By Tom Humphrey,
May 25, 2009

NASHVILLE – Gov. Phil Bredesen observed last week that, “after a suitable amount of posturing,” a bill to raise the taxes that businesses pay to support unemployment benefits now appears on track for passage by the General Assembly.

But 4 1/2 months since the 2009 legislative session began and with at least two weeks to go, it appears a substantial amount of posturing remains before decisions are made on many other matters.

The overriding concern is enactment of a state budget when a finalized version will be presented later this week, probably Friday. More details will be provided to committees Wednesday.

Bredesen outlined his budget plan in March, when the estimated state revenue shortfall for the current fiscal year was estimated at $1 billion. Since then, the projected shortfall has grown by about $200 million, the figure most common in legislator discussions. The latest official State Funding Board estimate is at least an extra $161 million and maybe as much as $307 million.

Bredesen’s plan for dealing with the situation, in both the current year and the budget for the next fiscal year beginning July 1, is almost certain to involve more cuts.

Already, for example, the governor has proposed amending a bill to change various statutes to allow cutting mental health services by about $11.8 million and children’s services by $7.5 million and taking $9 million from a fund set up to benefit hospitals operating trauma centers.

Some legislators call for using more of about $900 million in the state’s rainy-day fund and other reserves to avoid cuts, though the governor says that is a bad idea because the reserves may be needed even more in the months ahead.

Also prominently featured in the money mix is about $5 billion in federal stimulus funds, provided over a two-year period and mostly earmarked for specific areas such as education and weatherization of homes.

While the stimulus money effectively shields some areas from cuts that would have otherwise been necessary – notably the state’s colleges and universities – other areas reliant solely on state funding are facing cuts.

In announcing that $62 million of stimulus funding would go to launch a solar energy project and a solar research institute, Bredesen emphasized that he would prefer to use the money to avoid cuts in mental health and children’s services.

While the final version of the budget is pending, the administration also is holding back on proposing its annual technical corrections bill to make changes in state revenue laws, typically to close what Revenue Commissioner Reagan Farr considers loopholes and generate a modest amount of new tax money in the process.

Farr said last week the specifics are being withheld in hopes of reaching a consensus on the changes before they are officially proposed.

One proposal stripped from last year’s technical corrections bill, repeal of a tax exemption benefiting businesses operating as a “family owned, noncorporate entity” is in play this year as a stand-alone bill.

Lt. Gov. Ron Ramsey, House Republican Leader Jason Mumpower and House Democratic Leader Gary Odom have opposed the repeal. But Bredesen, in his budget plans, assumes that it will pass and generate an extra $25 million in needed revenue.

If it fails, that $25 million must be made up elsewhere.

A difference of opinion also has developed over Bredesen’s proposal to issue $350 million in bonds for bridge construction and repair, based on an assumption that the bonds can be repaid with federal funds in coming years. Republicans have opposed the bond issue, insisting the state should stick with its traditional “pay-as-you-go” approach.

Another pending tax bill pushed by Bredesen would raise the tax on premiums paid to health maintenance organizations from 2 percent to 5.5 percent, with $136 million in proceeds going to TennCare and triggering 2-to-1 federal matching money. The bill is the same omnibus measure that includes statutory changes needed to make some cuts.

Lawmakers face several other unresolved issues when they return from the Memorial Day weekend, including:

A decision on how to select the state’s top judges. The Judicial Selection Commission, centerpiece of the current system, will cease to exist July 1 unless the Legislature does something to extend it. At least three bills are in play, though most attention last week focused on SB1573, sponsored by Senate Speaker Pro Tempore Jamie Woodson, R-Knoxville, and Rep. Joe McCord, R-Maryville, as a possible compromise.

The bill would set up a new commission to nominate prospective judges for gubernatorial appointment, but eliminate the control legal interest groups have over the panel under today’s system. It also would give the governor the chance to pick from at least six nominees and, under one version, ignore the panel’s recommendations and pick anyone who had applied for a vacancy.

Deciding whether the Tennessee Ethics Commission should continue to exist as an independent body or be merged with the Registry of Election Finance.

Deciding a partisan standoff over the State Election Commission, which also will cease to exist July 1 unless some action is taken. The Senate has passed a bill that would give Republicans a majority on the commission, but the measure stalled in the House as Democrats rallied against it. Senate Republican Leader Mark Norris has now raised the possibility of letting the commission die unless House Democrats retreat and allow passage of the GOP-majority bill.

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