Posted on 06/24/2002 3:56:29 AM PDT by GailA
Legislature enters final week in a quandary
By TOM SHARP
Associated Press Writer
NASHVILLE, Tenn. - The threat of a government shutdown looms over the Tennessee Legislature as members scramble this week to balance the state's budget while facing a nearing deadline.
"Is this not the equivalent of looking for loose change in the couch?" Sen. Jim Kyle, D-Memphis, asked the Senate Finance Committee last week.
Lawmakers must battle through budget proposals with names such as DOGS and CATS, even as the possibility of an income tax lingers. And they know any decisions may prove temporary since November elections will put a new governor in charge next year.
But the state's finances can't wait, leaving lawmakers debating complex plans to decide a simple question: How much will Tennesseans pay to keep the state in business? Without a budget, the state cannot legally spend money. It cannot pay prison guards, state troopers or caregivers in mental health institutions. It cannot disburse TennCare health care benefits, repay bonds or pay contractors.
The state Constitution constrains lawmakers, requiring them to balance the budget by the end of the fiscal year on Sunday at midnight. The House and Senate finance committees set a Monday deadline for hearing new tax bills.
Lawmakers on Tuesday will finish a budget that does not raise or create new taxes. Known as the DOGS, or Downsizing Ongoing Government Services, budget, it serves as a last resort to preventing a shutdown.
The House could vote on the DOGS budget, which cuts $750 million from state spending and shifts a sizable burden onto local governments, as early as Thursday. The Legislature wants to allow time to override a promised veto by Gov. Don Sundquist.
John Tighe, chief of TennCare, the state's health care program for 1.4 million poor and uninsured, said the budget would take benefits away from 200,000 people and shift charity care to struggling, rural hospitals, among others.
"I'm trying to be as clear as I can. This is insane," he said. The Legislature's options remain unchanged from a week ago, although lawmakers refined several plans during a hectic and emotional week marked by the suicide of Rep. Keith Westmoreland.
House Speaker Jimmy Naifeh did not alter his 4.5 percent income tax plan, which also would remove the 6 percent sales tax from food, non-prescription drugs and most clothing. The tax failed by five votes to get the 50 it needed to pass last month. Naifeh says he's still working to get majority support, but he lost one pro-tax vote with Westmoreland's death.
Lawmakers revised two other options considerably. The Continuing Adequate Taxes and Services, or CATS, budget would raise sales, business, tobacco and alcohol taxes for one year but put off a long-term solution until a new governor takes office next year.
Lawmakers changed the CATS budget to increase to the excise tax on business profits by .25 percent instead of the originally proposed .75 percent. It imposes a one-time $100 tax on commercial trailers instead of a yearly registration. It also increased how much local governments could collect in sales taxes on high-cost items.
The revisions also include closing a loophole regarding royalty payments and extending an 8.75 percent statewide sales tax to cable and satellite television services, newspaper sales, and coin-operated amusement machines.
Senate sponsor Doug Jackson, D-Dickson, said a list of cuts totaling $100 million would be presented this week. The plan also raises taxes on a pack of cigarettes from 13 cents to 43 cents, and 80 percent increases on the levies for beer, liquor and wine.
Critical to the plan is an 8.75 percent statewide sales tax, which would raise an estimated $771 million.
The state sales tax is now 6 percent. Local governments can add up to 2.75 percent, but most do not add the maximum. The CATS plan would leave the current local option taxes in place, but raise the rate to the maximum of 8.75 percent, with the state capturing any difference from the current rate. Sixty of the state's 95 counties would see sales tax increases. The biggest change to the DOGS budget was the redirection of $360 million in taxes the state shares with city and county governments to K-12 education.
While preserving education funding, local governments would likely either raise property taxes to make up the losses in state funding or cut services.
"Instead of one budget crisis, you'll have 349 city crises and 95 county crises," said Ross Loder, deputy director of the Tennessee Municipal League.
The House Finance Committee, which compiled the DOGS budget over three weeks of lengthy hearings with state departments and budget staff, also made changes to prevent the elimination of the departments of tourism and economic development. Even so, the proposal cuts about 2,500 state jobs. Saving the tourism office required redirecting a $5 million tax break for Sevier County, home to the Smoky Mountains, to the department. The economic development budget was cut 42 percent and the state's Rainy Day Fund would fund the remaining operations.
Rather than revert TennCare to a Medicaid program, children whose families make less than twice the federal poverty level would remain eligible for state health benefits. Adults who make less than half the federal poverty level but do not otherwise qualify for Medicaid, and people who make less than the federal poverty level and cannot get commercial insurance, would also receive coverage.
