March 11, 2010

Bill seeks to curb illegal drug activity from out-of-state “pill mills

The Senate and House Judiciary Committees approved legislation this week to attack a major source of illegal drug activity in Tennessee. The bill, Senate Bill 3027 by Senator Steve Southerland (R-Morristown), would stiffen penalties against those who get prescriptions in another state and return to distribute the drugs illegally in Tennessee.

Action on the bill follows a 96.6 percent increase in drug-related deaths according to a study conducted by the Centers for Disease Control (CDC). Some Tennessee law enforcement officers attribute the increase to the misuse of prescription drugs by those who obtain them legally from out-of-state “pill mills.”

“States across the South have seen an increase in crime stemming from the rise of pain clinics in Florida, where the laws are much looser than other states,” said Senator Southerland. “These are often referred to as pill mills. We have experienced major drug busts in several of my counties involving prescriptions obtained at these pill mills and sold illegally in Tennessee.”

The most common drugs found are OxyContin, Darvon, and Vicodin, but drug busts in Tennessee also have included Xanax and Roxicodones. The legislation would increase the penalties for the illegal trafficking of out-of-state drugs from a Class C misdemeanor, which carries a 30-day jail term and up to $50 in fines, to a Class D felony with a 2 to 12 years in prison sentence and up to $5,000 in fines.

The lawmaker filed the bill after law enforcement officials in their East Tennessee counties brought the matter to their attention. Tennessee law requires all entities that dispense medications to file information on controlled substances on a state database to monitor abuse. That law has helped curb prescription drug abuse by providing information to those prescribing and dispensing the drugs to alert them of potential abusers.

Although 40 states have laws establishing drug monitoring programs, Florida is among those which do not have a program. That state now has one of the highest concentrations of pain clinics in the U.S., including those housed in shopping centers. This has caused other states to pass laws cracking down on offenders who traffic these drugs within their boundaries.

“The penalties are currently too low to serve as a deterrent,” added Southerland. “This bill is a very good start in addressing illegal drug activity due to the purchase of out-of-state drugs. Hopefully, this legislation will be approved so that we can curb this abuse.”

Constitutional amendment prohibiting income tax passes Finance Committee

A constitutional amendment to ban an income and payroll tax passed the Senate Finance Committee this week by a vote of 7 to 3 and was read for the first time on the Senate floor for consideration by the full Senate on Thursday. The action marks the first time that such an amendment has ever passed a legislative committee in Tennessee.

The amendment, Senate Joint Resolution 763, clarifies that the legislature as well as Tennessee counties and cities shall be prohibited from passing either an income tax or a payroll tax, which is a tax on employers measured by the wages they pay their workers. The resolution authorizing the amendment must be read three times on three separate days on the Senate floor before members can cast their votes.

“The last thing Tennesseans need to be worrying about in these difficult economic times is having to pay a state income tax or a payroll tax,” said Senator Kelsey. “I am very pleased this amendment will advance to the floor of the Senate for final consideration.”

Opposition to the resolution in the committee centered on the possible need to impose an income tax during hard times like during the Depression, when the first income tax was proposed in Tennessee.

“The income tax is a very real problem facing Tennesseans today,” said Senator Kelsey. Currently, eight state lawmakers have filed “The Tennessee Income Tax Law of 2010,” House Bill 3597.

“Tennesseans need the assurance that they will not have to face an income tax, especially in these difficult economic times. If this resolution passes, the people will be able to vote on the issue, and we will never have to face another income tax battle again,” said Sen. Kelsey.

There have been three cases before the Tennessee Supreme Court throughout the state’s history that have upheld that the income tax is unconstitutional. The most recent case was decided in 1964, and this case has never been overturned. However, in 1999 the State Attorney General issued an opinion saying an income tax was constitutional.

A payroll tax has been proposed in recent years by elected officials as a way around an income tax. This includes a 2.5 percent payroll tax withheld from each employee’s paycheck in Shelby County.

If passed by a majority vote in the Senate, the resolution proposing the constitutional amendment would next need to be approved by a majority vote of the House. It must then be approved by a two-thirds vote in each chamber during the next General Assembly in 2011-2012. After that the amendment would be placed on the next gubernatorial ballot for ratification by the people in November 2014. The amendment next will go to the Calendar Committee, which will schedule the bill for a floor debate in the full Senate, which could come as early as next week.

Pre-K study conducted by independent research group
continues to show disappointing results

This week lawmakers received the third in a series of reports assessing the effectiveness of Tennessee’s Pre-Kindergarten program with disappointing results. The study, conducted by Strategic Research group, continues to confirm earlier reports showing any gains made from Pre-K are short-term and do nothing after second grade to bridge the achievement gap between children who are at-risk those from a higher socio-economic background.

