Posted on 02/07/2002 5:08:59 AM PST by GailA
Sundquist proposes 12% boost in revenue
By Richard Locker locker@gomemphis.com
NASHVILLE - Gov. Don Sundquist proposed a 12 percent increase, or nearly $1.2 billion, in state tax revenue Wednesday.
He targeted education, health care, economic development and public employee compensation for the largest increases.
The proposal for the fiscal year starting July 1 would reopen state parks closed since last fall, provide $9.5 million more for "homeland security" and help fund $293 million worth of construction and maintenance, mostly at college campuses, National Guard facilities and state parks.
Sundquist today will unveil his proposal for how to raise the new revenue. He is expected to ask lawmakers again to enact a flat-rate state income tax coupled with removing the sales tax from grocery food, according to legislative leaders. The legislature has declined to enact income tax plans in each of the last three years.
A similar 4 percent flat-rate income tax is one of seven tax options left on the table at the ongoing tax summit involving legislative leaders and Sundquist. The bipartisan House and Senate leaders are trying to reach a consensus on a tax plan to present to the General Assembly.
The proposed $1.2 billion state revenue increase - $1,167,000,000 - is the bottom line in the first-ever "State Taxpayers' Budget" released by the Sundquist administration. The pared-down document details spending and revenue derived exclusively from state tax revenue, which would total $9.655 billion if the budget is approved as proposed.
The simplified budget (on the Internet at www.tennesseeanytime.org) is designed to counter the perception fostered by the total state budget of more than $20 billion that spending is out of control. The larger "official" budget, to be released Friday, accounts for billions in federal money, money collected by the state and sent directly to local governments, and nontax revenue such as college tuition and the $350 million a year in child support payments that state governments must collect and distribute.
Slightly more than one-third of the $1.2 billion increase, or about $412 million, would address budget deficit problems building for three years: $309 million to close a budget deficit next year and another $103 million to replenish the state's Rainy Day reserve fund after the current year's budget shortfall.
That leaves nearly two-thirds of the increase, or $755 million, for new spending, divided into three broad categories: $249 million for increases that are mandatory or obligated by federal, judicial or legislative order; $437 million for "needed improvements" - such as $70 million for a statewide reading and preschool initiative - and $69 million as the taxpayers' share of $293 million in construction and maintenance.
The budget recommends funding the priorities the governor outlined in his State of the State address on Monday night, including:
K-12 public schools - The big ticket item is $70 million for the reading and preschool program, approved by the legislature last year but not funded.
Higher education - The governor proposes $89 million for an "excellence" initiative at colleges and universities, including efforts to recruit quality faculty, obtain new technology, increase financial assistance to students and address maintenance needs.
Public employees - The governor is recommending differing salary and compensation package improvements among three classes of public employees: general state employees, public school teachers and higher education employees. He is seeking a 5 percent salary increase for state employees, 3.5 percent for higher education employees and 2.5 percent in the portion of teacher salaries paid by the state. The state would begin paying the cost of teachers' liability insurance. The total compensation package represents a $135 million increase.
Health care - The budget recommends a $114.5 million increase in the state's portion of TennCare, including $89 million for a rate increase for TennCare's managed care organizations.
Economic development - The governor proposes nearly $14 million more for the Tennessee Infrastructure Improvement Program, which provides grants for cities and counties to use to extend utilities and roads to industrial plants.
Homeland security - The budget proposes $9 million to prepare for emergencies, including water supply protection, bomb and arson investigations, military equipment, emergency management, health services, food and agricultural protection, equipment for state troopers and security at state facilities.
Contact Nashville Bureau chief Richard Locker at (615) 255-4923
Sundquist reintroduces income tax
By Rebecca Ferrar, News-Sentinel Nashvilel bureau
NASHVILLE - The governor, seeking to find an extra $1.16 billion in state tax revenue to fund a 12 percent boost in spending, resurrected a flat-rate income tax proposal Wednesday.
The latest tax plan by Gov. Don Sundquist was among 18 options being debated in a budget summit. Legislative leaders narrowed the plans to eight, focusing on sales, payroll and income taxes. A statewide property tax did not make the list.
Details of the governor's plan to raise the $1.16 billion will be presented today along with the complete version of the 2002-03 budget. The "taxpayers' budget," or an abbreviated budget, focusing on state dollars, was presented Wednesday.
