Plans to close 105th General Assembly put on hold as budget questions still remain

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

Plans to close 105th General Assembly
put on hold as budget questions still remain

(NASHVILLE, TN, May 16, 2008) — Plans to close the 105th General Assembly were put on hold this week, as lawmakers ontinued to explore answers about the newly proposed budget regarding the state employee layoff and buyout plan.  Action on several other key issues also remains to be resolved, including the proposed lottery scholarship distribution plan, a major open records bill, and legislation to reform the board that operates Tennessee’s Veteran Nursing Homes.

Meanwhile, the Senate passed Governor Bredesen’s “technical corrections bill” without the administration’s provision calling for taxing family-owned, non-corporate entities, known as FONCEs.  The governor had proposed removing the franchise and excise tax exemption on FONCEs, which are certain limited liability corporations and limited partnerships that derive passive income through commercial property.  The provision, which would have raised $15 million, was removed by the legislature due to concerns about the impact it would have on more than 8,000 family-owned businesses.

“The governor said he wasn’t raising taxes when he addressed us earlier this week.  Unilaterally exposing small businesses to this tax in a technical corrections bill did so without warning and without the benefit of legislative debate,” said Senate Republican Leader Mark Norris (R-Collierville).

Funds collected for land conservation purchases could be used to bridge the gap left by removal of the FONCEs provision.  Some of the revenues collected by Tennessee on real estate transactions go into several land acquisition funds, including those to purchase wetlands.  Currently $18 million of the $30 million available from collection of the tax is available on a recurring basis.  Many legislators feel that a portion of these funds could be used during the economic downturn, as the state has been aggressively purchasing land over the past several years for conservation purposes.

The governor had already reverted $12 million of the $30 million realty transfer tax to the general fund.  The 40-cent per pack tobacco tax increase, passed last year, that was purportedly to go for improvements to Tennessee’s K-12 schools, has also been placed in the state’s general fund.  The tax was passed last year during a period of record high revenues, but it has not met projections and returns are continuing to diminish.

The proposed budget must have $468 million in cuts from the governor’s original appropriations bill in order to meet the state’s constitutional mandate for a balanced budget.  It must also include a $314 million downward revision of state revenues for the current budget.

The proposal to cut state employees by offering voluntary buyouts would net the state an estimated $64 million to help fill that gap.  However, the governor says that if the buyouts are unsuccessful, he will have to cut state employees to reach the elimination of the 2,000 state jobs needed to realize the savings.  The lack of details about the buyout and how the governor would proceed to cut the positions has concerned many lawmakers about such items, like the monetary benefit of the buyout for the employee, how health insurance coverage might be extended and any other assistance that might be offered.  The administration is expected to provide more information when the General Assembly returns for their final legislative week.

Lottery plan offers scholarships to over 13,000 more

Over 13,000 more students would receive lottery scholarship funds under legislation sponsored by Senate Education Chairman Jamie Woodson (R-Knoxville) and considered by the Senate this week.  The bill would extend the 2.75 GPA requirement for students to maintain the HOPE Scholarship through the end of their junior year.  It also provides scholarship opportunities to non-traditional students, military veterans, military dependents, those who are dually enrolled in college and high school, students
seeking medical degrees who agree to serve rural areas, and foster children.

The State Senate also adopted legislation to use a portion of the excess funds to set up an “Energy Efficient Schools Program” aimed at helping schools save money on their energy bills.  Senator Randy McNally (R-Oak Ridge), sponsor of the measure, said the bill is especially needed to help bolster capital needs of local K-12 schools this year due to the administration’s cuts in the Basic Education Program 2.0 (BEP) improvements that were slated for distribution.

“We will have no money to fund the BEP 2.0 improvements under the governor’s revised budget,” said McNally, who is the Senate Finance Committee Chairman.  “This money will provide funding to schools across Tennessee.  It will be done in a manner that will produce cost savings in the future that will be realized by schools for years to come.”

The proposal partners the state with TVA, Oak Ridge Laboratory, and other energy experts by setting up a Council that would guide schools in energy-saving options.  The Council would set up the rules for distribution of the funds, which would come in the form of grants and loans.  The Council could also tap into federal grants from TVA and the Department of Energy available for such “green energy” programs.

The program could result in a net savings of 18.5% on energy bills if the schools implement the upgrades and utilize some of the best practices for energy conservation.  The measure is expected to save an estimated $29 million in energy costs for Tennessee schools annually.

Currently, there is $461.8 million in the lottery reserve account, of which $50 million must be kept in savings under current law.  The General Assembly also benefits from ongoing net revenues of an estimated $11.4 million more than is needed to continue the current programs funded by lottery proceeds.

