VOL. 132 | NO. 96 | Monday, May 15, 2017
Haslam Credits Republican Leadership for Budget, Economic Accomplishments
By Sam Stockard
With the legislative session finished, Gov. Bill Haslam is touting budget accomplishments and a strong economy as the result of Republican leadership.
In a Capitol Hill press conference shortly after the General Assembly adjourned for the year, the governor called passage of a $37 billion budget, the second consecutive one with no new debt, as the Legislature’s most important act.
It added $132 million to the rainy day fund, pushing it to $800 million; increased the TennCare reserve to more than $200 million; completely funded the Basic Education Program for K-12 education, the Complete College Act for higher education and gave teachers a pay increase. The budget also includes the IMPROVE Act, his fuel-tax increase/tax reduction initiative designed to bolster the economy and improve infrastructure, even with $2 billion in extra money on hand.
The second-term governor, a former Knoxville mayor, pointed out he is Tennessee’s first Republican governor to serve with Republican majorities in the Legislature, and he contends the shift from decades of Democratic leadership are making the difference.
“So we started this experiment in Republican government six and a half years ago. These are the results,” Haslam said.
In addition, the Legislature passed the Reconnect Act, which offers every adult in Tennessee an opportunity to enroll in community college or a technical school tuition-free.
On the heels of enacting the Tennessee Promise for students coming out of high school, Haslam said, “We followed that up, now saying regardless of your background, regardless of your income level, regardless of your ZIP code, if you’re an adult in Tennessee you can get two years of community college or technical school absolutely free. I think you’ll see dramatic dividends.”
In addition, the Legislature established the STRONG Act, a pilot program to provide funding for National Guard members to work toward a bachelor’s degree through tuition reimbursement.
Haslam also touted passage of a law for rural broadband accessibility statewide through grants to private providers and by enabling electric cooperatives to enter the retail internet business.
The governor’s IMPROVE Act dominated debate in the General Assembly, though, taking the lion’s share of time and energy, as Senate Majority Leader Mark Norris rewrote the legislation to turn it from a tax-neutral bill to a net tax cut.
The bill will cut $300 million in taxes next year and $500 million once fully in effect, with reductions in the food tax, Hall income tax and franchise and excise taxes on businesses and manufacturers.
Tennessee also will charge more for gas and diesel taxes, up to 6 cents and 10 cents more after increases are phased in over three years, in addition to higher fees on vehicle registrations and electric cars. More revenue will be directed to the state’s transportation fund to start chipping away at $10.5 billion in 962 road and bridge projects over the next 15 years, along with cities and counties for road work.
“It’s been an amazing session, and we’ve accomplished remarkable things with really resourceful reallocation of revenues and reinvestment in the future of this state, in ways I think most people never thought possible,” Norris said, considering the $800 million in tax cuts over the last few years that is set to top $1.4 billion in about six years.
“Some people talk about the growth in state government in terms of appropriations,” Norris, a Collierville Republican, added. “Mind you, it’s not because of growth in taxation. In fact, we’re doing much, much more with much, much less every year.”
Haslam disagreed with the idea tax reductions in the IMPROVE Act are weighted toward the more affluent instead of the working class and poor. The food tax is set to drop to 4 percent from 5 percent next fiscal year, while the Hall tax will be phased out over the next few years and franchise and excise taxes can be trimmed down to a single factor.
The governor contends Tennessee is one of the nation’s lowest tax states on individuals, but it taxes businesses and manufacturers heavily, forcing some employers to move out of state.
“One thing we can do, we’ve just enabled job creation, and if we’re setting up the right environment for jobs then that’s the way we serve middle-class and lower-income families better than anything else we can do,” Haslam said.
Lt. Gov. Randy McNally, in his first year at the post, called the session a success despite a few bumps and noted his primary concern always lies with weathering potential economic slumps.
“If you look at Tennessee’s budget, where it stands today you can see that we’re doing all the right things. We’re keeping our debt low, taking care of post-employment benefits, and other areas,” McNally said. “And secondly we’ve returned money to the taxpayers, probably a greater amount than any previous administration. … And we’ve invested in our state.”
Minority party outlook
In spite of being outnumbered badly in the Senate and House, Democrats played more of a role this session than they have in recent years.
While House Republicans were largely split over the IMPROVE Act, with nearly half of their caucus wanting to use $2 billion in excess revenue collections to fund transportation projects, Democrats battled for bigger reductions in the food tax as opposed to expedited cuts in the Hall tax and business taxes.
House Minority Leader Craig Fitzhugh pointed out Democrats negotiated for a bigger cut in the food tax and raised concerns about other tax reductions because of the potential for an economic downturn. Ultimately, they backed the IMPROVE Act.
“Overall, we thought for the safety of Tennesseans, for the ability to have good transportation, both rural and urban, we thought it was the thing to do and we delivered a sizable vote, and that vote passed the bill, and that was the only way it would pass,” Fitzhugh, a Ripley Democrat, said of the gas-tax proposal. “It was a tax increase, the first one since 1989, but we felt overall it was the right thing to do.”
Democrats delivered 23 votes for the IMPROVE Act in a 60-37 vote, with 35 Republicans opposing it, nearly half the GOP caucus.
Urban Democrats were especially supportive because the measure contains a provision allowing counties to raise taxes to support mass transit projects. Memphis leaders have discussed purchasing more buses to serve the city, and some Shelby County legislators have talked about the need for some sort of high-speed rail across the state. Nashville lawmakers, meanwhile, support a major mass transportation development project in and around the Capitol City.
But while Haslam touted Republican leadership as the driving force behind the state’s economic standing, House Minority Chairman Mike Stewart called such a contention “ridiculous on its face.”
“The fact of the matter is President Obama and the previous administration was extraordinarily successful in taking the worst economy America had seen since the 1930s and turning it around and delivering to the new administration an economy with a record low unemployment and essentially every economic statistic going extremely well,” Stewart said.
During the financial crisis, Tennesseans depended on the federal government for help, and amid improving economic trends in the state, Stewart said the supermajority is “generally making life difficult for Tennesseans, even in a time of economic prosperity.”
Sam Stockard is a Nashville-based reporter covering the Legislature for the Memphis Daily News. He can be reached at firstname.lastname@example.org.