Budget moves front and center in busy week on Capitol Hill

The State Senate passed several key immigration and crime bills this week; however, it was the budget, that was front and center with the presentation of Governor Phil Bredesen’s amended budget package to the Senate Finance Committee. Afterwards, Senate Finance Chairman Randy McNally (R-Oak Ridge) presented an alternative Republican proposal designed to offset the governor’s tax increases with cuts in spending.

“This is not a final budget,” said Chairman McNally. “It is simply a schedule that helps us, rather than to just say no, to recommend cuts that could be made to address the shortfalls created by not passing the administration’s proposed tax increases.”

The larger items in the administration bill include tax increases that would impact small businesses by raising the single article cap on sales tax, increase taxes on cable television customers, and raise the fee for Tennessee driver’s licenses. The Republican plan addresses those tax hikes by cutting state government spending by $133 million instead.

Both budget plans acknowledge $78 million less in revenues from the revision presented earlier this year for the current fiscal year and $76 million less than the 2010-2011 budget year which will go into effect on July 1, for a shortfall of about $150 million in the governor’s original budget proposal. The new budget amendment comes after the State Funding Board adjusted downward its previous estimates for total state taxes due to a more dramatic decline in revenue collections than previously anticipated. The board’s consensus recommendation in March was to recognize lower growth rates than those adopted December 18, 2009, from which the original budget was constructed.

The revised ranges reflect growth rates ranging from negative 1.77% to negative 1.29% for total taxes and negative 2.31% to negative 1.78% in general fund taxes. Based upon the funding board’s March recommendation, the revised estimates for 2009-2010 now assume an under collection in total taxes in the amount of $258.9 million and an under collection of $231.0 million in general fund taxes.

The budget is typically among the last bills passed by the legislature before adjournment. The General Assembly will carefully review language in the both amendments in the Senate Finance Committee next week and make any needed changes before the bill goes to the full body for final consideration. Expect the legislature to focus almost entirely on the budget during the remaining days of the 2010 legislative session.

Tennessee Disaster Update / Contingency Funds — On disaster relief funds, Finance Commissioner Dave Goetz told Committee members the state presently has about $17 million in funds that have been held to assist with the costs of the storms and draw down federal relief. Commissioner Goetz said the state would then rely on contingency funds that could be available to the state soon from enhanced Federal Medical Assistance Percentages (FMAP) legislation to assist them.

FMAP is used in determining the amount of federal matching funds available to assist states with payments for certain social services and state medical and medical insurance. If approved, the move could provide the state with an additional $341.6 million with the state using a portion of that money to assist counties with major damage that cannot meet their 12.5 percent match.

The governor proposed several new spending items to the budget contingent on the state receiving the federal FMAP funds. The largest expenditure would be $100 million as a special allocation to help community colleges get ready for an influx of new students as a result of legislation passed during the Special Session on Education. He has also proposed $16.1 million for a fish hatchery in Carter County. Goetz said both of these allocations could go to disaster relief, depending on the need. Several counties are suffering major devastation in their infrastructure and are struggling to find matching funds to draw down relief.

In addition, U.S. Senator Lamar Alexander said this week that he has been assured the Supplemental Appropriations bill pending in Congress will include emergency funds to address the unprecedented flooding in Tennessee. Alexander is working with other senators in the U.S. Senate Appropriations Committee on the final numbers. The Supplemental Appropriations bill includes funding for Iraq, Afghanistan and disaster relief. The Federal Emergency Management Agency (FEMA) announced this week that over $28 million in disaster assistance has been approved to help with recovery efforts of those who were impacted by the severe storms and flooding.

Disaster Relief / Property taxes – Disaster relief legislation was also approved in the Tennessee Senate this week to authorize local governing bodies, by a two-thirds vote, to prorate a homeowner’s or business owner’s property tax assessment when the structure cannot be occupied for more than 30 days as a result of a disaster certified by the Federal Emergency Management Agency (FEMA). The proposal was added as an amendment to Senate Bill 3687, sponsored by Senator Randy McNally (R-Oak Ridge), who stepped aside to let other senators whose districts were impacted take the lead on the measure. The legislation would provide tax relief on properties that are not inhabitable during the time it takes to rebuild. Those severely impacted by the recent storms would need to apply for property tax relief prior to September 1, 2010 under the bill.

Lawmakers continue to work with state and federal officials in the aftermath of one of the worst natural disasters in the state’s history.

Revenues improving — In good news this week regarding the state’s finances, Tennessee’s revenue collections improved in April with a net positive growth of 2.23 percent over April collections one year ago. April revenues were $1.243 billion, which is $43.4 million more than the state budgeted for the month, representing the first positive sales tax growth month in almost two years.

Sales tax collections started their downward spiral starting in January 2008. Beginning in June 2008, Tennessee has recorded an unprecedented 22 consecutive months of negative collections until now.

Tennessee sales tax revenues for the past nine months are still under collected by $201.8 million. The year-to-date growth rate for nine months is negative 4.11 percent. The general fund is under collected by $153.6 million and the four other funds are under collected by $47.1 million.

