992 sponsored by Senator Jack Johnson (R-Franklin), prohibits the confiscation of weapons from law-abiding citizens or restricting the ability to purchase guns and ammunition during times of martial law.  The law already makes that provision in cases of a natural disaster or declared
emergency under a law passed in the last General Assembly, sponsored by Senator Mark Norris (R-Collierville).

Several firearms bills advanced in the Senate Judiciary Committee this week, including a measure to allow legal gun carry permit holders to posses a firearm in state or federal parks in Tennessee.  The legislation, SB 976 sponsored by Senator Mae Beavers (R-Mt. Juliet), also allows local government bodies to maintain control of concealed carry within
local parks.

According to a report from the U.S. Department of Interior, there were 8 murders, 43 forcible rapes, 57 robberies and 274 instances of aggravated assault in parks nationwide in 2007.  In January, the federal government lifted a regulation that banned guns in national parks and wildlife refuges.  Previously, guns were only allowed if they were unloaded and inaccessible.  The new federal rule applies to legal permit holders in the 48 states that have a process for issuance of licenses to allow law-abiding citizens legally to carry
firearms for self-defense, including Tennessee.

Similarly, the Judiciary Committee approved a bill, SB 1519 sponsored by Senator Tim Burchett (R-Knoxville), extending those privileges to carry into wildlife refuges, public hunting areas, wildlife management areas or national forest land.

Finally, the Judiciary Committee approved legislation, SB 19 sponsored by Senator Dolores Gresham (R-Somerville), authorizing judges who possess handgun carry permits to carry a firearm during judicial proceedings.

Legislation benefits consumers who
utilize the services of debt management specialists

The State Senate approved comprehensive legislation sponsored by Senator Doug Overbey (R-Maryville) on Monday that would benefit Tennessee consumers who utilize the services of debt management specialists.  The legislation, named the Uniform Debt Management Services Act, provides guidance and regulation to the consumer debt management industry, while also providing fairer services to debtors.

“As the recession has deepened, we are finding more and more consumers turning to debt management companies which have tripled over the past few years,” said Senator Overbey.   “There have been frequent instances or accusations of abuse by consumers who utilize these services.  This legislation regulates the industry in uniformity with other states, while protecting consumers.”

Congress passed bankruptcy reform legislation in 2005 mandating counseling by a private agency before an individual may enter into bankruptcy.  Debt Settlement is the option that lies on the continuum between credit counseling and bankruptcy.  It is most often used by consumers who may not qualify for credit counseling, or who do not qualify under the new rules of bankruptcy or prefer to honor their debts to the best of their ability, rather than declare bankruptcy.  Their services primarily include negotiating a reduction of the consumer’s non-secured consumer debts in exchange for a faster repayment plan.

The legislation, SB 812, requires a debt management company in Tennessee to obtain a license and supply information about their practices, fees, educational materials and employee qualifications.  A company must also post a surety bond or another security to safeguard any money that it receives from individuals for payment of creditors.  In addition, the debt management company must provide a disclosure to consumers that this may not be the best option for them and that it may affect their credit rating.

“We need credible counseling services for those facing massive debt,” added Overbey.  “However, we don’t need an unregulated industry that might prey on those who are already in deep financial trouble.”

The new act gives the Department of Commerce the right to take enforcement action against anyone who violates the act.  It also creates a consumer right of action
and treble damages for certain circumstances involving abuse.

“When consumers turn to these companies for help, they need greater assurance that they will receive the appropriate debt counseling and assistance.  I am pleased that our State Senate has approved this legislation and hope that we will have full reciprocal participation from all states in the near future,” Overbey concluded.

 Senate approves legislation
protecting soldiers from having their names used in anti-war demonstrations or

Legislation designed to protect soldiers from having their names or likeness used in anti-war activities without permission, was approved in the Tennessee State Senate on Monday by a vote of 32 to 0.  The bill, SB 836 sponsored by Senator Randy McNally (R-Oak Ridge), allows individuals to recover damages plus attorneys fees against those who
knowingly use or infringe on the rights of an active member of the armed forces in violation of Tennessee’s “Personal Rights Protection Act.”

