TCSA Capitol Update: March 27 - March 31, 2023
A horrific school shooting at a private school in Nashville on Monday impacted the General Assembly in a number of ways this week. Out of respect for the tragedy, House and Senate leadership canceled the consideration of any legislation that evening. Both chambers only held short prayer vigils before adjourning.
As the week progressed, some committees had plans to meet late into the evening on Wednesday night in order to wrap up their work for the year. But when a ceremony was planned for that evening at the Metro Courthouse to honor the victims, the committees revised their schedules to end in time for anyone who wished to attend that event.
Then Thursday morning, the Capitol was the site of a major protest in favor of gun control and better school security. Parents and students flooded into the building, packing the galleries and the space outside the chambers on the second floor of the Capitol. The protest, while peaceful, was noisy at times and caused disruptions of both the House and Senate sessions.
Transportation Modernization Act
The Governor’s Transportation Modernization Act of 2023 (HB321/SB273) was one of the bills scheduled to be heard on the House floor Monday night. The bill was moved to the House’s Thursday morning session where it passed with a 78-12 vote. It will now be headed to the Governor’s desk for his signature. This legislation is a major win for county highway departments with the bill providing $300 million in additional one-time funds in the state aid grant program. Additionally, county associations, with TCHOA Director Brett Howell taking the lead, were able to successfully lobby to get local governments a share of the registration fees paid by electric vehicles and hybrid vehicles. These fees are intended to replace the revenue lost from fuel taxes that owners of these vehicles either don’t pay or pay at a reduced level. County associations are very grateful to the administration and the legislature for the much needed resources this legislation provides.
Business Personal Property Tax
Legislation to enact reforms recommended by the Tennessee Advisory Commission on Intergovernmental Relations on business personal property taxes passed unanimously on the Senate floor. Currently, small business owners have to file a detailed itemized schedule of all their personal property each year. In many cases, the time and effort to comply with filing the schedule is far more costly than the nominal tax they end up paying. This tax is also difficult for assessors of property to administer and audit and for trustees to collect. Under existing law, the smallest of businesses can check a box that they have less than $1,000 worth of personal property and pay a minimum tax. The TACIR report recommended increasing that to $2,000 and adding an additional step. The legislation sets another level at $10,000. (SB384/HB804) was placed behind the budget in the House due to some anticipated costs related to modifying computer systems to enact the new procedures, but the bill is expected to eventually come to the floor for a House vote.
The Governor’s legislation to provide small businesses and families with tax relief made progress this week. (SB275/HB323) enacts a three-month holiday on sales tax on food and makes numerous changes to businesses taxes to provide tax relief to small businesses. In testimony before the Senate Finance Committee, Department of Revenue Commissioner David Gerragano explained that the legislation is holding local governments harmless for any reduction in taxes. Sales of exempt food items will still be reported by retailers to the state, which will send local governments an amount equal to the local option sales tax that normally would have been paid. The state is also increasing the percentage of business taxes that is distributed to local governments to offset any anticipated reductions due to changes made by this legislation.
Sales Tax Administration Fee
A bill, (SB385/HB419), to reduce the administrative fee charged on local option sales tax by the Department of Revenue was placed behind the budget in the House Finance Subcommittee. As the legislation is not currently funded in the Governor’s proposed budget, this was an expected development. County associations are hopeful that either the Governor will fund this in his supplemental budget amendment, which may be presented as early as next week, or the General Assembly will find enough revenue to fund this initiative. The bill was scheduled to be heard in the Senate State and Local Committee on Wednesday, but the committee did not get to the bill before adjourning for the evening. It is expected to pass out of that committee next week when it has its final meeting for the year. If the bill passes and is funded, this legislation would return more than $28 million to local governments when fully implemented. Call your legislators and tell them you support the bill.
Legislation to codify Governor Lee’s stated goal of raising the minimum step of the salary schedule for teachers to $50,000 over 4 years passed on the Senate floor. (SB281/HB329) would raise the bottom rung of the state’s minimum salary schedule for teachers to $42,000 for the upcoming year, then to $44,500 in the following year, then $47,000, then $50,000 by the FY26-27 school year. A fiscal analysis on the amendment indicates that this would require $125 million in the base amount of TISA to be earmarked each year by the General Assembly for teacher salaries (that amount is included in the governor’s proposed budget this year). The analysis estimates that the additional funds would cover the cost of the mandated raises for all school districts in the first two years. Five school districts would have to provide a combined total of $106,142 in additional local funds in FY 25-26 and eight districts would have to provide $1.6 million in FY26-27. There was an effort on the Senate floor to remove a provision that eliminated the ability of school districts to deduct dues from teachers’ salaries for professional organizations, but that failed in a close vote. The bill was scheduled to be heard in the House Finance Subcommittee, but was rolled for a week.
Another bill that would require school districts to make any excess space in a school building available to non-resident students passed out of Senate Education this week on a narrow vote. (HB959/SB973) was also scheduled to be heard in the House Education Admin Committee, but they committee did not get to it. The bill raises concerns, especially for counties experiencing significant enrollment growth. Meanwhile, a second similar bill (SB1419/HB1130) was taken off notice in the House K-12 subcommittee. This bill would have prohibited school districts from refusing a student admission to a public school based on that student’s residential address. The bill would allow students to attend school in other counties or other districts so long as they were a Tennessee resident.
Property Tax Limits
The week started on Monday with a presentation by economist Art Laffer before the House Appropriations Subcommittee. While Laffer praised Tennessee for being a low tax state and acknowledged that we have the 48th lowest property tax burden in the country, he encouraged legislators to consider enacting caps on property taxes or reforms like Proposition 13 in California. While the presentation was not specifically related to the bill, (HB1209) by Speaker Sexton had received an amendment earlier this year to set up a legislative study committee to consider some of these ideas. Lt. Governor McNally took the bill off notice in the Senate and the Speaker followed suit followed suit this week. However, legislators in the Appropriations Subcommittee spoke as if they intend to continue studying these issues over the summer.
After sitting dormant for most of the session, a bill (HB947/SB845) began moving the last few weeks to merge some of the state’s utility oversight boards, but also create a new grant program called the utility revitalization fund. Monies in this fund could be used to mitigate a utility’s operating expenses, including assisting districts with funding depreciation that may result from major improvements made with state or federal infrastructure funds. The bill was recommended by the Senate Finance Committee and is scheduled to be heard by the House Finance Subcommittee next week.