This is the second, flat-rate income tax plan Sundquist has presented, though he has continued to advocate for such a plan. The latest comes during his last year in office.
"He's still optimistic and hopeful that legislators will also see the benefit of compromise and will continue to keep open minds," said Alexia Levison, the governor's press secretary. "His main goal is to reform taxes, not raise taxes."
Sundquist and bipartisan House and Senate leaders have been meeting at the executive residence to find a solution to the estimated $1.2 billion budget shortfall in the next fiscal year - the one issue the group agreed on last week.
At the same time, legislative leaders have continued the gridlock that has held at bay a long-term solution to the perennial budget shortfalls for three years. Apparently, Wednesday's meeting got heated at times.
"Members have their own personal opinions about what needs to be done and at times they're excited," said House Finance Committee Chairman Matt Kisber, D-Jackson, in a press briefing following the meeting. "Compromise is never an easy process."
Under an agreement with legislative leaders, the meetings are covered by two pool reporters - one for print, one for broadcast. The pool reports include the content of the discussions but do not identify individuals making specific comments.
A list detailing the winnowed options is to be released today, and the group is scheduled to meet again next Wednesday.
Despite the debate, members of the group said they are getting closer to consensus.
"I'm encouraged, I'm optimistic, and we will continue working," said Senate Democratic Caucus Chairman Joe Haynes of Goodlettsville.
All plans on the list would raise about $1 billion. The options are:
* The governor's plan with no details provided.
* A 4 percent flat-rate income tax combined with rolling back the state sales tax on food, clothing and non-prescription drugs.
* A graduated income tax based on income combined with sales tax rollbacks.
* A 1-cent sales tax increase of the 6 percent state sales tax combined with a 25-cent increase in cigarette taxes, expanding the Hall income tax to 50 percent of capital gains and a vehicle tax based on value. The car tax would be $50 the first year while the tax on a vehicle's value is implemented.
* A plan to extend the state sales tax rate by 3 percent on all services not now taxed, including health care, combined with a rebate of sales taxes on groceries to impoverished families. * A 10 percent uniform sales tax rate (state and local) on all goods with the removal of the sales tax on food on Jan. 1, 2003. This would be combined with a special tax commission or a constitutional convention to find a long-term solution.
* A uniform sales tax rate of 5.25 percent (state and local) extended to services that are not taxed and goods now exempted.
* A 1.5 percent payroll tax, details of which are still being considered. Employers could pass the tax along to employees, making it, in effect, an income tax.
THE TENNESSEE BUDGET
By BONNA de la CRUZ and DUREN CHEEK Staff Writers
Gov. Don Sundquist will announce a flat tax proposal today to fund a $9.7 billion budget that gives major emphasis to education and early childhood development and raises the pay of state employees, K-12 teachers and higher education personnel.
The budget released yesterday is the first of its kind because it spells out only how Tennessee tax dollars are spent. It calls for $1.167 billion in new tax dollars next fiscal year, which starts July 1.
Sundquist said he preferred his tax proposal but said he will continue to meet with lawmakers to forge a compromise. Legislative leaders remain divided over raising revenue through a sales tax or a state income tax.
In a meeting between Sundquist and key lawmakers yesterday, a list of 18 tax plans was whittled to eight, with at least seven proposed by individual lawmakers willing to advocate them.
They include four plans built around raising the state sales tax or expanding it to untaxed services and goods; three plans built around a state income tax, including the governor's; and a payroll tax plan.
The group has met for three weeks, inching closer, they hope, to an agreement.
However, there has yet to be a meeting of the minds between two factions, resulting in tense moments during yesterday's meeting.
There are those who advocate more sales taxes, saying it is the only politically feasible option, especially during an election year. Then there are those who advocate an income tax because they say it will sustain the state over the long term, while sales tax collections are deteriorating because of Internet sales.
''Concessions will have to be made on all our parts,'' said Sen. Joe Haynes, D-Goodlettsville, who is firmly entrenched against an income tax and proposes raising the state sales tax from 6 cents on the dollar to 7 cents on the dollar, along with increasing taxes on tobacco and car tags.
He said there were not enough votes to pass an income tax in the Senate. Meanwhile, key House leaders are not ready to support a sales tax increase as anything but a temporary bridge to an income tax.