The constitutional amendment creating Tennessee’s lottery scholarship program adopted  in 2002 approved the use of excess dollars for three purposes.  The amendment listed K-12 construction as the first purpose, new Pre-Kindergarten classes as the second, and after school programs as the third.  The Energy Efficient Schools program would fall under the K-12 construction provision, which is the only facet of the amendment yet to be enacted, even though it was listed first on the ballot.

On the lottery scholarship distribution plan, the bill sets aside $349.5 million to create an interest bearing endowment fund, which together with the $11.4 million will fund all the proposals in the bill, including one for TSAA need-based grants.  TSAA is Tennessee’s primary need-based student assistance program.  Almost all of these students, or 90 percent, have family incomes below $30,000.  The endowment fund would provide $10 million to issue these grants.  The bill would provide over 3,000 more students with scholarship opportunities, more than any other plan submitted to date.  This is in addition to the 950,000 K-12 students that would benefit from the Energy Efficient Schools Program.

“I am very pleased that we have been able to put together a fiscally responsible package that will help over 13,000 students receive scholarship money,” said Woodson.  “It by far impacts the most students with the dollars that we have available to us.”

Some of the other highlights of the plan include:

  • continues funding of $25 million for Pre-K
  • extends the 120 credit hour-limit to five years in order to accommodate any hours lost due to transfer, change of major, or majors requiring more than 120 hours of credit
  • removes home school requirement of two years
  • allows dependents of religious workers who are from the state but who are temporarily overseas to claim Tennessee for scholarship purposes
  • gives students attending two-year institutions with housing the four-year award
  • provides Civic Education Scholarships for exemplary students
  • establishes a Laptop Pilot Program to help students access more online course opportunities

The Senate sent the lottery scholarship distribution plan back to the Senate Finance Committee due to a rule regarding the financial impact of a rural healthcare scholarship amendment added to the bill.  That amendment, sponsored by Senator Jim Tracy (R-Shelbyville), would set up an endowment to fund scholarships for students pursuing a medical degree and who agree to practice in rural areas of Tennessee.  If approved again by the Finance Committee as amended, the legislation would go back for final approval by the Senate next week.

Issues in Brief

Judicial Selection Commission – Legislation that would continue the current Judicial Selection Commission stalled this week in the Government Operations Committee, an action that would put the commission in wind down next year.  The sponsor of legislation to continue the Commission for another year then announced his intentions to bring the matter to a vote on the Senate floor.  At a minimum, Senate Republicans want to see a change in the way the commission functions, allowing more input from groups seeking membership on the commission.  Currently members of the commission are selected from a list of special interest groups as prescribed by law.  Republicans believe there are important Constitutional issues which need to be addressed and that reform is needed to have a more fair and open process with greater accountability.  They also believe that the Commission, which has not been reviewed in the sunset process, should go through the full and normal review process to ensure appropriate legislative oversight of the agency.

DUI Registry — The full Senate approved legislation to create a registry of persons who have two or more DUI convictions with the Tennessee Bureau of Investigation, similar to that of the Sex Offender Registry.   The bill is sponsored by Senator Tim Burchett (R-Knoxville).  Burchett said the Registry would serve as a strong deterrent to
driving under the influence and would make drunk drivers think about the consequences of their actions.  In 2006, there were 1,287 fatalities on Tennessee roads with 509 due to alcohol-related crashes.  Motor vehicle crashes are the leading cause of death among persons between the ages of 3 and 33, with 50% of the victims killed in alcohol-related crashes.

Verified voter paper trail The State Senate passed legislation that would use federal funds to replace voting machines with voter-verified paper trails and a system to strengthen random auditing.  The legislation would use the Help America Vote Act (HAVA) funds to ensure a way that the machines could be checked to verify that votes are cast
correctly, detect possible election fraud or malfunction, and provide a means to audit the stored electronic results. Only two of Tennessee’s 95 counties keep paper trails of ballots.  Most counties use a direct recording electronic touch screen voting machine that does not allow for a paper record that can be audited or recounted in cases of suspected fraud.

Homelessness — The problem of chronic homelessness was the subject of a resolution sponsored by Senator Tim Burchett (R-Knoxville), and approved by the State Senate this week.  The resolution calls for the Department of Mental Health and Developmental Disabilities to devise a ten-year plan to eliminate chronic homelessness in Tennessee.  The most recent estimates on the number of homeless individuals, released by the United States Department of Housing and Urban Development, state showed there were 9,560 homeless individuals in Tennessee.  Of that number, 2,338 were classified as chronically homeless, a state which is defined by being homeless for twelve out of the past thirty-six months.  Memphis, Nashville, Knoxville, and Chattanooga have each devised and implemented their own ten-year plans to erase homelessness.  The resolution maintains that the state should adopt the same forward-thinking approach to addressing this widespread problem.


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