The series was commissioned by the Tennessee Comptroller of the Treasury’s Offices of Research and Education Accountability (OREA). The reports have been conducted under former Democrat Comptroller John Morgan, who now serves as Deputy Governor, and Republican Comptroller Justin Wilson. The purpose of the study was to assess whether children who attended a Tennessee-funded Pre-K program perform better academically than a comparable group of peers who did not attend. The disappointing report mirrors similar Pre-K study results that have been conducted in other states.

“As previous reports in this series have found, there are positive effects on these outcomes associated with participation in Pre-K, although they are for the most part limited to economically disadvantaged students (those who received free or reduced-price lunch) and are evident primarily in Kindergarten and First Grade,” the report said. “Among students who completed the Second Grade in 2007-2008, there were no significant effects for any assessment associated with Pre-K participation. This general pattern of results is consistent with any pattern of convergence noted in previous reports, such that effect associated with Pre-K participation tend to diminish over time.”

The State of Tennessee has been funding early childhood education since 1996 when a pilot program was established for economically disadvantaged three- and four-year-olds. In the 1998, Governor Don Sundquist pushed the creation of 30 Pilot Pre-K classrooms, serving approximately 600 students. Since then the program has grown to over 934 classrooms under Governor Bredesen, serving approximately 17,000 children at a cost of $83 million.

Senate passes legislation to set up optimal community property
trust to help state compete for investment in trusts

Legislation was approved by the full Senate this week continuing efforts to make Tennessee a desirable state to establish a trust. The bill, Senate Bill 3529, allows married couples to create and transfer property to a community property trust to help Tennessee create an optional community property system in the state.

“This legislation continues our efforts to improve our trust laws to make Tennessee more competitive as a desirable location for trust investments,” said Senator Overbey. “The more trusts we have in Tennessee, the more opportunities we have for investment. This is important as we continue to make our state more competitive.”

There are two types of benefits which a community property trust would provide couples who “elect in” to the system partially or completely, including a significant tax advantage. At the death of the first spouse to die, both spouse’s interests in the community property receive a full basis adjustment. As a result, there will be no capital gain payable if the property is sold for its value at the date of the first spouse’s death. Further, the increased basis will allow for increased depreciation deductions for business and investment depreciable property. In a separate property state, if the property was jointly owned between husband and wife, only one-half of the property would receive such an adjustment in basis.

Secondly, community property is a property ownership system which generally provides for equal ownership of property by husband and wife. This general involves a sharing in the appreciation and income from the property. Likewise, there is often an equal sharing in the management of the property. This bill would provide an option for couples who find this equality and sharing arrangement the preferred form of property ownership.

“This system provides more flexibility in cases where a spouse dies and it may be necessary for the surviving spouse to sell some of the assets, added Overbey. “Assets may need to be sold for the survivor to continue to meet the family’s needs. This can help reduce or eliminate capital gain taxes if a full basis adjustment has been obtained.”

The community property trust can be added to existing estate planning, including revocable trusts or sophisticated wills. If a couple had not yet accomplished estate planning, then a new joint revocable trust could be formed that would hold their community property, the husband’s separate property, and the wife’s separate property. Residents outside Tennessee could form a trust in the state as long as they obtain an in-state qualified trustee.

Last month Overbey won passage of a new law to improve Tennessee’s Uniform Principal and Income Act, the Uniform Trust Code, and the Investment Services Act by adding a number of statues to upgrade to improve the state’s trust laws. It also creates a new type of trust in Tennessee called the unitrust. The bill now goes to the governor for his signature.

Senate Tax Subcommittee calls for Tennessee, not the feds, to fund state’s highway program

Legislation that calls for Tennessee to keep its own road money rather than participate in the Federal-Aid Highway Program has cleared its first hurdle in the legislative process with passage in the Senate Finance Committee’s Tax Subcommittee. The bill, Senate Bill 3678 sponsored by Senator Tim Burchett (R-Knoxville), provides for Tennessee to opt out of the federal program subject to enabling action by Congress. The state could then elect to retain the state’s contributions to the federal Highway Trust Fund for transportation purposes.

“Tennessee is a donor state as far as the Federal-Aid Highway Program is concerned,” said Senator Burchett. “We send more road money to Washington than we receive. Unfortunately, those states who do not manage their money as well as Tennessee have reaped the benefits of these funds and have received road money paid for by Tennessee taxpayers. This bill will bring those dollars back home to Tennessee in the future, upon authorization by Congress.”

The legislation would result in an increase in the highway fund of over $67 million upon implementation of the measure. In the 2008-2009, Tennessee remitted $740.6 million in taxes collected from fuel, batteries and diesel to the federal highway trust fun and received $673.4 million in allocations. Under the bill, taxes retained by the state would be directed to the State Highway Fund instead.

Last week, the Senate Transportation Committee heard testimony showing the federal government has rescinded $686 million in Tennessee’s highway funding since 2005 and officials expect another $80 million to be rescinded in the upcoming budget year. The funds were part of the Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA-LU) which is the federal government’s surface transportation program for the states’ highway, highway safety and transit needs.