''Everyone is working, and we're making progress,'' Sundquist said after the meeting. ''It's good that people are making proposals to solve the problem. Everyone needs to judge those sales tax plans on how long they would last.''
Sundquist, for his part, is willing to discuss a sales tax increase or sales tax expansion to services as a temporary measure until an income tax is implemented, his spokeswoman, Alexia Levison, said.
There is no leading contender among the tax plans. Nearly all raise the necessary $1.2 billion to fund Sundquist's budget.
Called the ''State Taxpayers' Budget,'' the $9.7 billion budget is up about $600 million, or 12%, over anticipated spending this year. State Finance Commissioner Warren Neel said the growth percentage was misleading because the state is making up a large hole from this year's use of one-time funds and lower-than-expected sales tax collections.
Neel said the Sundquist administration had decided to isolate state funds in a separate budget to ''dispel a lot of myths'' about what is discretionary spending and what is not.
The full budget document, including federal funds, will be released tomorrow.
''Unfortunately, this is not about the future of Tennessee in the minds of some. It's all about 'What's in it for me.' We have to go beyond this,'' said Neel, who laid out the budget to the House Finance Committee yesterday.
Neel said that in his estimation, just $300 million to $400 million in the budget is discretionary. The balance is mandated by state or federal laws or court orders, he said.
Rep. Bill Dunn, R-Knoxville, did not buy the argument that the state has limited discretion over spending.
''I feel like the guy whose friend is a drinker and you tell him to quit drinking for his health, and he ignores you. I've been pointing out specific cuts over the years, and they've ignored me,'' he said, saying he needs more time to find what to cut.
His minority leader in the House, however, Rep. Steve McDaniel, R-Parkers Crossroads, said he did not see any fat in the budget. ''I think the legislature will make every reasonable effort to fund the programs,'' he said. ''It's an extremely conservative budget.''
Rep. Jamie Hagood, R-Knoxville, said she would not support a budget that includes nearly $1.2 billion in new funding. ''It will be a challenge to create that new revenue,'' she said, adding that she needed more time to identify potential cuts.
Former House Majority Leader Jere Hargrove, D-Cookeville, said he could not imagine that the legislature would ante up all the money Sundquist wants. ''The first thing we will do is to go through this budget and see what we can take out,'' Hargrove said.
He disagrees with constituents who tell him the state needs to make across-the-board budget cuts. He said he says to them, ''Let's just close five percent of the prison cells. Which ones do you want living near you? Drug dealers? Rapists? Child molesters?''
The budget recommends $437 million in new spending, including salary increases totaling $135 million 5% for state employees, 2.5% for teachers in K-12 and 3.5% for higher education personnel. The raises would be effective July 1.
Representatives of the state's employees said they were happy with the salary proposal, but representatives of the state's teachers were not. ''I really hate they tried to make a distinction between salaries for state employees and teachers. State employees deserve every penny that they earn but so do teachers,'' said Jerry Winters of the Tennessee Education Association.
The logic, Neel said, is that teachers can get additional raises from their local governments.
Among new spending:
K-12 education: $2.8 billion, up from $2.6 billion this fiscal year. Additionally, the state will pick up the cost of liability insurance for teachers at a cost of $7 million.
Reading program: $70 million, scaled back from the $90 million program passed last year but not funded. It would fund pre-kindergarten for at-risk 4-year-olds, an early reading program and catching-up programs for students to prepare for high school exit exams.
Higher education: $1.2 billion, up from $1 billion this fiscal year, including $89 million for faculty retention and recruiting, increased operating money and student assistance awards.
Health and agriculture: allot $25 million for health and agriculture from the money the state is receiving from tobacco companies for not suing them for the cost of treating tobacco-related illnesses.
Help them all out of office this November if they go along with this bull.
$249m for mandatory, obligated, or judicial order? This arises from creating entitlement programs for a class of beneficiaries resulting in law suits from parasites who have a "me too" attitude.
Don't you love it when they use titles to obfuscate the obvious? A "payroll tax" versus an "income tax". We all know where it's coming from now don't we?
He disagrees with constituents who tell him the state needs to make across-the-board budget cuts. He said he says to them, ''Let's just close five percent of the prison cells. Which ones do you want living near you? Drug dealers? Rapists? Child molesters?''
