TN TAX BATTLE: Senate suspends rules, prepares for ALL-OUT budget battle today

Senate suspends rules, prepares for all-out budget battle today By Richard Locker and Paula Wade locker@gomemphis.com wade@gomemphis.com June 20, 2002 NASHVILLE - The state Senate took the procedural steps Wednesday for a major floor fight today on a variety of tax plans, possibly including one that contains a state income tax.

Senators agreed to suspend the rules to allow an expedited vote today on the so-called CATS budget, which would raise the sales tax to 8.75 percent statewide, increase taxes on cigarettes and alcohol, and cut up to $600 million from the governor's budget proposal.

Sen. Doug Jackson (D-Dickson) indicated he will seek to amend his CATS plan onto a separate bill that authorizes the use of up to $470 million in state reserve funds to balance this year's budget. Jackson has promoted the proposal as a "middle-ground" approach between a state income tax and a no-new-taxes plan that would slash spending by as much as $1 billion.

The reserve funds bill had been set for a floor vote Wednesday, and Jackson quickly seized upon the idea of grafting his plan onto it to avoid a possible defeat in the Senate Finance Committee, where his plan has not yet been reviewed. With the rules change, it will take only a majority vote of the 33-member Senate to approve the plan, instead of the two-thirds vote he was facing without the parliamentary action.

In addition to Jackson's plan, Sen. David Fowler (R-Chattanooga) indicated he may attempt to present his complex proposal that includes a sales tax hike Oct. 1 and a state income tax on Jan. 1, 2003, if the voters reject a state constitutional convention on the Nov. 5 ballot. Fowler's bill would set up the constitutional referendum and raise other taxes as well, but it is considered so complicated that it has little chance of passage.

Neither the Senate nor the House of Representatives called up the separate income tax/tax reform bill proposed by House Speaker Jimmy Naifeh for a vote Wednesday, indicating Naifeh still lacks the 50 votes required for House passage. Horn-honking tax protesters returned to the streets and sidewalk near the Capitol Wednesday in anticipation of an income tax vote, but their numbers were down from usual, and they were surprised to find that tax reform advocates had arrived at 2:30 a.m. and seized half the sidewalk they usually occupy.

For hours, the income tax supporters held a huge yellow sign saying "Yes on Naifeh Plan" directly in front of where anti-tax Nashville radio talk show hosts set up their live broadcasts. By the time the anti-tax forces and horn-honkers arrived, the pro-taxers were ready with signs reading "Honk if you're for tax reform," and "Health care is an essential."

"They'd honk and then they'd stop, and then they'd just shoot us the bird because they didn't know what else to do," said Tennessee State Employees Association director Linda McCarty. "We were nice - just waved and said thank you."

Inside, the House galleries were packed with city and county officials from across Tennessee whose budgets remain in limbo due to the possibility that the state will cut off hundreds of millions of dollars in funding to local governments. Like the state, most local governments also must have their budgets in place by July 1.

The House Finance Committee members worked through a proposal to give early retirement incentives to state employees as "a more humane way" to eliminate the estimated 4,000 state workers and at least 2,000 employees in higher education. They worked through other details of implementing a no-new-taxes budget, including an option that would shift $250 million in funds now given to local governments and enacting substantial fee increases to blunt the impact of cuts.

House members also are working on a proposal to maintain the federal TennCare waiver with a minimal non-Medicaid population, a plan designed to keep the state's advantageous funding arrangement with the federal government.

"I'm trying to be as clear as I can - this is insane," said Deputy Finance Commissioner John Tighe of the proposal to revert to a Medicaid program, which he said would cost the state more than it would to continue TennCare. Up to 400,000 people would lose health coverage and the state would lose $750 million in federal matching funds.

The Senate Finance Committee began hearing testimony on the impacts of a no-new-taxes budget, including the loss of up to 7,000 K-12 teachers, 4,000 general state employees and 2,000 higher education employees. The Departments of Tourism and Economic Development would be eliminated, and state parks that could not financially support themselves would be shuttered or privatized, the panel was told by legislative budget analysts.

NO DOGS, NO CATS, NO INCOME TAX! CUT YOUR GROSSLY BLOATED BUDGET AND GO HOME! SHUT IT DOWN!