“I am very pleased that this bill is moving in the Senate,” added Burchett. “Congress has shown it is out of control and states need more stability in planning road projects. We don’t need to be building a bridge in California or a highway in New York with Tennessee tax dollars. I have more confidence that our state road officials can appropriately manage these funds than Congress.”

Issues in Brief

Revenue CollectionsState revenue collections once again fell short of budgeted estimates last month. Overall February revenues were $638.9 million, which is $47.1 million less than the state budgeted. February was the 21st consecutive month of negative growth in sales tax collections since January 2008, when the downward economic spiral began. February is the seventh month of the 2009-2010 fiscal year. The general fund was under collected by $43.8 million and the four other funds were under collected by $3.3 million.

Drive-through beer sales — Legislation was approved in the full Senate this week that requires anyone selling beer through a drive-through window, curb service or drive-through to be certified under Tennessee’s responsible vendor law. The bill, Senate Bill 2486 sponsored by Senator Mike Faulk (R-Church Hill) aims to assure that clerks selling alcohol would be trained to identify fake or altered identification to prevent under-age sales or to recognize the effects of alcohol to prevent drunk driving. The responsible vendor act, approved in 2006, requires clerks to attend a certified training course within 61 days of employment, with a follow up renewal each year and has been successful in curbing the sale of alcohol to minors.

Children in State Custody — The Senate Finance Committee has approved legislation to help Tennessee get a handle on counties that were committing kids into state custody at a rate three times higher than the statewide average. The legislation, Senate Bill 2974 by Senator Diane Black (R-Gallatin) strengthens the collaborative planning process put into place last year to help families stay together, but repeals the cost-sharing provision with counties that costs them $3.5 million last year.

Illegal Drugs — The full Senate has passed legislation to create a Class A misdemeanor offense for offenders who produce, manufacture, distribute to possess the hallucinogenic plant salvia divinorum, which is also known by its “street drug” name spice. The drug, which was popular in Europe before spreading to the U.S., is sold primarily on the Internet. The bill, Senate Bill 2982 sponsored by Senator Reginald Tate (D-Memphis) and Senator Diane Black (R-Gallatin), is pending action in the House Judiciary Committee.

Multiple birth siblings / School — Schools and boards of education would be prohibited from separating twins, triplets or other multiple-birth children into different classrooms solely due to the fact they are siblings, under legislation approved by the Senate on final consideration this week. The bill, Senate Bill 2480 sponsored by Senator Dolores Gresham (R-Somerville), allows parents to have a say in classroom placement if school officials have separated the children only because they are multiple birth siblings.

Ocoee River Rafting — The Senate Environment, Conservation, and Tourism Committee voted this week to change the caps that limit the daily commercial carrying capacity on the lower Ocoee River Recreational area from 4,000 to 4,500, with the cap to be lifted the following year if the customer count falls to 4,050. The bill, Senate Bill 3789 sponsored by Senator Dewayne Bunch (R-Cleveland), also authorizes the Hiwassee/Ocoee Scenic River State Park management to decrease the daily commercial carrying capacity as long as it does not go below 4,000 customers. An annual study is also authorized by the legislation that would analyze the effect of the increased carrying capacity to be sure the river and infrastructure are functioning to meet any increased demand. The Ocoee River was the site for white water rafting in the 1996 Summer Olympic Games.

Military / Exempt Professional Privilege Tax — Legislation has been approved by the Senate Tax Subcommittee to exempt servicemen and women from paying the professional privilege tax when serving as a commissioned member of the medical corps of the army, the navy, the air force, or the public health service of the U.S. The bill, Senate Bill 2782, is sponsored by Senator Tim Burchett (R-Knoxville).

International Drivers — Members of the Senate Commerce Committee voted this week to make it a violation under the Tennessee Consumer Protection Act of 1977, to advertise, promote, or sell an international driver’s license. Drivers from other countries can purchase an official license that translates their language to English, which is valid in Tennessee. However, unscrupulous vendors have sold documents that report to be driver’s licenses to unassuming customers for up to $500. Violations, under the bill, would be punishable by a civil penalty of a minimum of $1,000 up to a maximum of $3,000 per violation in addition to a court ordered civil penalty of up to $1,000 for each violation. The bill, Senate Bill 2712, is sponsored by Senator Brian Kelsey (R-Germantown).

Honoring the late Lt. Governor John Wilder — The full Senate has approved a resolution urging the State Capitol Commission to place a bust of former Lt. Governor John Wilder in the State Capitol. Wilder was first elected to the State Senate in 1958, but did not seek re-election in 1960. He was elected to the Senate again in 1966, becoming lieutenant governor in 1971 until January 2007. He died on January 1, 2010 at age 88 and is listed as having served longer than any other Lieutenant Governor in the history of the United States. Senator Dolores Gresham (R-Somerville) is the sponsor of Senate Joint Resolution 765, with all other Senate members joining as sponsors.

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