The TennCare changes would cost the state about $41 million less than going back to the Medicaid program. "With no new revenue, this is where we are," said House Finance Committee Chairman Matt Kisber, D-Jackson. "The whole last three weeks have been devoted to finding an alternative to shutting down the government. It is the desired course of no one, but we have an obligation and responsibility to have it ready."
All you need to tell them is basically, NO DOGS, NO CATS, NO INCOME TAX, CUT YOUR GROSSLY BUDGET BUDGET AND GO HOME!
You can email ALL of them at once by sending one email to this adress: teaparty@nashville.com
You can also call them toll free 800-449-8366 + 1 + the last 4 digits of their Nashville legislative office or capitol switch board 615-741-3011
OR TN GENERAL ASSEMBLY Their email may be swamped so a phone call would be the best method of contacting them.
Budget's witching hour a week away Pick one: cuts, taxes - or shutdown
By Richard Locker locker@gomemphis.com
June 24, 2002
NASHVILLE - Tennessee begins a weeklong countdown today toward some resolution of the long legislative stalemate over the state budget and taxes - or a potential shutdown of government at midnight June 30.
After a weekend recess, state lawmakers return to the Capitol today to either patch together a no-new-taxes budget with large spending cuts, enact a sweeping tax reform plan centered on an income tax or adopt some middle-ground approach that combines raising other taxes with more modest spending cuts.
The General Assembly has put all but the finishing touches on a plan to plug a $470 million deficit in the current fiscal year - by spending down most of 35 state reserve funds set aside for such specific purposes as low-cost home loans, highway construction and helping compensate injured victims of criminals and drunken drivers.
But legislators cannot agree on what to do with the budget for the fiscal year that starts July 1. If they don't adopt an appropriations bill by that time, state Atty. Gen. Paul Summers said, the result will be simple but catastrophic:
"On July 1, Tennessee government will come to a halt . . . because the Tennessee Constitution says, 'No public money shall be expended except pursuant to appropriations made by law.'
"No one guards the prisons. No one patrols the highways. No one treats the patients in state hospitals. No one serves the mentally ill. No one processes child support payments. No one handles TennCare applications and payments. No one teaches summer classes in state schools. These are just the tip of the iceberg. The list goes on and on. Everything the state does stops cold," Summers told the House Finance Committee last month.
Haven't we been at the brink before?
Yes, last year. On June 29, 2001, faced with virtually the same choices as today, the legislature hurriedly adopted an "interim" budget to avoid a shutdown. It included funding from nearly $300 million in accumulated proceeds from the national settlement with tobacco companies and provisions to withhold the first monthly payment to local school districts in August.
But the tobacco proceeds are gone,( MY NOTE: this is a recurring yearly blackmail fund not a once only fund) and with the plan to use the various reserve funds this year, those won't be available either.
The House Finance Committee has been working for three weeks to craft a no-new-taxes budget as a last resort if lawmakers can't agree on new taxes. Unlike earlier versions of this approach, the latest plan would spare K-12 schools $367 million in cuts by diverting that amount from money the state now sends to local governments from the investment income tax, the wholesale beer tax and the state sales tax. About $20 million in school cuts would remain.
"The critics are saying that we always use children as a scare tactic. This takes that argument away. We're protecting the children as much as we can," House Democratic Caucus chairman Randy Rinks of Savannah said Friday.
It shifts a revenue problem to local governments, mostly municipalities, just as they are also starting their budget years.
Before the spending-cuts budget is brought forth, legislators who have advanced various midlevel tax plans will make last-ditch efforts to pass them, including the so-called CATS budget that combines $770 million in new taxes and hikes of existing taxes with about $200 million in spending cuts.
And House Speaker Jimmy Naifeh still is working to gain the five or so more votes he needs in the House to pass his 4.5 percent flat-rate income tax plan, which would remove the sales tax from grocery food, clothing up to $100 and nonprescription drugs and exempt the first $15,000 in income for singles and $30,000 for couples.
"We're optimistic that if the House passes it, the Senate will," Naifeh (D-Covington) said Friday. "We are working hard."
Naifeh and other House leaders say that if the tax stalemate is not resolved this week, they would vote for the no-new-taxes budget to avert a shutdown but with the hope that a special legislative session would be called sometime after July 1 to continue work on a tax agreement.
"The income tax or tax reform will not be declared dead until Nov. 5," Naifeh said. That is Election Day, when a half-dozen income tax supporters are stepping down from the General Assembly by not seeking re-election.