According to Steve Gill's inside information, the senate, led by Bob Rochelle, Bill Clabough, and few others, were putting together a tax plan that would increase the sales tax by .25%(a quarter of one percent) and cancel itself off after one year. That would allow the new governor and legislature to deal with this next year.HERE IS THE KICKER: This Bill would allow for the senate to make quick amendments and add Naifeh's/Rochelle's state Income Tax Bill into this Bill after passage by the Senate and pass it to the House for the final vote, which would get enough votes because the honus would be off of the House's back. This Bill was later sent back to committee, but this Bill is very much alive.

The Senate has told the House that if they have an Income Tax plan then they had better pass it tomorrow, Thursday June, 20,2002. If not, they are going to proceed with their ideas(CATS BUDGET or CONTINUATION BUDGET). This means that Jimmy Naifeh is very busy twisting arms in backrooms trying to get the votes. However, the votes are not there in the Senate in support of Naihef's tax plan. There probably aren't enough votes in either chamber to pass the CATS BUDGET either.

CONTACT INFO: 800-449-8366 + 1 + the last 4 digits of their Nashville legislative office or 615-741-3011 capitol switch board

or TN GENERAL ASSEMBLY OR

MASS EMAIL (chose tax central scroll down to next to last item) VALENTINE

Stopgap budgets in mix Lawmakers hear of impact on schools, TennCare service http://www.tennessean.com/government/archives/02/06/18986966.shtml?Element_ID=18986966

KARLA GACHET / STAFF Signs waved at passing cars near the Capitol yesterday reflect opposition to efforts to create an income tax. The Senate did not vote on an income tax yesterday, but other plans to raise revenue for the budget may be offered today.

By BONNA de la CRUZ and DUREN CHEEK Staff Writers

Lawmakers, using their 90th and last regular, paid legislative day, did not vote on an income tax yesterday, opening the door to possible votes today in the Senate on alternate plans.

At the same time, finance committees in the House and Senate began pursuing ''no-new-revenue'' budgets that would make $959 million in spending reductions as a ''default budget.''

Members of the Senate Finance Committee explored whether the no-new-revenue budget could be a short-term solution to operate the state until a special session in the fall. Many lawmakers are on election primary ballots on Aug. 1.

Lawmakers, however, were told that such a stopgap strategy would send local school budgets into chaos and still require about 350,000 people to be removed from TennCare, the health insurance program for more than 1.4 million Tennesseans.

Rep. Randy Rinks, D-Savannah, House Democratic Caucus chairman, said the only way ''responsible members'' of the legislature would vote for a no-new-revenue budget is if it is coupled with a requirement that they meet in special session to try again to pass new taxes.

''This isn't a plan; it's just where we are,'' said Rinks, adding that there does not appear to be consensus on any tax plan. ''People don't think it will happen, but I think it will.''

Yesterday, activists on both sides of the tax issue rallied outside the Capitol, with anti-tax protesters honking horns and tax supporters holding up signs. Some pro-tax demonstrators may have confused casual passers-by by holding signs urging motorists to honk for an income tax.

The two-track strategy of pursuing new taxes while putting together a default budget comes as lawmakers face a June 30 constitutional deadline to balance the 2002-03 budget.

Because they used one-time money to pay for normal recurring operations last year and have seen lower-than-expected tax collections, lawmakers are looking to raise at least $877 million to continue services at the current level, or to cut $959 million as part of a no-new-revenue budget that would include about $325 million in K-12 education cuts.

Gov. Don Sundquist and some legislative leaders have wanted to raise $1.1 billion-$1.35 billion to add spending for employee pay raises, a reading and pre-kindergarten initiative, and other programs.

Tax plans scheduled for possible votes in the Senate today include:

• The Continuing Adequate Taxes and Services budget plan, sponsored by Rep. Frank Buck, D-Dowelltown, and Sen. Doug Jackson, D-Dickson. It would raise about $807 million, although sponsors were making changes last night.

The plan includes raising the statewide sales tax rate to 8.75%; raising the corporate income tax from 6% to 6.75%; raising alcohol taxes by 80%; raising cigarette taxes by 230%; removing the $1,600 local-option sales tax cap on big-ticket purchases; taxing vending-machine goods at 8.75%; and imposing a $100 annual fee on commercial trailers, a large increase from the current one-time $50 fee.

