TCSA Capitol Update

Week of April 22 - April 26, 2024

Legislature Adjourns Sine Die

On Thursday evening, the General Assembly completed its work and adjourned for the year. In what has become a regular occurrence, there were protests, controversies, flaring tempers, and uncertainty about the fate of major pieces of legislation in the waning days of the session. The Governor’s proposed franchise and excise tax looked for a moment like it could be another victim of House vs. Senate disagreements, but their differences were resolved in a conference committee report that eventually passed both chambers. A number of other bills made it as far as the chamber floor for debate only to end up tabled or rolled to the heel of the calendar and never taken up again. When a bill passed allowing teachers to carry guns at school, it triggered a loud and angry response from protestors and caused the Speaker to order state troopers to clear the galleries. Tempers flared between House members off and on throughout the week and long debates on controversial bills left observers wondering if they could complete their work. The House held several long sessions to work off the remaining bills on their calendars, some of which were originally scheduled on Tuesday or Wednesday of last week. They made significant progress early in the week, leaving yesterday mostly focused on resolving differences with the Senate on a few remaining issues.   

Franchise and Excise Tax Reform

This session began with a major and costly proposal to revise the state’s franchise tax laws. These taxes on businesses only fund state operations and are not shared with county governments. They are based on the greater of the net worth of the company or the value of the company’s real and personal property in Tennessee. Governor Lee, on the advice of the attorney general and Department of Revenue lawyers, proposed to eliminate the alternative calculation based on the value of property. Similar provisions had been successfully challenged in other states. The change is projected to reduce state revenues on a recurring basis by more than $400 million a year. The Governor’s budget also included non-recurring dollars to refund three years worth of excess tax payments to businesses that would have overpaid based on the proposed changes. Senate leaders described this as a “black swan event” that created a major risk of liability for Tennessee. House leaders were more measured in their description, tending to describe the revision as a modernization of taxes originally enacted in the 1920s and 1930s.

The Senate was aligned with the Governor’s proposal and expressed concerns that the state could lose a legal challenge and face even greater liability if the law wasn’t revised. House members wanted a shorter refund period, wanted assurances that any business accepting a refund would release its claims against the state and demanded transparency from the companies so that the public would know how much money the companies received in rebates. The final version of the legislation went with the Governor and Senate’s preferred longer (and more expensive) refund period. It included a limited transparency provision.

Companies accepting refunds would be listed on a public website, with the amount of their refund reported in three ranges:

• 1) $0 - $750,
• 2) $750 - $10,000, or
• 3) More than $10,000.

 In this form, the conference committee was approved by both chambers.

Arming Teachers

Legislation that created the most controversy in the final week of the session was a bill allowing school personnel to carry weapons under certain conditions. The bill, HB1202/SB1325, passed the Senate on April 9th. In a rare occurrence in that chamber, its passage generated an angry outburst from opponents in the gallery, leading Lt. Governor McNally to order the chamber cleared of protestors other than Covenant School parents who were present. The bill was up for discussion on Tuesday of this week on the House floor, and it stirred up similar outbursts and protests. Under the provisions of the bill, certain school personnel could be allowed to carry a weapon on school grounds if approved by both the school district and local law enforcement agencies. The employee would have to have an enhanced carry permit, complete 40 hours of training at their own expense, and undergo a mental health evaluation and background check. The bill passed both chambers along mostly party lines. After the bill’s passage, numerous school districts across the state have put out statements that they will not implement their policy in their school facilities.

Greenbelt Revision Passes

The bill to increase the limit on greenbelt acreage from 1,500 to 3,000 acres passed both chambers this week. After being set aside due to the projected impact on local property tax revenue, the bill was suddenly revived during budget negotiations last week. The fiscal analysis of the bill indicates it could reduce property tax revenue statewide by more than $2 million dollars. When it passed on Tuesday, the bill had over 50 co-sponsors in the House. It passed the Senate the following day. County associations intend to collect data on how much the proposal actually costs county governments and come back to the legislature next year for relief.

Reappraisal

The Comptroller’s bill to shorten reappraisal cycles could not overcome a perception in the House of Representatives that it was a massive property tax increase. After reaching the House floor and facing numerous questions and opposition, the sponsor laid the bill back on the clerk’s desk. Attempts to revive the bill were unsuccessful. HB2057/SB1946 received zero “no” votes in committee and passed on the Senate floor 29-0, but opposition suddenly arose once the bill reached the House chamber for a final vote. The bill would have reduced the reappraisal cycle from a maximum of 6 years to a maximum of 4 years. Shortening the cycle was proposed to help reduce the effect of sales ratio provisions that begin to apply in counties as their property appraisal gets out of date with market values. While this legislation would have eliminated 5 and 6-year appraisal cycles, a number of counties have already proposed shortening their program to a 4-year cycle and have been approved by the Comptroller and State Board of Equalization.

When the Comptroller’s bill hit resistance, county associations worked to get language added in a separate bill to give assessors more flexibility to use software and photographic images to assess property, reducing the need for time-consuming onsite inspections. HB 2055/SB2769 passed both chambers with that language and has been signed by the Governor. Counties currently on long appraisal cycles are encouraged to work with their assessors to move toward shorter periods to keep property values more current and accurate and reduce the impact of sales ratios.    

County Commission Training

A bill to create both a carrot and a stick to encourage more county commissioners to comply with continuing education requirements ended up without either. As initially introduced, HB2677/SB2897 increased the number of annual continuing education hours a county commissioner must complete from 7 to 8, it required counties to pay a $600 annual stipend to commissioners completing this requirement and it prohibited a county commissioner who failed to comply with the law from running for reelection. The bill passed the House in this form, but Senators balked at both mandating the cost of annual stipends and disqualifying individuals from running for reelection. The Senate amended the bill down so that it only increases the number of required hours to 8 and encourages counties to pay a stipend. When the bill came back to the House in this form, the House concurred in the changes.  

Resources on the Way

Now that the session has concluded, TCSA will work with CTAS and other partners to get comprehensive information to counties about all the legislation that passed that affects counties. We will be outlining and discussing bills on a wide-range of topics at the upcoming conference in Gatlinburg next month. In the meantime, if you have questions about the outcome of any legislation, you can email us at [email protected].