The Senate has been virtually a nonentity in the endgame work, its leaders content to follow the lead of the House. But there is a looming fear the legislature's various factions may not be able to agree even on a no-new-taxes budget; that could lead to at least a partial shutdown early next Monday morning.
House Finance Committee chairman Matt Kisber (D-Jackson) said the mood in Gov. Don Sundquist's weekly Wednesday morning meeting last week with House and Senate leaders was "somber with the fear of a shutdown considered a real possibility."
Contact Nashville Bureau chief Richard Locker at (615) 255-4923
So many budget options, so little time
By BONNA de la CRUZ Staff Writer
Lawmakers are expected to decide today or tomorrow whether they plan to raise taxes or make deep cuts in spending for the 2002-03 budget year, which begins in a week.
At least two state senators plan to propose major tax increases that do not include an income tax, while House Speaker Jimmy Naifeh said he was still working to get the three or four votes he needs in the House for a flat-rate income tax.
If they are unsuccessful, House Finance Chairman Matt Kisber said he would push for floor votes on a ''no-new-revenue'' budget on Thursday or Friday as a ''default'' in the face of a June 30 deadline for lawmakers to approve a budget.
The legislative session, which began six months ago, has been dominated for the fourth consecutive year by disagreement over the state's tax system and whether it is sufficient to fund services.
Lawmakers are looking for at least $877 million in new money to maintain state services at current levels.
''The ball starts rolling Monday,'' said Sen. Jim Kyle, D-Memphis.
This morning, the Senate Finance Committee will consider tax plans from senators who are not pushing for an income tax. If they fail, the committee will shift its focus to a no-new-revenue budget prepared by the House, which was to be express-delivered to Senate Finance members over the weekend.
Lawmakers have a spectrum of options but little time to decide.
At one end of the spectrum is a proposal that includes a 4.5% state income tax and a rollback of some sales taxes. That plan is projected to raise $1.1 billion and fund mandatory state services, plus new education programs and raises for state workers and teachers.
At the other end is a no-new-revenue budget that proposes $945 million in cuts and originally included $325 million in K-12 education cuts. Those may not be necessary if lawmakers are successful in shifting tax money sent to local governments to fund education.
In the middle is a plan that would call for a hefty business tax increase coupled with an increase in the sales tax rate to 8.75% for many parts of the state. This measure would be a temporary patch until the next governor and General Assembly take over, said its sponsors, Rep. Frank Buck, D-Dowelltown, and Sen. Doug Jackson, D-Dickson.
As of last week, none of the three proposals had mustered majority support in either body.
''I'm trying to be prepared for the worst-case scenario if there is no money available to fund the budget,'' said Joe Haynes, D-Goodlettsville, chairman of the Senate Democratic Caucus.
The no-new-revenue budget was being fine-tuned by staff members over the weekend.
It initially encompassed $945 million in cuts, including $325 million for K-12 education, removal of 350,000 people from TennCare rolls, and major cuts to most every other state agency. State parks would be closed unless they could become self-sufficient, and two state departments, Tourism and the Department of Economic and Community Development, would be abolished.
In a move to protect K-12 education, the House Finance Committee on Friday opted to withhold a portion of the tax money now being sent to local governments — about $361 million — to erase the education cuts.
City officials will make ''an all-out assault'' on state lawmakers to oppose the taking away of tax revenue, said Ross Loder, deputy director of the Tennessee Municipal League. The assault will include a letter-writing campaign, along with personal visits to lawmakers.
Naifeh and his lieutenants acknowledged that the move probably would translate into higher property and sales taxes on the local level.
If the no-new-revenue budget passes, Naifeh said, he expects lawmakers to be back in special session.
The Tennessee Municipal League also opposes the Buck-Jackson plan, which would raise about $770 million. It takes away some of the potential taxing ability of local governments, Loder said.
The Buck-Jackson plan, a compromise among 23 bipartisan House members and Jackson, also is drawing fire from business interests, which bear the brunt of the increase.
The plan, called Continuing Adequate Taxes and Services II, would raise the sales tax to 8.75% statewide, raise business taxes, and raise taxes on cigarettes and alcohol.
Lawmakers who support an income tax are leery of the measure, saying it does not do enough for state services and would require them to vote for more taxes again next year, because it is a one-year patch.
A plan by Sen. David Fowler, R-Signal Mountain, was explained last week during caucus meetings and may also be presented to the Senate Finance Committee.
The plan would generate $939 million by raising the state sales tax to 8.75%, reducing the tax on food to 5%, extending the sales tax to aviation fuel and, at a lower rate, to non- direct manufacturing energy, taxing alcohol and cigarettes and other changes. The new taxes would expire in 2006, forcing the next governor to outline a revenue plan.
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