GOVERNOR BILL HASLAM’S 2017 BUDGET OVERVIEW
Governor Bill Haslam presented his State of the State / Budget Address to lawmakers recently as he and the General Assembly continue a multi-year focus on improving education and recruiting new and better paying jobs to Tennessee. The governor unveiled major legislation to make Tennessee the first state in the nation to offer all adults without a degree tuition-free access to community college. The Tennessee Reconnect Act would establish a last-dollar scholarship for adults living in the state which would allow them to attend a community college tuition-free.
In addition, the governor announced his proposed Tennessee STRONG (Support, Training, and Renewing Opportunity for National Guardsmen) Act that would create a pilot program to provide eligible members of the Tennessee National Guard tuition funding toward a first time bachelor degree through a tuition reimbursement program.
Both proposals build on the Tennessee Promise scholarship program which has provided tuition-free assistance to approximately 33,000 high school graduates since it was implemented in 2015.
The purpose of the legislation is to build and sustain the state’s robust economic growth and to make Tennessee’s workforce more competitive. In 2013, Tennessee launched its Drive to 55 goal of equipping 55 percent of Tennesseans with a degree or certificate by 2025. Tennessee needs 871,000 degrees to reach the state’s Drive to 55 goal, but only 645,000 high school students are expected to graduate between 2014 and 2022.
The Reconnect Act, which is an expansion of a grant program launched in 2015, especially aims to attract approximately 900,000 Tennesseans who have earned some college credit but no degree. Adults without a certificate can already attend Tennessee Colleges of Applied Technology (TCATs) tuition-free under the current Reconnect program. This proposal would expand that program’s access to community colleges and relieves some of the previous requirements to receive assistance. The Reconnect expansion would be funded out of lottery reserves at no cost to taxpayers.
Likewise, the STRONG Act would provide an opportunity for those who protect and serve their state and country to receive their bachelor degree, a move that would give Tennessee’s National Guard a competitive edge in recruitment. All but four states nationwide, and all states adjacent to Tennessee, already offer 100 percent state tuition assistance for those who are serving in the Guard.
Broadband
Governor Bill Haslam reiterated his call to widen access to broadband Internet services by asking lawmakers to support the Tennessee Broadband Accessibility Act. The legislation would provide $45 million over three years in grants and tax credits for service providers to assist in making broadband infrastructure available to unserved homes and businesses. It would also permit Tennessee’s private, nonprofit electric cooperatives to provide retail broadband service in an effort to reach rural customers.
Tennessee currently ranks 29th in the U.S. for broadband access, with 34 percent of rural Tennessee residents lacking access at recognized minimum standards. The governor said allowing Tennessee’s private, non-profit electric co-ops to provide retail broadband service and investing $15 million in grants and tax credits annually will help spur deployment in rural unserved areas – opening them up to economic investment and job growth. The improved connectivity would also assist in increasing education opportunities, promoting agriculture advancements and providing health care options like telemedicine.
Transportation Infrastructure
On transportation infrastructure, Governor Haslam asked lawmakers to support an increase in highway user fees, which is included in his proposed budget named the Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy (IMPROVE) Act. The IMPROVE Act also cuts the state sales tax on groceries another .5 percent to 4.5 percent, makes Tennessee’s franchise and excise tax on manufacturing businesses more competitive by allowing companies to go to a single weighted sales factor, and cuts the Hall income tax 1.5 percent this year with a commitment to cut it another 1.5 percent next year.
An estimated $270 million in taxes would be cut annually under the proposal, bringing the total number of tax cuts made since 2011 to $540 million per year.
“At its core, transportation and infrastructure are some of the most basic needs provided by state government, and a safe and reliable network is vital to the Tennessee we can be,” said Governor Haslam. He said, “Scores of mayors across Tennessee – cities and counties, rural and urban – have told me that, if we don’t do something to address the fuel tax, they will have no alternative but to raise the property tax in their municipalities.” The governor’s proposal would mean $78 million annually in increased revenue for county road projects in Tennessee and $39 million for cities.
The IMPROVE Act calls for increasing the highway user fee by 7 cents for a gallon of gas and 12 cents for a gallon of diesel and increases car registration fees by $5 for the average passenger vehicle. Approximately 40 percent of the revenues received are paid by out-of-state travelers. Tennessee relies on fuel taxes to fund its highways and does not use debt financing, tolls, or general fund revenues.The governor’s proposal places an annual road user fee on electric vehicles and increases charges on vehicles using alternative fuels.
The IMPROVE Act also includes changing the state’s open container law to allow the Tennessee Department of Transportation flexibility to use $18 million in existing federal dollars on roads. Presently, it is illegal to consume alcoholic beverages while driving in Tennessee, but that law does not extend to passengers. Because state law does not meet federal requirements, some of Tennessee’s share of federal transportation funds have been diverted from road projects to other areas like DUI enforcement efforts.
K-12 Education
Governor Bill Haslam’s $37 billion budget continues his and the General Assembly’s strong commitment to education by providing $200 million to fund the state’s Basic Education Program (BEP). This includes $100 million to improve teacher salaries, $22 million to help schools serve high need students and $15 million for career and technical education equipment.
Since 2011, lawmakers have increased total K-12 spending by more than $1.3 billion. This includes increases of more than $430 million for teacher salaries during that time period.
The budget proposes allocating $132 million in non-recurring funds to the state’s Rainy Day Fund to an all-time high of $800 million, well on the way to the statutory guideline of $1 billion. The Rainy Day Fund, which acts as a savings account to help the state weather downturns in the economy or emergencies, dipped from $750 million in 2008 to $284 million in 2011 and is still short of the pre-recession years’ level.
For a second year in a row and in Tennessee’s recorded history, the state budget does not propose any new debt. Tennessee has the lowest debt per capita and the lowest taxes as a percentage of personal income in the nation. The governor said that if the IMPROVE Act becomes law, Tennessee would still remain the lowest taxed state in the nation.
In addition, the state is lauded for continuous sound management of its long-term liabilities. The budget proposal addresses the state’s Post-Employment Benefits (OPEB) liability to continue this fiscally responsible practice.
Other Highlights
$77 million for state employee pay increases and market rate adjustments targeting high-turnover positions in state government;
$655 million in state dollars for maintenance and new buildings across general government and higher education;
$135 million transferred from the General Fund to pay back the Highway Fund;
$78 million for higher education and the Complete College Act;
$15 million for career and technology education equipment;
$21 million to fund recommendations from the Rural Task Force;
$11.6 million to fund more than 700 additional slots in the Employment and Community First CHOICES program; and
$9.5 million combined to expand substance abuse and crisis intervention treatment services and supports.
Legislative Process
Now that the Governor’s budget has been presented and all bills have been filled (about 1,400) the process begins. There are 9 standing committees in the Senate and 14 in the House. All of the Departments will present their budgets to the Committee that has oversight over that Department and then also to the Finance committees in both houses. Other presentations are made that are of importance to Tennesseans.
Members have begun presenting their bills in the assigned committee to be voted on. Members will bring in experts to testify and also, if a bill has opponents, they can have the opportunity to testify if they request it with the chairman of the committee. A bill has to pass with the majority of the members assigned to that committee.
If a bill has a fiscal cost to implement, then after it goes to the assigned committee, it will then move to the Finance committee. After bills pass successfully through the committees, then they will be voted by the full Senate and the full House. Most legislation passes with bi-partisan support. A bill has to ultimately pass in both houses before it will become law. At this point, it goes to the Speakers of both houses and the Governor for signatures.