More like petty drug users Hargrove. Besides at least I would know up front they want to steal from me. Unlike the legislators in Nashville who could get jobs as ventriloquists.
Am I bitter, am I angry YOU BET YOUR SWEET BIPPY I AM. Each year nearly two dozen Tennesseans are MURDERED by a recidivist on probation or parole! All so some pol can build MORE GOLF COURSES. And enrich the pockets of his friends or relatives in Higher Ed
New 'taxpayers' budget' shows $603 million hike
By Joe White
Gov. Don Sundquists state taxpayers budget, emphasizing only those dollars the governor and the legislature can actually redirect, was posted Wednesday at $9.65 billion for the upcoming fiscal year.
The formal budget including federal funds, child support payments, tuition checks from college students, hunting license fees and other pass-through payments will be unveiled Friday, Finance Commissioner Warren Neel said.
The new taxpayers budget is $603 million greater than the same figure this year. The big budget, which was $19.6 billion this fiscal year, will logically exceed $20 billion when announced on Friday.
Tennessees budget traditionally accounts for every dollar that passes through state accounts. The state taxpayers budget is modeled on the type used in Georgia and concentrates purely on state revenues. But it is an illustrative document, not the legal budget. The little budget is online at www.TennesseeAnyTime.Org
If the budget had been cast in the same form for the past two years, it would have looked so:
* Fiscal Year 2000-2001 (last year) -- $8,567,192,500
* FY 2001-2002 (current) -- $9,051,534,450
* FY 2002-2003 (next year) -- $9,654,632,900
Neel told reporters and legislators on Wednesday that the new $9.65 billion budget would require a 12 percent increase in state-generated revenues. But were standing in a $600 million tobacco hole, he said. More than half of that increase is necessary to purchase what was paid for last year with Tobacco Trust Fund money -- the rest is a more manageable 5 percent growth figure, he noted.
The hole is made up of:
* Revenue shortfall -- $312.5 million
* Structural deficit -- $193.8 million
* Total -- $506.3 million.
If the revenue growth next year manages $197 million, which Neel officially forecasts, the hole shrinks to $309 million. But the finance commissioner expects to put $103 million (roughly) back into the Revenue Fluctuation Account (Rainy Day Fund), which now has only $178 million in it.
The above figures are changeable, Neel pointed out. Revenue shortfall is improved slightly from several months ago because the state financial planners now forecast some improvement in the economy before June 30, the end of the fiscal year. In that view, the worst of the revenue shortfall is over but the state wont draw even by the end of the year.
Structural deficit is the amount of recurring cost that was funded this year with one-time money -- like paying the rent by selling Grandmas gold watch instead of getting a job. A week ago it would have been shown at $230 million, this week some $40 million plus has been shifted (on paper) to budget improvements, although actually they are programs already in place.
Neel said that some $248.9 million will be needed for things required by the federal government, by court order, or because of contracts to which the state is bound.
Almost $69 million would be used in capital outlay requirements.
Neel said the governors improvements would total $437.3 million.
Among those improvements:
* The governors elementary school reading initiative, mentioned in Mondays State of the State speech, at $70 million. The program is the same as proposed last year, but Neel said some additional $20 million in federal funds has been found to lessen the cost of implementation. And the implementation would be more conservative, he said.
* Salary hikes totaling about $135 million:
* $40.7 million for teachers, about a 2.5 percent increase on July 1, 2002
* $41.4 million for higher education, about a 3.5 percent increase on July 1.
* $53 million for general state employees, a 5 percent pay increase.
* Local teachers have resources for other salary increases from local government. Higher education can make up pay from tuition increases, Neel noted. State employees are generally paid 70 75 percent of the state average for their job skills, he said.
* TennCare in state dollars: The $1.898 billion budget breaks down to $70.9 million for administration; $1.21 billion for physical and mental health services, $216 million for waiver and crossover services not directly related to TennCare and $397 million for nursing home programs which are used to draw down federal dollars under the TennCare umbrella.
Some 51 cents of each state taxpayer dollar would come from sales tax, and 11 cents from franchise and excise taxes paid by businesses. Some 12 cents would come from undetermined new revenue, according to the state document.
