House of Representatives

Weekly Wrap
Capitol Hill Review
May 21st - 25th, 2007

“No tax, no pork” budget improved
Last week, House Republican leadership unveiled a “no new taxes, no pork” budget that they dubbed “a starting point.” Now, one week later, a new and improved budget alternative has been released; one that fully funds the priorities outlined in the Administration’s budget and addresses legislators’ concerns. The revised budget has several prongs: providing tax relief, funding the Basic Education Plan 2.0 at 50 percent (the same level the Administration is now proposing), and allowing state government to live within its means. Other highlights include:        

IN THIS WEEK’S WRAP 1
“No tax, no pork” budget improved

◦ Tax Relief ◦
Education

No tax increase No pork 2 Education Committee 3% state employee raise examines BEP 2.0 Funds the last 1/3 of compression pay for state employees Funds a crime package to increase penalties on sexual predators ◦ K-12 Capital Outlay Grants Includes a $21 million farm grant program 3 The week ahead… Adds 136.6 million to the Rainy Day Fund Allows $100 million for K-12 capital outlay improvements from lottery reserves  Restores $32.8 million in recurring road funding Republican leadership contends that, contrary to a now-common misconception, these priorities can be fully funded without any kind of tax increase. They were adamant that they have heard the calls of their constituents for no new taxes, tax relief, and no pork. Even after all these initiatives are funded, the budget has a remaining balance of $26 million in non-recurring and $5.4 million in recurring funds left over. Tax Relief With lawmakers divided on how a food tax reduction should occur, the new budget combines two opposing ideas in order to maximize the benefits to hardworking Tennesseans. The budget provides a ½ cent recurring reduction in the food tax, and a non-recurring holiday for a one month “no food tax” holiday in December. Reducing the food tax permanently to 5.5 percent will save consumers just under $39 million, with the one-time holiday saving them $76 million.

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Education The budget funds BEP 2.0 at 50 percent, increasing education spending by $335.5 million for K-12. The plan provides K-12 teachers with the 3 percent pay raise as well. In addition to the $335.5 million improvement, the alternative budget provides $100 million in grants for K-12 capital outlay projects from the lottery reserve account, as opposed to the Administration’s plan, which provides for the projects through loans. Republican lawmakers believe that the grant program is more fiscally responsible, saving the state and local governments from eventual debt. For months Republicans have called on the legislature to wait for the new budget estimates before supporting a tax increase. House Republican leadership echoed their call from over three weeks ago, when they held a press conference to call for tax relief to be included in the budget. With new budget estimates released at the beginning of the month by the funding board, leadership said it is obvious now more than ever that some of the money should be returned, and there should be no talk of raising taxes.

Education Committee examines BEP 2.0
Committee studies capital outlay grant proposal closely
The Education Committee met this week to closely examine some of the changes proposed in the new BEP 2.0, which the Governor rolled out at the beginning of this month. Although lawmakers agree that improvements could be made to the formula, there is some disagreement as to the approach. The committee heard testimony from Comptroller John Morgan and University of Tennessee economist Dr. Bill Fox to explain the complicated formula and how they derived it. Lawmakers had several questions which still remain to be answered about the bill, which must be decided in the next couple of weeks as the session draws to a close. The new proposal has three overall concepts: 1.) The new fiscal capacity model, which is a component that determines how much education money a school will get, is based on a formula aiming to determine a county’s ability to raise revenue, taking into consideration their property and sales tax. This concept drew criticism from those who said the fiscal capacity model did not consider the average income level, which should also be considered as a measure in this formula of how much tax capacity a county has to raise money for school funding.
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2.) The second concept is to eliminate the current CDF (cost differential factor) which is the component of the BEP that sent more money to counties that have higher salaries in the private market. The purpose of this factor was to try to retain teachers who might leave teaching for a more profitable competing job in that county. 3.) The third factor is for the state to take on a greater share of a county’s teacher payroll, moving how much counties pay in teacher salaries from 65 percent to a goal of 75 percent. There were also questions in the committee regarding increased payments to school systems with a large number of at-risk students, who are defined as those who are on a free or reduced school lunch program. The questions centered on why it cost more to teach the poorer or modest-income children than those with families with higher incomes. One of the main goals of the administration is to lower the classroom size for higher poverty schools. Similarly, another factor of the new BEP formula is to move the English Language Learners ratio from the earlier proposal of 1 teacher per 30 students to 1 per 20. Finally, the state would move the state share of non-classroom funds to 25% and fund student enrollment growth during the year it occurs. K-12 Capital Outlay Grants The House Republican Caucus bill for use of reserve lottery funds for capital improvement for K-12 schools was placed in a study committee. The bill was sent there so that legislators could concentrate on what it could do—provide counties with the ability to build new schools or make improvements to existing ones. The plan aims to keep property taxes down, because local governments typically depend on property taxes to pay for school building improvements. Legislators are hopeful that the measure will not be postponed until the summer, but possibly be revisited again before the General Assembly adjourns so that counties who desperately need money to build schools will have the means to do so.

The week ahead…
• • House Bill 1851 enacts the “Non-smoker Protection Act.” (Agriculture Committee) House Bill 439 prohibits smoking in certain food services establishments to which children are granted access; prohibits smoking in buildings owned or operated by county or municipal government. (Agriculture Committee) House Bill 239 increases the state’s share of funds generated through the BEP formula in the instructional positions from 65 percent to 75 4… Continued on page

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percent by increasing the share 2 percent per year for five years. (Education Committee) House Bill 698 places certain requirements on municipalities contracting for and the operation of surveillance cameras installed to enforce or monitor moving traffic violations at intersections controlled by trafficcontrol signals. (Finance, Ways and Means Committee) House Bill 406 enacts the “Tennessee Taxpayer and Citizen Protection Act.” (Budget Subcommittee of Finance, Ways and Means) House Bill 283 adds inpatient rehabilitation facility services to those services covered by TennCare. (Budget Subcommittee of Finance, Ways and Means) House Bill 132 authorizes persons with handgun carry permits to possess firearms in all public hunting areas, refuges, wildlife management areas, and national forests managed by the state. (Budget Subcommittee of Finance, Ways and Means)

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Kara Watkins House Republican Press Secretary
102 War Memorial Building Nashville, TN 37243 Phone: 615-741-1975 E-mail: kara.watkins@legislature.state.tn.us