Posted on 06/23/2002 5:19:13 AM PDT by GailA
Plans laid for limiting shutdown Stopgap budget, emergency spending order considered
By Tom Humphrey, News-Sentinel Nashville bureau June 23, 2002 NASHVILLE - Contingency plans are quietly being laid to provide for a partial, instead of complete, shutdown of state government if the Legislature fails to adopt a budget this week.
Faced with a July 1 deadline, legislators will be debating whether to raise taxes or enact a budget that cuts spending to existing revenues. Bitter divisions in the Legislature raise the possibility that both efforts will fail.
"We don't really want to operate under the assumption that the General Assembly will not carry out its constitutional responsibility" to enact a budget. "I really believe they will," said Justin Wilson, deputy governor for policy under Gov. Don Sundquist. "But it's irresponsible not to deal with contingencies." State Attorney General Paul Summers says "a fiscal and legal train wreck of historic proportions" will occur if no new budget is in place at the start of a new fiscal year.
The contingency plans, broadly speaking, call for first trying to postpone the wreck and, if that fails, trying to reduce the damage. In either case, the state could face a flood of lawsuits and major disruptions.
If, by the end of this week, it appears that no budget can win majority support of the House and Senate, the first step will be taken, according to several officials. At that point, a stopgap budget would be proposed authorizing spending - perhaps for as little as 10 days - for "essential services." The idea is to give the Legislature time to keep trying.
If a stopgap budget cannot pass, or expires with nothing to replace it, the second part of the plan would kick in. That would hinge on the governor's power to declare "a state of emergency" and order spending to protect public safety and security.
Wilson said the emergency-spending idea "gets into uncharted waters" and declined to give specifics, saying only that Sundquist "is looking at what powers he would have and what action he would need to take if a government- shutdown situation develops."
A tricky part of a temporary "essential services" budget, said state Comptroller John Morgan and state Treasurer Steve Adams, would be defining "essential services." Continuing the operation of state prisons and institutions for the mentally ill would obviously fit that criteria, while tourism advertising would not.
But many functions of state government are debatable. Education, for example, might be deemed essential in the long run (the state constitution requires operation of a public school system) but not for a short period.
"Does the constitution require education in a 30-day period. A one-day period? A year? That is the sort of issue we are reviewing," said Wilson. While those involved declined to give specifics, Adams said Friday, "I can guarantee you that if this (stalemate) continues, sometime next week something will be slapped together."
The concerns are based on Article II, Section 24 of the state constitution, which declares "no public money shall be expended except pursuant to appropriations made by law."
Basically, Summers told legislators in a speech last month, that means "all state functions and services would shut down." But a formal attorney general's opinion on the subject notes that there are some exceptions to that blanked statement, even without the governor invoking emergency powers.
Some laws now on the books authorize expenditures for specific purposes, but the overwhelming majority of state programs have no "appropriation" as a part of general law, the opinion says.
Specific statutes, for example, authorize paying the salaries of judges, district attorneys general and legislators. Those would pass muster as "appropriations made by law" under the constitution, Summers said in his formal opinion.
But there is no such law appropriating funds to the TennCare program, basic education, the university systems or highway construction.
There are statutes requiring disbursement of state-shared taxes to local governments, though a pending bill would repeal that provision. Another statute authorizes payment of benefits to retired employees.
Last year, the Legislature adopted a statute that authorizes payment of interest on bonds and other state debt without a budget in place.
But in general, there would be no authority to pay state employees, Summers said in his formal opinion. Thus, even where existing statutes authorize expenditures, the accountants handling the paperwork face working without pay.
If state employees work voluntarily, assuming they will later be reimbursed, they risk being held personally liable in court for accidents or mistakes. Legislation that would shield them from liability during a government shutdown passed the Senate last week and awaits only House approval.
Linda McCarty, executive director of the Tennessee State Employees Association, said her organization would advise employees against working without a budget.
"I would advise them not to take the state's responsibilities onto the shoulders of themselves and their families. But, knowing state employees, I think most of them would want to do it anyway," she said. On the lawsuit front, even a partial shutdown could create monumental problems. Attorneys say a state, unlike city and county governments, cannot be forced into a bankruptcy whereby a trustee can order money spent.
