TCSA Capitol Update
Week of March 25- March 29, 2024
In a whirlwind week, the administration presented its appropriations amendment to the budget, several key committees wrapped up their business for the year and numerous bills that could affect counties were resolved. After the Cities and Counties subcommittee closed last week in the House, the Property and Planning Subcommittee followed suit this week. The caption bill for a property tax cap that had been deferred to the final calendar of that subcommittee was taken off notice without being discussed. The issue is dead for this year. In the Senate, the State and Local Government committee held a four-hour meeting on Wednesday of this week to complete its calendar and close for the year.
Governor’s Budget Amendment
In a sign that the boom in state revenues has come to an end, there was little new spending of note when the administration presented the Governor’s supplemental amendment to the budget. In fact, Commissioner Bryson mentioned that they had to be “very creative” just to fund the proposed budget. The budget for FY 25 is $10 billion less than the previous year, which included several billion in federal funding as well as spending $3 billion in state surplus funds on transportation projects. To balance the proposed budget for next year, they are including $285 million in agency reversions and more than $500 million in extraordinary interest earnings to generate enough revenue to balance proposed expenditures.
On the expenditure side, they are having to set aside $150 million to close an expected gap in the current year’s revenue, which would put them behind to start next year. Then, they needed several hundred million to cover the increased cost of a proposed change to the Franchise and Excise tax. At the start of the session, the administration proposed a revision to F&E taxes in order to fend off threatened litigation. As the legislation has progressed, revised estimates added around $350 million to the cost of those refunds, driving the total for a three-year refund to $1.6 billion.
Vouchers
It is noteworthy that the Governor did not add any funding to his budget to cover additional costs for a school voucher program. He originally proposed $140 million for his version of the legislation. In the House, the bill that is moving to create universal school vouchers includes hundreds of millions in additional education funding for a number of initiatives. Some of these improvements are believed to be necessary to garner enough support in the House to pass the bill. Without that funding in the Governor’s budget, the House would have to find those funds elsewhere and convince the Senate to go along or try to pass a stripped down version of the proposal. The voucher bill that is moving, HB 1183/SB503, was not heard in committee this week. It was referred to the Senate Finance committee back on March 6th and is finally scheduled to be discussed by that committee next week. The bill still is not on the calendar in the House Finance Subcommittee where the bill is expected to face a close vote.
Legislative Round-Up
Fuel Purchasing
HB2547/SB2432 that gives local governments flexibility to buy bulk gas and diesel fuel using documented quotes instead of competitive bids passed on the House floor Thursday morning. It now heads to the Governor for his signature. The legislation is a TCHOA initiative intended to give highway departments better ways to make bulk fuel purchases.
Recall Elections
A bill that would create a statutory framework for recall elections for “non-constitutional” offices ended up off notice in the Senate this week. SB 1580/HB181, would have made municipal officials, school board members, and county officials not listed in the constitution, subject to recall. County highway officials and certain court clerks are not considered “constitutional” offices and therefore could have been recalled under the provisions of the bill. In Senate State and Local, the committee chairman proposed to amend the bill to make it a local option. That amendment was added, but the bill generated other significant questions and the committee ended up sending it to the “general subcommittee,” meaning it is off notice for the year.
County Commissioner Continuing Education
SB 2897/HB 2677 was placed behind the budget in the House Finance Subcommittee this week due to the bill imposing mandatory costs on counties to pay a $600 annual supplement for commissioners who meet training requirements. The bill increases the continuing education requirement for county commissioners from 7 to 8 hours and provides that commissioners who do not comply with the training requirements are ineligible for election or appointment to the county commission until they complete the training. The bill does not apply to incumbents in office on the effective date of the act or to any commissioner after they complete 8 years of service on the county commission. The bill was referred to Senate Finance last week but is not currently scheduled.
