State budget deal nears

With more cooperation, end is in sight for 105th General Assembly

By TOM HUMPHREY, KnoxNews.com
June 11, 2007

NASHVILLE - After six months of routinely partisan and occasionally petty discord, the 105th General Assembly is poised to finally end its 2007 session this week on a somewhat harmonious note.

"General acquiescence has broken out," state Comptroller John Morgan told the Senate Finance Committee at one point Friday as details of the state budget deal between leaders of the Democrat-dominated House and the Republican-led Senate were presented.

Morgan and state Treasurer Dale Sims have played pivotal roles as number crunchers and mediators in legislators' decision-making process. An end finally seems near.

"We had intense negotiations about a lot of things, and eventually we found a lot of agreement," said Rep. Harry Tindell, D-Knoxville, who chairs the House Budget Subcommittee. "I think we've found a great consensus."

Others do not necessarily see greatness, but they do see a way to finally fulfill the only official duty given the General Assembly by the Tennessee constitution - enactment of a balanced state budget before the new fiscal year begins July 1.

The starting point was Gov. Phil Bredesen's budget bill, HB2353, which was presented in February and totals $28 billion after the last administration revision.

It grew by about $500 million with that last revision, which came after new data showed that the state's revenue surplus has grown substantially since February.

With a few exceptions, the budget awaiting House and Senate floor votes today still has everything the governor wanted.

It also has some things he did not want, notably including $20 million for "community-enhancement grants" and a permanent reduction in the state sales tax on grocery food from 6 percent to 5.5 percent, or a half-cent per dollar, that will cost the state about $42 million per year in lost revenue.

The half-cent food tax is particularly "troublesome" for Bredesen as an erosion of the sales tax base that could cause problems in the future, said Finance Commissioner Dave Goetz.

"But he also understands they (legislators) feel the need to do this," he said.

Fatigue appears to be one factor in the legislative budget compromise.

"There is significant discomfort on both sides of the aisle" with portions of the compromise, said Senate Republican Leader Mark Norris of Collierville. "But at the same time, pragmatically speaking, we want to be productive."

In other words, there seems a growing realization that extending an already overextended session would not be productive, given that the state's political power balance is such that neither side can overwhelm the other.

"I'm not so sure that part of the strategy isn't to wear us all down," said Sen. Tim Burchett, R-Knoxville, who presided over Senate Budget Subcommittee sessions.

The session began Jan. 8 with legislative leaders voicing hope that it could end by late April or early May. Instead, the session has become the longest since 2002, when the state faced a budget crisis and a shutdown of "nonessential operations."

Along the way, there was protracted and sometimes acrimonious argument over raising state cigarette taxes. That ended last week with the enactment of a 42-cents-per-pack increase that will generate an estimated $230 million.

Bredesen says the money will be needed in the long term to cover improvements in state financial aid to schools. The school improvements will cost $524 million annually when finally implemented, and the next year's budget, as it stands, will take a $290 million step in that direction.

One provision of the compromise that has gotten relatively little attention sets aside $100 million in the 2007-08 budget that can be used to take another major step toward the $524 million goal in the 2008-09 budget year.

Other key compromise provisions are:

• Providing $20 million for "community-enhancement grants" that will be given to various charities and nonprofit organizations. The $20 million is what House Democrats wanted, but the system for distributing the money is in accord with what Senate Republicans wanted. Charities will have to apply for a grant, explaining how it will be used, then file a report subject to audit after the expenditure is made.
  
  Lt. Gov. Ron Ramsey said the grant method assures "some form of accountability," as Republicans demanded, and differs from classic political "pork" in that "the grants are delivered to the grantee, not to the legislator."

• The half-cent reduction in the food tax is exactly what House Democrats have been pushing for several weeks as Republican leaders contended that it was inadequate. The preferred Republican alternative in recent weeks has been a suspension of the grocery tax on a one-time basis for the months of November and December 2007, using $126 million in surplus funds.

• The compromise provides $24 million to cover anticipated prison expense increases as a result of legislation that will add three to six years to the sentences of anyone convicted of using a gun in some violent crimes. A coalition of law enforcement officers and prosecutors had pushed a broader package of anti-crime bills with a cost estimated at $60 million, but Republican and Democratic legislators alike said it marks a major step toward keeping the state's most dangerous criminals behind bars.

The state's "rainy day fund," or savings account, will grow to $750 million. It already is at a record $496 million, but Bredesen has set a new goal of pushing the fund to $1.1 billion, or roughly 11 percent of state tax dollars spent annually.

The overall $28 billion budget figure includes federal funds received by the state and nontax funds, such as college tuition payments and the like.

If the budget deal holds through floor votes - and there's always the chance a last-minute dispute will break out - there will still be several major bills where no consensus has been achieved. But it appears that won't stop legislators from adjournment.

One major example is an "omnibus lottery bill," that makes several changes in the lottery scholarship program, including an increase in the annual maximum entitlement from $3,800 to $4,000 and lowering the college grade point average required to maintain scholarship eligibility from 3.0 to 2.75.