“Many families of deceased soldiers have unfortunately had to face the use of their loved one’s name or likeness in anti-American or anti-war fundraising campaigns or advertisements,” said Senator McNally.  “This is a slap in the face of our brave soldiers’ sacrifices for their country that their loved ones should not have to endure.” The legislation comes after several violations were reported, including T-shirts sold on the Internet using the names of about 1700 soldiers.  The T-shirts contained defaming information about their country with the names of soldiers on the back.   “This legislation would make such use a violation under Tennessee’s ‘Personal Rights Protection
Act’ with treble damages for those who abuse the name or likeness of our nation’s heroes,” added McNally.  “Hopefully, it will serve as a deterrent for any abuse of the personal rights of our soldiers in the future.”

Full Senate approves public charter
school bill

Legislation that strengthens Tennessee’s public charter school law was approved by the full Senate upon final consideration on Thursday.  The legislation, described by sponsor, Speaker Pro Tempore Jamie Woodson as a “conservative next step,” widens eligibility, clarifies funding and addresses rules for renewal of the public charter schools.  Tennessee currently has one of the most restrictive public charter school laws in the nation.  The bill also puts into place a process so the best practices gained from the “laboratories of
learning” go into traditional school programs.

“Charter schools are public schools that are given flexibility to operate without the constraints of some of the rules and regulations normally imposed on traditional schools,” said Woodson.  “In exchange for this flexibility, they are held accountable for performance through a charter, which is an agreement between the local education agency (LEA) and the charter school.  It requires a strenuous approval process by the LEA and an equally tough renewal process of the charter every five

The legislation, SB 2133, addresses four provisions in the current charter school law.

  • Eligibility — Currently, public charter school enrollment is limited primarily to failing students and those from failing schools.  This legislation permits “at-risk” children (as defined by free and reduced-price lunch) to attend charter schools in those systems that have 12,000 or more students.
  • Caps — Currently public charter schools are limited to 50 statewide, with a cap of 20 in Memphis.  This bill says that converted charter schools do not count against the cap, clarifying in law what the Attorney General has already opined.
  • Renewal process – Currently, the charter agreement between the LEA and the charter school is renewed every five years.  This measure would change the renewal period from five to ten years, as well as establishes the required documentation needed during the renewal process.
  • Funding – Currently a public charter school receives the per pupil expenditure of state and local dollars.  Although it mentions appropriate federal dollars, interpretations vary from one LEA to the next.  This legislation defines the state and local charter school facilities funding responsibilities and clarifies the LEAs must allocate all appropriate federal funds, including Title I and ESEA funds, to the charter schools.

Tennessee now has 15 public charter schools, with six more opening in the fall.  Overall, the schools have shown success.

“This bill provides flexibility to give our schools one more tool in the toolbox to help students succeed,” Woodson concluded.

Bills in Brief

Tornado shelters – Legislation that authorizes the Tennessee Emergency Management Agency (TEMA) to establish and administer a grant program to assist in the partial reimbursement of installation costs for safe rooms and in-ground shelters has been approved in the Senate State and Local Government Committee.  The bill, SB 697 sponsored by Senator Dolores Gresham (R-Somerville), is modeled after a successful grant program in Arkansas that assists citizens in building shelters.  There have been 120 deaths in Tennessee since 1999 as a result of tornadoes.