Possible modifications could include making the proposed $100 trailer fee one-time and not annual; raising the $1,600 local-option sales tax cap to $5,000 instead of eliminating it; lowering some of the alcohol rates; and including a $25 increase in car-tag fees.

• A proposal by Sen. David Fowler, R-Signal Mountain, that would let voters decide whether to hold a constitutional convention on an income tax. Fowler said his bill incorporates some elements of House Speaker Jimmy Naifeh's 4.5% flat-rate income tax, which failed in the House by five votes last month.

Under the Fowler plan, the state would increase the state sales tax rate from 6% to 7% from July 1 to Dec. 31. In November, voters would decide whether to hold a constitutional convention on taxes. If they vote to hold the convention, the income tax would start Jan. 1. If they vote no, a 7.5% state sales tax would be imposed. It would raise about $1 billion.

• A ''lighter'' version of the Buck-Jackson plan by Sen. Randy McNally, R-Oak Ridge, that would raise about $400 million by imposing a statewide sales tax rate of 8.75% and raising alcohol and cigarette taxes. McNally, chairman of the Senate Education Committee, wants to use the new tax to deflect education cuts.

The tax proposals could be added as amendments to legislation authorizing lawmakers to take reserve funds to balance this year's budget, which is $472 million in the hole.

Lawmakers have set Tuesday as the target deadline for floor votes on taxes, and after that would pursue the no-new-revenue budget.

The Senate and House finance committees yesterday concentrated on the no-new-taxes budget.

When talks turned to reverting TennCare to a Medicaid-only program, Deputy Finance Commissioner John Tighe told House members, ''This is insane.''

The state would save $55 million and remove about 350,000 people from TennCare. Tighe said hospitals would end up picking up charity care that could cost the state another $70 million, and millions of dollars would be sucked out of the health-care economy.

Sen. Bob Rochelle, D-Lebanon, said he worried the proposal sends mixed signals. For instance, the state's arts commission would continue to receive $2 million in funding from the sale of cultural license plates while the state would still face shutting down the Tennessee State Museum and Tennessee Historical Commission and drastically scaling back other state services.

Rochelle also used the discussion of a no-new-taxes budget as a backdrop to criticize gubernatorial front-runners Phil Bredesen and Van Hilleary, who have said they could manage the budget without new taxes.

Rochelle described ''management'' ideas of changing the state's policy on building roads from ''pay as you go'' to bonding out the projects as ''boneheaded,'' as well as the idea that the state should use the employee retirement fund to buy the state parks and lease them back to the state at little cost.

Aides to both campaigns said their candidates have not advocated those ideas.

State Treasurer Steve Adams briefed members of the House Finance Committee on a plan that could be used to offer about 8,000 state and higher education employees a buyout as a more ''humane'' way to lay off personnel.

Under the plan, three classes of employees would be eligible: those with 30 years of service; those age 60 with 10 years of service; and those age 55 with 25 years of service. Their options would include a cash payment of $8,000 plus longevity pay. Cost of the plan would be amortized over 20 years, Adams said.

State budget threatens proposed county raises

By Michael Silence, News-Sentinel staff writer June 20, 2002

Knox County commissioners and school board members stand to get a 17 percent raise if the proposed new budget passes as is.

But at least one commissioner said if the state budget crisis adversely impacts the county, the raises would be the first to go.

County Executive Tommy Schumpert is proposing the raises because it has been eight years since commissioners and board members have had raises.

He said the 17 percent figure comes from the average wage increase that county employees have had over the last four years.

Currently, commissioners and board members make $14,899 a year, not including benefits and travel allowances. Under the county charter, board member salaries are set the same as commissioners' salaries.

Schumpert's proposal is to increase that amount by $2,533 to $17,432.

By comparison, commissioners in Hamilton County make $17,314; commissioners in Shelby County make $16,500 (MY NOTE: SHELBY CO COMMISSIONERS JUST VOTED IN A 50% PAY RAISE for themsleves); and metro council members in Davidson County make about $6,900.