The size of the new 12-cent chunk would the weight of the taxpayer dollar -- currently the state taxpayer dollar 55 cents sales tax and 13 cents F&E taxes.
Here are the highlights of Gov. Don Sundquist's proposed $9.6 billion budget for fiscal 2002-2003. For the first time the budget does not include federal dollars and pass-through money over which the state has no control, such as tuition and child support payments.
* K-12 education. It recommends $70 million in new spending for the governor's Reading Initiative, which was passed but not funded by the General Assembly last year. The Reading Initiative includes funding to ensure every child can read by the end of third grade; pre-school for at-risk 4-year-olds; special support for educationally at-risk children; Gateway test preparation for students and teachers; a mentoring program for first-year teachers; and increased scholarships to attract high quality teachers.
Other improvements include $45 million to maintain full funding for the Basic Education Program and nearly $41 million to fund the state share of a 2.5 percent salary increase for teachers beginning July 1.
* Higher education. The governor's budget recommends spending nearly $89 million to fund the Higher Education Excellence Initiative. The initiative will include efforts to recruit and retain quality faculty; support technology initiatives; address maintenance needs and increasing operating costs; increase financial assistance to students; and fund the second installment of a $30 million appropriation goal to make the University of Tennessee one of the top 25 public research universities by 2008.
Also covered under Higher Education improvements are more than $41 million for a 3.5 percent salary increase for higher education employees, and $6 million for this year's installment of the settlement of the Geier desegregation lawsuit. As part of the settlement, filed by in 1968 professor Rita Sanders Geier, the state promised to spend millions of dollars toward making Tennessee State a more attractive school to students of all races.
* Homeland security. The governor's budget calls for nearly $9 million to protect Tennesseans from the threat of terrorism and to further prepare the state for emergencies. Besides supporting the new Office of Homeland Security, funds will be provided to various departments for water supply protection; bomb and arson investigations; military equipment; emergency management; biological and other local health services; food and agricultural protection; criminal intelligence analysis and investigation; additional trooper equipment; and additional security of state facilities.
* Economic development. The governor recommends an increase of more than $15 million for improvements to economic development. These include nearly $14 million for the Tennessee Industrial Infrastructure Program, which provides grants to local governments for infrastructure, industrial site preparation and industrial training, and $1 million for development district grants. Other improvements include development of high technology industry and funds for the Black Enterprise Conference, which is designed to develop minority businesses in Tennessee.
* Health care. The budget provides nearly $1.9 billion for TennCare. The spending increases include $89 million to provide capitation rate increases for managed care organizations and behavioral care organizations; a pharmacy inflation increase and increased dental services; $10 million to provide funding for an open enrollment period; $8.5 million to maintain and expand the mental retardation home and community based services waiver; $5.5 million for nursing home facilities and to meet increased Medicare cost sharing; and $1.6 million for the TennCare share of improvements in the Department of Children's Services.
* State parks. The governor recommends a $2.5 million improvement to operate state parks and an additional $3 million to replace the previous special non-recurring appropriation for maintenance.
* Rainy Day Fund. The governor's budget would increase the rainy day fund by nearly $103 million by June 30, 2003. This reserve fund, which is required by law, allows services to be maintained when revenue growth is slower than estimated in the budget. The fund's current total is $178 million, but lawmakers may use some of it this year to balance a $350 million budget deficit.
* Pay raises. The governor recommends a 5 percent salary increase effective July 1 for state employees at a cost of $49 million, and recommends $20 million to fund classification-compensation salary adjustments for state employees.
Sundquist to release $1.2B tax revenue plan
by Tom Sharp Associated Press
NASHVILLE -- Gov. Don Sundquist will release his plan to raise about $1.2 billion in new tax revenue today.
Speech highlights (se above post)
Here are the highlights of Gov. Don Sundquist's proposed $9.6 billion budget for fiscal 2002-2003. For the first time the budget does not include federal dollars and pass-through money over which the state has no control, such as tuition and child support payments.
Sundquist has been guarded about details of the plan. It may include a flat rate income tax and other changes to the tax system similar to plans he has introduced or supported during the last three years of budget debates.
The governor also has supported various business taxes. He also has suggested taxing compensation above $100,000 to the owner of at least 1 percent of a business. For sole proprietors, such a tax would function as an income tax.