Inmate Work Details
Last session, a bill passed requiring inmates out on work release or on work details outside of jails to wear GPS monitor devices unless they were accompanied by an armed guard. When the law took effect in January, we began hearing from counties about the challenges this process was causing. A bill has passed the Senate and is moving in the House to provide some relief. HB 2444/SB2536 would allow an inmate to be on release without the monitoring device if the judge of the sentencing court and the sheriff approve this in writing. The bill passed the Senate on the consent calendar and was recommended by the House State Government Committee.
Purchasing Election Equipment
A bill allowing election commissions to purchase voting equipment when the cost is being covered by state or federal grants was approved by the House Local Government Committee this week. The next stop for SB 2587/HB2096 will be House and Senate floor votes. As originally filed, the bill would have allowed election commissions to incur debt on behalf of the county or spend county funds on equipment. A compromise amendment allows them to purchase equipment so long as the cost is covered entirely by state or federal funds.
Rabbits and Chickens
While Easter is just around the corner, bunnies suffered a loss in committee this week. A bill that would preempt local governments from enforcing any regulation that would prohibit gardening or the raising of six or fewer chickens or rabbits at single-family residences was sent to summer study.
Resiliency Funding
A bill to create the resilient Tennessee revolving loan fund is headed to the House floor on the consent calendar. HB1684/SB2082 is an administration proposal that creates a fund which could loan funds to counties at an interest rate of not more than 1 percent for local resilience and hazard mitigation projects. It has already passed the Senate.
Assessment of Low Income Housing Properties
HB1450/SB793 has been moving in the House, but died on a close vote in the Senate State and Local Committee. The bill proposed to change how housing projects built with federal tax credits are valued for property tax purposes. The fiscal note estimated a cost to local governments in excess of $100,000.
Hotel Motel Taxes
A bill is moving forward that will require some communities to report how they are using hotel/motel tax revenues, but one that would have set a cumulative cap on how much can be charged combined by city and county governments died. HB2240/SB1676, as amended, requires cities and counties utilizing the general law authority passed a few years ago to levy up to a 4% occupancy tax to report to the Comptroller on how they were spending the funds.The law that authorized the tax requires the funds to be spent exclusively on tourism or tourism development. There have been allegations that not every community utilizing the law is complying with this requirement. HB2241/SB1675, which under a proposed amendment would have said the combined rate of local occupancy taxes charged by cities and counties could not exceed 8%, was taken off notice.
Changes to the County Powers Relief Act
SB 2261/HB2426 moved out of the State and Local Government Committee this week. The bill has been the subject of intense debate. It amends the County Powers Relief Act to increase the amount the development tax could be levied from $1.00 per square foot to $1.50 per square foot and allows the tax to be applied to the first 150,000 square feet of commercial developments. The bill was a compromise between fast growing counties and homebuilders, who required that a condition be set that local governments could only levy or increase the tax so long as they continuously hit the population growth thresholds in the act.
Currently, the law allows counties that grew 20% between censuses or 9% over a four-year period to levy the development tax which must be used for school capital projects. Once a county qualifies to levy the tax, they can continue to levy it and may raise it by 10% every four years. Originally, the homebuilders only wanted counties to be able to levy the tax as long as they continue to hit the growth thresholds. After negotiations, language was added to grandfather in the counties currently using the law, allowing them to keep their tax at the rate they were levying on January 1, 2024. However, as the bill is currently moving, those counties would lose the ability to raise the tax unless they could show they met the growth requirements in the future.
End of Session Approaching
While there is still a lot of work to be done, the main issues remaining this session are all interconnected. The state budget, the voucher proposal and the F&E tax revision are the major issues that need to be resolved between the House and Senate. A change in one of those proposals would affect the others. For instance, if the House version of the voucher bill moves forward, it will require significant changes to the state budget, likely requiring the General Assembly to scale back on the F&E tax changes. The Senate version of the voucher bill costs less than what is set aside in the Governor’s budget, and could free up money to spend on other initiatives. If no voucher bill passes, that could give the General Assembly $140 million to spend on something else. Barring a major stalemate, adjournment is anticipated sometime in late April.