"I was shocked," said Commissioner Wanda Moody when she first saw the line-item salary increases. "These are such tight times."

But Moody also noted as the county has grown, so too have duties and time demands for researching and handling such issues as complicated zoning matters and funding issues.

Moody said she had heard the request for an increase came from another commissioner.

But Finance Director Kathy Hamilton said that was not true. "It was recommended by Mr. Schumpert. They (commissioners) have not had an increase in eight years."

Commissioner John Schmid acknowledged the increase recommendation comes at a bad time, especially if the state limits or cuts funding to local governments. If that happens, Schumpert has said a property tax increase is possible.

"If we end up having to re-do Tommy's budget, (salaries) would be the first place to start. You have to lead by example," Schmid said.

If approved, the salary increases would amount to about $71,000 in a proposed budget of nearly $490 million.

Michael Silence can be reached at 865-342-6310 or silence@knews.com.

City discusses payroll tax in case state cuts funding Council members prepare for fiscal emergency action

By Blake Fontenay fontenay@gomemphis.com

June 19, 2002

If state legislators slash funding to local governments, City Council members may consider a municipal payroll tax to make up the difference.

The idea of a payroll tax resurfaced during an executive session Tuesday while council members were discussing ways to deal with a possible reduction in state funding.

When the council debated a 1 percent tax on wages several years ago, the proposal was met with strong opposition from business leaders, led by FedEx. Questions were raised, too, about whether the state Constitution gives cities the power to adopt payroll taxes.

Even if a payroll tax were deemed constitutional, the city would probably require permission from state lawmakers in order to adopt one.

Despite those obstacles, council members said they want to consider options other than spending cutbacks or a property tax increase if state funding is reduced.

"I'd like to entertain that thought,'' said council member TaJuan Stout Mitchell.

Councilman Joe Brown said a payroll tax would be a fair way to collect revenue from non-Memphis residents who work within the city limits.

By generating that extra money, Brown said city officials could reduce their reliance on property taxes.

"The first thing it's going to do is reduce the property tax,'' Brown said after the session. "It's the only way to reduce the property tax."

Employers could collect the money through payroll deductions, Brown said.

Councilman Brent Taylor believes the council should consider spending cutbacks rather than tax increases if budget-balancing steps are required.

"The payroll tax has been proposed before, it's been discussed before, it's been defeated before,'' Taylor said after the session. "As far as I'm concerned, it's a dead issue."

Council members scheduled a special meeting June 28 in case they need to take emergency action to balance the municipal budget.

The council had passed a budget for the next fiscal year at a meeting June 4. However, city officials are concerned the General Assembly may reduce funding for local governments to help address the state's projected financial shortfall for the coming year.

If the state provides the city with less money than expected, the council will have to take steps to bring the municipal budget back into balance. The city expects to get about $73 million from various state sources in the budget year that begins July 1.

Council chairman Rickey Peete said that by the time of the next meeting, he expects city staff members to provide projections on revenues a payroll tax might bring, the legal ramifications involved in imposing such a tax, and any other information the council might need to consider.

The special meeting is scheduled for 1 p.m. in the first-floor council chambers at City Hall.

- Blake Fontenay: 529-2386

Wrapup of today's Gubernatorial Debate between the 3 Democratic candidates held on Teddy Bart's Roundtable.

It will make you laugh and it will make you vomit but if you have the time listen to or watch the Democratic Gubernatorial Forum held on Teddy Bart’s Roundtable this morning. These guys (Bredesen, Smith, and Nicholls) aka Moe, Larry, and Curly danced and dodged but left some juicy statements in their own words that can certainly be used in the coming campaign.

Democratic Candidates for Governor Forum.

This is my report of what I heard. Please listen for yourself as we hear different things.

On the tax-protests and the Westmoreland suicide

Bredesen: “Talk shows encourage people to say whatever they feel.” “It is easy to call in and demonize someone you do not have to face. The “good” talk hosts keep that type of actions under control.” “I have not been at the protests because that is not my style. I would rather be out campaigning.”

Smith: Condemnation for some of the protestors in the Westmoreland situation. “There were lots of jokes being made. One guy even had on a trench coat with a sign saying he was Westmoreland. Some of the protestors took things too far.” “Reporting on such cases should be fair and balanced.”