What he would spend the new money on was released Wednesday by Finance Commissioner Warren Neel in the first State Taxpayers' Budget.
For the first time, the money derived from state taxes is dealt with in a separate document. The total state taxpayer budget as proposed by Sundquist is $9.6 billion.
That includes $437 million in new spending in education, homeland security, economic development and health care. It also includes an increase of $249 million in spending on federally mandated, court ordered or contractual programs.
The budget would require $1.2 billion in new revenue. Nearly half of the new revenue would be used to cover what Neel calls the "tobacco hole" the state is already in -- a $350 million shortfall in the current year budget that has to be funded again next year, plus replacing more than $200 million in one-time money used to fund ongoing programs.
Much of that one-time money came from the $560 million in tobacco settlement proceeds the state used to make the books balance last summer.
"We're trying to dispel a lot of myths about what the budget that Tennessee taxpayers fund looks like," Neel said of the new accounting method. "We've stripped out all those monies not related to the taxpayers of this state."
Neel said $1.2 billion in new state tax income would represent an increase of about 12 percent over the current year. He said about 7 percent of that is attributable to the "tobacco hole."
"If we're ever to solve this continuing effort to mask the state's real needs we're going to have a growth rate that's astonishing at least one year," Neel said. "Whenever we cover the structural deficit and one-time money we're going to have a huge growth rate, and with every passing year when we don't address the problem that rate gets larger."
The total budget will be released on Friday. It is expected to top $20 billion for the first time.
Neel said the new spending "emphasizes the need to give our children a bright start in life, through quality education, reliable health care and safe and secure communities. We must solve the state's revenue shortfall to meet Tennessee's needs."
The Taxpayers' Budget is designed to eliminate confusion associated with federal funding and pass-through funds, such as tuition and child support payments, that are listed in the total budget document.
For example, the state's current $19.5 billion budget contains $9.2 billion in state money and $7.1 billion in federal money. The rest comes from pass-through funds, double-counted money, and user fees dedicated to a specific purpose.
"This is something that should have been done long ago," said Rep. Dewayne Bunch, R-Cleveland.
House Speaker Pro Tem Lois DeBerry said she doesn't know whether it will make any difference in the debate over changing the state's tax system, "but people who are running from the truth can no longer pull figures from the air."
The governor and legislative leaders met Wednesday and narrowed a list of 18 possible tax plans to seven.
They include two versions of an income tax; a 1.5 percent payroll tax; a combination plan that increases the sales tax, "sin taxes" on alcohol and tobacco, capital gains taxes and a tax on the value of automobiles; a 3 percent sales tax on services; a unified sales tax of 10 percent; and extending the sales tax to services and exempted items and lowering the overall rate from 6 percent to 5.25 percent.
Spending increases in the governor's proposed budget include:
* $70 million for the a reading initiative, which among other things is designed to ensure every child can read by the end of third grade. The General Assembly approved the program last year but didn't fund it.
* $41 million to fund the state share of a 2.5 percent salary increase for teachers beginning July 1.
* $89 million for higher education, including more than $41 million for pay raises.
* $9 million for homeland security.
* $15 million for economic development.
* $114 million for TennCare.
* $49 million for a 5 percent salary increase for state employees, plus $20 million to fund classification-compensation salary adjustments. Classification adjustments are targeted toward employees whose state salary is most out of sync with what they could make in the private sector.
"This budget is a balanced investment in our future that offers promise and opportunity to our children," Sundquist said.
On the Net:
Full text of the State Taxpayers' Budget: www.tennesseeanytime. org
Also, I doubt that protesters will be allowed to drive around and honk or even gather around the Capitol. Homeland security has taken over. They have barriers up everywhere and even armed national guard patrolling some streets.
By the way, Valentine & Gill had a bit of a squable. Van Hilleary went on Valentine's show and signed some type of no-tax pledge. Gill said that did not count because it was not the "official" pledge document.
The Media Tax
Impose a 30% tax on all revenues ( after accounting for expenditures ) generated by newspapers, television, and radio. Establish a bureau that will strictly enforce the tax, and will severely prosecute any media industries that engage in Arthur Anderson type accounting practices to evade the tax.
I'm certain you'll hear a lot of screeching from the limosine liberal types if that is proposed.
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