TCSA Capitol Update

Week of April 15 - April 19, 2024

Legislature Lurching Toward Adjournment

Capitol Hill observers often note that people who are unfamiliar with the legislature greatly underestimate the conflicts between the House and Senate. Those differences were evident this week as the General Assembly passed the state budget and worked to resolve a handful of major issues. The budget itself passed easily, but major disagreements remain on school vouchers, franchise and excise tax changes, the Comptroller’s reappraisal bill, and more. And while nowhere near as large a threat as a property tax cap, county associations also found themselves suddenly battling a property tax break intended to help preserve the agriculture industry in Tennessee.

State Budget Passes on Thursday

The budget itself was a rare issue where there was virtually no disagreement between the House and Senate (at least in public). It seemed to pass as smoothly as it has in many years. In part this may be because of less money to argue about. With revenues flattening, both chambers appeared committed to adding very little new recurring spending and making as few changes as possible to the Governor’s budget. Strangely, this included leaving the full funding in the governor’s budget for his universal voucher proposal, even though the bill has made no progress for weeks. The budget also includes a set aside for the maximum amount of refunds of the state’s franchise and excise tax. The legislation reforming the F&E tax passed in very different forms in the House and Senate and is headed to a conference committee to resolve the differences between the two chambers. The competing versions are several hundreds of millions of dollars apart in the amount of refunds provided to corporations. As far as the budget goes, it preserved enough non-recurring funds to cover the three years of refunds proposed by the governor and approved by the Senate rather than the more modest refunds in the House version. On the floor of both chambers, the main arguments about the budget came from Democrats who criticized the budget for doing too much to provide tax breaks for big corporations and not enough for low-income and middle-class Tennesseans. The minority party proposed amendments to redirect the money set aside for school vouchers and invest it in k-12 public education. Those amendments were defeated along mostly party-line votes. The budget passed both chambers in the same form and is headed to Governor Lee to be signed.

School Vouchers

Rumors swirled all week about schemes and plots to attempt to get a universal school voucher bill to the floor for a vote, but none ever materialized. The general consensus is that the bill cannot make it out of the House Finance Committee, and it is questionable whether it has enough support to pass on the floor of either chamber. Still, the fact that it is funded in the budget has its opponents on edge. 

Some legislative leaders are still holding out hope that a compromise can be found, but there has been no indication that the House and Senate have found agreement on any of the major issues dividing the two chambers. The House remains opposed to the Senate’s open enrollment portion of the bill and committed to its proposals to reduce testing in public schools and redirect some education funding. The Senate opposes all the additional public education spending in the House version. Since those additional dollars were not included in the budget that passed both chambers this week, it appears certain that those concessions will not be made. Some broad education bills that could have carried an amendment to include vouchers were on the House floor Thursday, but no such amendment was filed. With the General Assembly expected to adjourn for the year sometime this next week, the clock has almost run out on this initiative.

Surprise Push to Expand Greenbelt 

A last-second initiative to expand the greenbelt property tax relief program for farms and forestry properties moved out of the House Finance Committee on Wednesday and appears to have leadership support in both chambers. County associations have seen some version of a bill for several years to raise the cap on the number of acres that qualify for greenbelt tax relief. Currently, that program is capped at 1,500 acres per owner per county. A bill was filed this year to raise that cap to 5,000 acres. HB2054/SB1659 was later amended and scaled down in the House to raise the cap to 3,000 acres. Still, the fiscal analysis on the bill showed it would cost local governments in excess of two million dollars in property taxes statewide. As a result, when it reached the Finance Subcommittee, the bill was placed “behind the budget.” Usually, once bills are in that posture, they are done for the year. Early this week, county associations began hearing this proposal may get resurrected. 

One of Governor Lee’s initiatives to create a farmland trust to provide state-funded incentives to keep farmland in agricultural production had died last week in the Senate Energy, Agriculture and Natural Resources Committee, even though the bill is believed to have broad bi-partisan support. After that happened, the $25 million in the Governor’s budget for the program was redirected to other priorities. Suddenly, the greenbelt bill showed up on a list of bills to be approved by the Finance Committees. County associations scrambled late Tuesday and early Wednesday morning to contact members of the House Finance Subcommittee. That subcommittee held a marathon meeting on Wednesday to consider well over 100 bills. When HB 2054 came up, Will Denami, representing county property assessors, testified about the potential impact of the bill and argued that the legislature needed a better understanding of how these tax cuts will impact individual counties before passing the measure. In an 8-6 roll call vote, the bill barely made it out of subcommittee, despite having support of leadership and more than 50 Republican co-sponsors signed onto the bill. When it came up later that evening in the full Finance Committee, debate was immediately cut off and the bill was approved on a voice vote. It was scheduled for discussion on the House floor yesterday, but the chamber didn’t get to the bill before adjourning for the week. The bill is expected to move in the Senate next week as well.