But there is speculation that a lawsuit could be brought, citing the constitution's mandate for enactment of a budget, that would lead to a court order. Generally speaking, Summers told legislators, a judge cannot order enactment of a tax.
At least in theory, a judge could order enactment of a budget. In that case, said House Speaker Jimmy Naifeh, attorneys have indicated a court would probably look to a budget that has been discussed, such as the no-new-taxes budget presented to legislators.
"The answer is, we don't know what a court would do," said Wilson, who is a lawyer. "It is fair to say that we are reviewing what has happened in other states. There were some cases, I'm sure, back in the Great Depression."
He declined to elaborate, saying, "I don't want to get too far ahead of myself."
Asked if the governor himself could sue the Legislature for failure to enact a budget, perhaps as part of a "state of emergency," Wilson declined to answer.
"There are a whole variety of scenarios. I don't want to speculate about it," he said. "Nothing has been decided upon yet and we hope, believe, it won't be necessary."
Tom Humphrey may be reached at 615-242-7782 or humphrey@edge.net
Please make as many contacts as you can. TN GENERAL ASSEMBLY
Toll Free calling 1-800-449-8366 + 1 + the last 4 digits of their Nashville legislative office or call the switchboard at (615) 741-3011.
NFIB Tennessee Legislative Update - June 21, 2002 Release Date: 06/21/2002
The General Assembly has used all of its 90 constitutionally permitted legislative days, and now faces a June 30 deadline to pass a balanced budget for the next fiscal year, which begins on July 1. Facing a $450 million revenue shortfall for the current fiscal year, and seeking more than $800 million in new revenue to fund next year's budget, the legislature is struggling to pass a plan that will generate the new dollars they need.
Since none of the current plans has enough votes to pass, however, the finance committees of the two houses are assembling a "No New Revenue," or "DOGS (Downsizing Ongoing Government Services) budget.
In the meantime, legislators hoping to avoid the painful cuts of DOGS are working to assemble any new revenue plan that might pass. The Naifeh income tax bill is still on life support, and the Speaker will certainly run the bill as soon as he thinks he has the votes. Sen. Doug Jackson has issued a revised CATS (Continuing Adequate Taxation and Services) plan that would, among other things,
Raise the corporate income tax rate from 6 percent to 6.25 percent.
Tax commercial trailers at $100.
Decouple excise tax regulations from federal regulations.
Require consolidated filing for businesses.
Increase the single article cap for local sales tax from $1,600 to $5,000.
And Sen. David Fowler has abandoned his confusing plan to raise taxes and hold a referendum on the income tax. Instead he is offering a mTlange of increases in existing taxes and removals of exemptions. The Fowler proposal would:
Raise the state sales tax temporarily to 75 percent (July and August, 2002 only).
Raise cigarette and beer taxes.
Raise the tax on non-direct manufacturing energy from 1.5 percent to 3.0 percent.
Raise the tax on fuel for food production from 1.5 percent to 3.0 percent.
Raise the trailer fee from $50 to $75.
Raise the tax on gasoline and diesel fuel by one cent per gallon.
Raise the corporate excise tax from 6 percent to 6.5 percent.
Raise the state sales tax to a uniform 8.75 percent.
Raise the sales tax on aviation fuel from 4.5 percent to 8.75 percent.
Raise the sales tax on interstate telecommunications services sold to business from 7.5 percent to 8.75 percent.
Raises the local sales tax single article cap from $1,600 to $9,100.
Deletes the sales tax exemptions for petroleum products for air carrier flights outside the U.S.
These are the plans du jour. They are subject to changes major and minor. Consider the impact of these changes on your business. Then contact your legislators immediately and let them know how these tax measures will affect your enterprise.
The General Assembly is scheduled to resume business at 1:00 p.m. Anti-tax rallies will begin at 11:00 a.m.
In other words... living on what you actually make. What a thoroughly preposterous idea!
Although I wouldn't put anything past this legislature, I do think this is a typo.
Amen to that. I feel like we're at the point where the TN government keeps squeezing us more and more, threatening dire cuts, expecting us to blink. I will not blink. Shut it down. Then we'll see who loses this game of chicken.
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