State Senate debates immigration, voter registration, and driver’s license bills

ICE / Prisoners – In action on immigration legislation, the Senate debated a measure calling for Tennessee jails to send information to the federal Immigration and Customs Enforcement office (ICE) regarding prisoners who do not have documentation that they are in the U.S. legally. The bill, Senate Bill 1141, requires the jail keeper to fax, email or send a copy of the booking information within three business days of the person’s arrest.

The bill does not apply to any county or municipality that enters into a memorandum of understanding with the United States Department of Homeland Security concerning enforcement of federal immigration laws. Davidson and Shelby Counties already have programs which share information. Knox County is also currently negotiating with federal authorities regarding a memorandum of understanding.

“This bill simply provides for information sharing with local law enforcement and federal authorities and protects citizens from criminals who are not in the country legally,” said Senator Dolores Gresham (R-Somerville), sponsor of the bill. “This is important to our national security.”

Debate will continue on the bill in the next floor session of the Senate scheduled for May 24.

Drivers License / English – Similarly, the full Senate gave approval to legislation to require that Tennessee drivers’ license exams are given in English. The bill, however, was defeated in the House Budget Subcommittee on the following day. The measure sought to make sure that immigrants know how to read the road signs and can drive safely in Tennessee. Senate Bill 63, sponsored by Senator Bill Ketron (R-Murfreesboro), would not have applied to persons whose presence in the United States has been authorized by Homeland Security for work in companies located in Tennessee through the efforts of Tennessee’s Department of Economic and Community Development in order to accommodate those nationalities with manufacturing facilities in the state.

Similar measures have passed the Senate for the last two years, but did not gain passage in the House of Representatives. Nine other states have “English only” laws.

Voter Registration — The full Senate approved legislation on final consideration aiming to strengthen the integrity of elections in Tennessee. The proposal, Senate Bill 194, sponsored by Senator Dewayne Bunch (R-Cleveland) and Senate Majority Leader Mark Norris (R-Collierville), requires that voter registration forms contain a disclaimer that clarifies giving false information to register to vote carries a criminal penalty. The legislation also requires that applicants affirm that they are lawfully in the United States.

The U.S. Constitution already requires citizenship to vote. In addition, federal law makes it a crime to knowingly make a false statement or claim regarding citizenship upon registering to vote.

The legislation, under an amendment sponsored by Norris, also gives election officials guidance and clarifies what they can ask for if they question whether a voter is qualified. The bill calls for verification by providing one of the following: a driver’s license, U.S. naturalization documents, birth certificate, passport, Federal Bureau of Indian Affairs card or other documents or methods of proof that are established pursuant to the federal Immigration Reform and Control Act.

English in the workplace – The Senate has voted to clarify that Tennessee employers have a right to institute an English-in-the-workplace policy. State Senators refused to recede from their version of Senate Bill 2753 in describing what circumstances are covered and sent the matter back to the House to begin the process of working out the differences on the legislation. The Senate version relies on EEOC (Equal Employment Opportunity Commission) guidelines to clarify that employers can require that English be spoken on in the workplace as long as it is posted and deemed a necessity for safety on the job. The bill is sponsored by Senator Jack Johnson (R-Franklin).

State Senate continues efforts to wage war on crime

Armed Robbers – The legislature approved numerous anti-crime bills this week, including a measure approved by the Senate Finance Committee to strengthen penalties against armed robbers. The legislation would more than double the minimum amount of time served for aggravated robbery.

Presently, armed robbers convicted on a first offense can receive up to eight years in jail, but the 30 percent requirement places the actual sentence at less than three years. This legislation would increase the percentage of jail time for these armed offenders from 30 percent to 74 percent.

To ensure there is prison space, the bill would sentence non-violent property to community corrections, with more intensive supervision, instead of jail time. The legislation, Senate Bill 3431, now goes to the Senate floor for a final vote. The bill is co-sponsored by Senate Majority Leader Mark Norris (R-Collierville) who has sponsored a series of bills, including “Crooks with Guns” legislation, to crack down on violent crime.

Criminals / Escape – State Senators gave final approval to legislation that creates a Class A misdemeanor offense for a person knowingly to aid a criminal who is fleeing law enforcement by intercepting police transmissions and relaying that information to the offender to help them escape. The legislation, Senate Bill 2545, sponsored by Senator Dewayne Bunch (R-Cleveland), was filed at the suggestion of law enforcement authorities.

Crack tax reimposed – The full Senate acted this week to reimpose a state law taxing the sale of illegal drugs that the state Supreme Court declared unconstitutional last year in a case involving Steven Waters. The legislation, commonly known as the “crack tax,” targets the sale of illegal drugs. The bill, Senate Bill 3134, is sponsored by Senator Randy McNally (R-Oak Ridge).