On an income tax

All 3 agreed that a government shutdown is very possible. Not one of them said a definite "NO, NEVER NO WAY" to an income tax

Nicholls: At least he was honest about his stance. He openly supports a State income tax in conjunction with some cuts. Polls show that people support an income tax when you explain that other taxes will be cut. Neither of my opponents has laid out a plan on how to solve this situation. My plan has been out there 15 months. Let’s walk over to the Legislature today and tell them what we would do. It’s easy to say what you are against, say what you are for.”

Smith: “I would not take any options off the table at this point. Everyone I meet now agrees there is a problem. Tennessee is so far behind the other states that we must do something. We have lost our competitive edge as a State due to high sales taxes.” “Management alone will not solve this problem.” “You layout your priorities, go to the people to sell your idea, and you do not take any options off of the table.” “Nashville alone should not determine what is best for the entire state.”

Bredesen: Weasel Words at their worst:

“I do not “think” and income tax is the answer to the current situation. It is not the polls that influence my stance. There is no easy answer to this. Management is required to solve this problem. Let’s get the ship off the rocks then we can debate where we would like to sail.”

“You should not spend money before you have it. If you want a tax, you should put your programs on the table, get support for the taxes, and administer. Governor Sundquist did not do this.”

“Governor McWherter sold his tax increase in the correct way. Identify the problem, identify your revenue sources, sell the legislation, and then properly administer the tax.”

“Once the landscape is clear, I will be able to be more specific with my proposals.”

On Bredesen’s record as Nashville Mayor:

Smith & Nicholls attacked Bredesen for doing the opposite as Mayor to what he claims he will do as Governor. The point was made that Bredesen left Nashville with a $900,000 million deficit when he left as Mayor. The arena and stadium issues were raised as examples of poor management. They fear that the Republicans will use this track record against him in the general election.

Bredesen:

“When I left office, taxes were still lower in Nashville than the other large Tennessee cities. You always have to ask for a property tax increase periodically as Mayor but we got a lot for that money.”

“The arena deal was a no-brainer for being a great deal. We knew it would loose about $2 million every year but estimates are that it has produced $100 million in new revenues for the city each year.” “The stadium deal was approved by the people of Nashville with full knowledge of the package.” “Cities the size of Nashville have to put something on the table to get major league sports.”

“I would not change anything in the arena or stadium deal struck in my administration.”

“When times are good, like we had in the 90’s, it is appropriate to spend money on some items. “

“The city deficit figures go up and down so I don’t know what the real number is right now but when I left office Moody’s gave Nashville its highest ranking.”

“As mayor, I identified a need for a stadium, an arena, and a library. I identified the money source and we did it. The issue of what you want and how to pay for it is always on the table.”

On the lottery:

Smith: “The State of Georgia did it the right way with funds going to higher education. If we had a lottery and I was Governor, I would veto any proposal to spend that money on anything else.”

Bredesen: As to whether the funds should be dispensed to students on grades or need: “I would lean toward dispensing funds based on need.”

On Tenncare:

All 3 said they think TennCare is a good idea if properly run. They were pretty much in agreement to blame Sundquist, the computer systems, and the HMOs. Bredesen said the solution was probably to hire experienced administrators from California, Texas, or Minnesota to clean up the waste. Smith & Nicholls said that the Governor should take this responsibility. No outside help is warranted. All 3 felt they could manage the system much more efficiently and make it work as a model for all other states.

On Teachers:

Again, all 3 were for increased pay for teachers. The lawsuit currently under consideration that could force the State to equalize the pay for all teachers statewide was mentioned. All agreed that this could upset any tax plans. Bredesen said he doubts that the courts will rule in favor of equalization but that certainly might force a change in his tax proposals.

Smith said the potential of the court ruling is why no tax option should be removed from the table at this point.” “Other states are raiding our teachers. Georgia offers $15,000 more than Tennessee for teachers. “ “If elected, I will raise salaries for teachers to the national average.”

Nicholls said “70% of our teachers will be retired within 12 years.” “The average tenure of teachers in Shelby County is just 3 years.” “This situation must be addressed now.”

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