Tennessee declares state’s sovereignty — The full Senate voted unanimously on Monday to approve a resolution claiming Tennessee’s “sovereignty under the Tenth Amendment to the Constitution of the United States.”  The proposal, SJR 311 sponsored by Senator Randy McNally (R-Oak Ridge), is designed to send Congress a message that the federal government has overstepped its Constitutional bounds by mandating a massive amount of federal policies upon the states in violation of the Amendment.  The language of the Tenth Amendment is clear and concise that the federal government’s powers are limited to a specific set of activities.  Twenty-eight states have approved similar

Secret Ballot Protection Act — Legislation designed to protect the rights of employees to vote on whether or not they want to unionize by a secret ballot was approved in the Senate Commerce and Labor Committee this week.  The “Secret Ballot Protection Act” is a counter measure to dangerous federal card check legislation pending in Congress, which would subject employees to intimidation by allowing unions to organize simply by persuading a majority of employees to sign a union representation card.  This
petitioning would take place outside the workplace, in front of union organizers and other employees who support the union.  The legislation, SB 1674 sponsored by Senator Jack Johnson (R-Franklin), defines the denial of secret-ballot elections as an unfair labor practice.

Home school diplomas – State Senators have given final approval to legislation that requires home school diplomas to be recognized as a regular public high school diploma.    The measure, SB 433 sponsored by Senator Dewayne Bunch (R-Cleveland), makes sure that church related schools or home schools be recognized by all state and
local governmental entities as having the same rights and privileges of diplomas issued by public school systems.

Ethics / General Assembly — Legislation that would end the rights of a member of the General Assembly to receive healthcare benefits if convicted of a felony was approved by the full Senate on Monday.  The bill, SB 2205 sponsored by Senator Jack Johnson (R-Franklin), would require the state to end the benefits upon conviction or upon a plea of guilty, if the charges are in relation to the member’s official capacity as a legislator. The family members eligible for benefits are not included under the bill.  The General Assembly has already passed similar legislation ending legislative pensions for those convicted of a crime in relation to their official capacity as a member of the General Assembly.  The bill would go into effect after the 2010 election.

Education pays – The Senate Education Committee has approved legislation that encourages local education agencies (LEAs) to develop “Education Pays” pilot programs for at-risk students. The idea is for the Pilot Program to provide monetary rewards for academic achievement funded through private organizations. The measure, SB 482 sponsored by Senator Dewayne Bunch (R-Cleveland), also encourages the State Board of Education to study the effects of any such programs in Tennessee and from other states and report its findings to the General Assembly.  Several localities across the country have been successful in implementing such programs to ensure that the right incentives are in place to reward good behavior for high risk youth.

English Initiative – Legislation has been adopted by the full Senate that calls for the Department of Labor and Workforce Development, in conjunction with the Department of Education, to establish and administer a grant program called the “We Want to Learn English Initiative.” The initiative, SB 1745 sponsored by Senator Bill Ketron (R-Murfreesboro), is designed to provide resources for immigrants and refugees in Tennessee to learn English.

Cyber-schools – Legislation that calls on the Select Oversight Committee on Education to study the authorization of cyber-based charter schools in Tennessee and to report back to the General Assembly by January 15, 2010.  The measure, SB 621, is sponsored by Senator Steve Southerland (R-Morristown). Cyber schools have gained in popularity over the last several years as yet another educational option.  Cyber schools primarily use a computer-based curriculum and accountability methods via internet access.  The
public cyber charter option is an attractive alternative for untraditional students or those with home-based needs.

Election Appearance / Governor – The full Senate has approved legislation that urges the state executive committees of each statewide political party to jointly establish a calendar of appearances in each county in Tennessee that enables their respective gubernatorial candidates to appear together during the time between the primary and general
elections. Each candidate would be provided an opportunity to speak at each appearance, under the bill.   Following each candidate’s speeches, time would be provided for a town hall forum.  If such a schedule is established, this bill recommends that the schedules be posted on the parties’ Web sites.  The bill, SB 2186, is sponsored by Senator Mike Faulk (R-Church Hill).

Wine sales – The Senate approved a minor amendment and sent to the governor legislation that would allow citizens in the state to purchase up to five cases of wine from out-of-state wineries that have a Tennessee license and transport them back across state lines.  The legislation, SB 944 sponsored by Senator Doug Overbey (R-Maryville), 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.


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