Used by law enforcement for several years, the tax has raised several million dollars for Tennessee. Last year, the Tennessee Supreme Court in a split 3-2 decision overturned the state’s crack tax. This legislation fixes any perceived ambiguities under the statute regarding the constitutional authority to tax those peddling illegal substances. It takes the suggested findings from the Water’s decision to make sure it is clearly defined that the tax applies to items being held for sale by drug dealers.

The purpose of the legislation is to reinstate the unauthorized substance tax and satisfy the issues identified in the court’s ruling. Sponsors say the tax is a means to offset the cost drug dealers impose on the criminal justice system.

Crime / Domestic Violence / Orders of Protection – The Senate acted on two separate measures to address domestic violence this week. One proposal, which was approved on final consideration, prohibits a respondent of an order of protection from telephoning, contacting, or otherwise communicating directly or indirectly with the petitioner. The bill makes it clear that the person to whom the order is directed cannot contact the victim “for any purpose.” The action would prevent excuses from being used in violation of the order. The measure, Senate Bill 2708, sponsored by Senator Rusty Crowe (R-Johnson City), now goes to the governor for his signature.

DUI / Ignition interlock – The House of Representatives approved major DUI legislation already passed by the State Senate to increase the use of ignition interlock devices to curb the number of alcohol-related car crashes in Tennessee. The bill requires the use of the devices if the offender has a blood or breath alcohol concentration of .15 percent or higher; is accompanied by a person under 18 years of age; or, violates the present implied consent laws. It also provides that those convicted of drunk driving from under .15 with the option to install an interlock device instead of being geographically restricted by the court. The legislation, Senate Bill 2965, sponsored by Senator Mae Beavers (R-Mt. Juliet) now goes to the governor for his signature.

Legislation would be amended to expand state’s new TNInvestco Program

Legislation to expand the state’s TNInvestco tax credit program by $80 million to include four additional participants was approved this week by the Senate Finance Committee. The goal of the program is to develop Tennessee’s entrepreneurial infrastructure to bring additional capital into the state for start-up or small businesses, to diversify the state’s economy and to create “anchors” or “clusters” of business innovation which can result in new companies being created in Tennessee. The innovative new program was launched last year as a result of legislation sponsored by Senator Doug Overbey (R-Maryville) who is also leading the efforts to expand the program to include alternates selected last fall due to tremendous interest in the program.

“The overwhelming majority of jobs in this state are created by small businesses. That is why it is so important to encourage the growth of small businesses,” said Senator Overbey. “This program provides a viable alternative for many companies to get the capital needed to grow and create jobs. The program also has a built-in mechanism that allows us to track the jobs created and the taxes paid so the state will know exactly what we are getting as a result of this investment.”

The Committee also added further improvements to the bill to increase transparency and accountability in the program by approval of two amendments sponsored by Senator Mark Norris (R-Collierville). Small businesses provide 67 percent of first jobs and produce 55 percent of innovations. TNInvestco helps to make investment capital available to small, medium and start up businesses in Tennessee.

In October, six investment firms were chosen to receive an allocation of $20 million dollars in gross premiums tax credits which are then marketed to insurance companies to create a pool of venture capital funds for investment in start-up and mid-stage companies in Tennessee. Under the plan, investors receive a tax credit against insurance premiums taxes that spread over years three through ten of the program. Even though the capital will be available for small businesses immediately, there are no tax credits for investors until 2012. Capital returned to the state through the program must first go to the General Fund, with any remaining funds to be deposited in the Rural Opportunity Fund which helps economically distressed counties grow jobs.

Tennessee Revenue Commissioner Regan Farr said he expects the program will pay for itself and provide additional money for the Rural Opportunity Fund. Farr said that Tennessee’s program is now a model for other states. “Every other state is a dollar for dollar subsidy program,” said Farr. “Our program pays for itself and puts money into the Rural Opportunity Fund. It also has more taxpayer protections.”

Individual businesses interested in applying for the program may go to https://www.tn.gov/ecd/topic/interested-in-tninvestco-funding and complete an application form which will be submitted to each of the TNInvestco funds. In addition, businesses applying for the program will receive information about available help through the U.S. Small Business Administration, the Tennessee Department of Economic and Community Development’s Business Enterprise Resource Office for small and disadvantaged businesses and the Tennessee Technology Development Corporation.

In Brief…

Transportation / Drivers / International Drivers – The Senate accepted a House amendment on Senate Bill 2712 sponsored by Senator Brian Kelsey (R-Germantown) to make it a violation of 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 now goes to the governor for his signature.

Citizen’s constitutional rights in foreign judgments / Uniform Unsworn Declarations Act — Legislation addressing how Tennessee courts should be required to deal with foreign judgments was approved on final consideration this week. The bill deals with the application of foreign laws, if and when they violate a citizen’s protections under the state and federal Constitutions. Senate Bill 3740 , sponsored by Senator Dewayne Bunch (R-Cleveland), calls on Tennessee courts to consider that the primary factor in decisions regarding whether to enforce decisions from foreign countries should be the protection of constitutional liberties and protections afforded to individuals under the U.S. and Tennessee Constitutions.

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