Comptroller’s Proposal for More Frequent Reappraisals

Another example of House and Senate disagreement was the Comptroller’s bill to shorten the window for reappraisals. SB1946/HB2057 was on the Senate floor for a vote this week and passed 29-0. Meanwhile, the bill hasn’t moved in the House since it was first heard on the House floor on March 7th. That day, numerous Representatives raised concerns that the bill was a major tax increase, when instead, it is intended to keep the tax base whole and help prevent rate increases. It appears that perception holds sway in the House, despite the fact that the bill passed on the Senate floor without a single “no” vote. The bill’s sponsor and the Comptroller’s office have indicated that there is not sufficient support to get the bill out of the House. 

Local Option Sales Tax and Groceries 

A proposal to allow a reduction in local option sales tax on groceries passed the Senate this week in a limited version. Originally, SB2520/HB2641 would have allowed both cities and counties to reduce the rate of local option sales tax on groceries or eliminate the tax altogether. The broader version of the bill raised concerns that it could allow a municipality to unilaterally reduce sales tax for county schools, since the first half of local option sales tax goes to K-12 education funding. A drafted amendment to allow the county to set a reduced rate countywide raised concerns from municipalities that didn’t want to see the county reduce their revenues. Ultimately, a limited compromise version of the bill passed in the Senate that only allows municipalities that levy a local option sales tax rate in excess of the county rate to reduce or eliminate that additional levy. Those excess levies are not shared with schools, so the municipality’s choice to reduce the rate would not affect county school funding. After passing in this form in the Senate, the House concurred in the amendment and sent the bill to the Governor’s desk for his signature. 

County Mayor’s Budget

HB2019/SB2023 which creates for the first time a maintenance of effort requirement on the county mayor’s budget moved forward in the House. The bill passed the Senate on March the 11th. The bill had been held up on the House Finance Committee. It came out this week and was scheduled for discussion on the House floor Thursday, but was not discussed before they adjourned.

County Commissioner Training

The bill to mandate continuing education for county commissioners encountered a number of questions and objections on the Senate floor this week. As SB2897/HB2677 is currently moving, it increases the number of hours of education that a commissioner must get each year from 7 to 8, it creates a financial incentive of $600 (paid by the county) for those who complete their required training, and creates a penalty of preventing commissioners who fail to meet the requirement from running for re-election. It is that last provision that created heartburn for a number of Senators when it was discussed in the chamber this week. The bill was rolled to Monday. In the House, the bill came out of the Finance Committee Wednesday and is headed to the House floor.

Prohibition on Holding Two Offices

The bill that prohibits an individual from running for two different offices in the same election came out of the Local Government Committee in the House after being deferred multiple times. It is scheduled for a floor vote. HB 2080/SB 1968 passed the Senate earlier this year with the bare minimum 17 votes.

Development Taxes

SB2621/HB2426, which makes changes to the County Powers Relief Act for fast growing counties, was on the Senate floor for discussion this week. After questions arose about differences in the language between the House and Senate, the bill was deferred to next Monday to ensure the correct language is placed on the bill. The bill allows the rate on residential development to be raised to $1.50 per square foot and allows the tax to be levied on the first 150,000 square feet of a commercial development. The bill also makes numerous concessions requested by the homebuilders. 

Miscellaneous

• HB2808/SB1771 which would have the state takeover funding for HIV meds for individuals incarcerated in county jails came out of the Finance Committee and appears to be funded in the budget.
• SB2028/HB1643 which has the state take over funding for mental health evaluations for misdemeanants passed the Senate this week after previously passing the House. The bill is expected to save county governments more than $1 million. 
• HB 2584/SB1948 which directs TDEC not to charge local governments a permit fee for a general aquatic resource alteration permit for emergency infrastructure repair or for maintenance activities necessary to replace or otherwise maintain a culvert, has passed the Senate and moved to the House floor for a vote.
• HB 2444/SB2536 which allows an inmate to be allowed out of a county jail for work release or on local work details without an ankle bracelet upon approval of the sheriff and judge has passed the Senate and is scheduled for a House floor vote.