Capitol Update

April 1, 2022

Committees are closing down, budget proposals are updated and TISA continues to generate significant debate and discussion. The General Assembly is rounding the curve into what could be the last month of session as legislators work to resolve all of these issues and adjourn to begin their re-election campaign (at least some of them).

TISA

While lots of meetings and plenty of discussions were going on behind the scenes, there were not as many public hearings on the Governor’s proposed new education funding formula (HB2143/SB2396) this week. The bill was up for discussion in the House Education Administration Committee on Wednesday evening. There was again a long period of questions and answers with Commissioner Schwinn and staff members of the Department of Education. Numerous amendments were proposed and several of them were adopted, in some cases even over the objections of the department and the bill sponsor. The version of the bill currently moving in the House has a number of changes from the original proposal. These include several items that TCSA favored, like keeping fiscal capacity determined in the same manner as it is now, moving the additional funding for charter schools from the weighted portion of the formula (which is funded 70/30 state and local) to the direct funding section (which is 100% state-funded) and allowing the State Board of Education to have a role in reviewing the proposed rules that the Department of Education is directed to promulgate under the bill. 

Additional amendments added Wednesday night include one clarifying who serves as the school health coordinator, another to add more directors of schools to a committee that provides advice on how to set outcomes-based goals, and another to set a goal of 70% of third-grade students being proficient on ELA. Rep. Cepicky proposed an additional amendment that made it onto the bill over the objections of the department. It encourages, but does not require, school systems to fund one school nurse position for every 750 students, one school counselor for every 250 students and one RTI position for every 500 students. The department has indicated that funding has been included in the base to improve these ratios. This improvement has been recommended numerous times by the BEP review committee. However, Commissioner Schwinn has been pushing for the creation of a formula that “funds students, not systems.” This consistent talking point from the administration seems to be creating some frustration with lawmakers who are wrestling with a proposed formula that assigns dollar values for the cost of educating individual children without specifying the costs of resources or personnel used to provide the services.

After hours of debate and discussion, several committee members began talking about how they feel the legislation is still rushed and not well understood. Rep. Mark White, who is presenting the bill for the administration, stated that he didn’t feel like the bill had to be passed out of the committee that evening, but he did argue that it needed to pass this year. As various members were commenting on the bill, Rep. Cepicky made a motion to adjourn the committee. Being non-debatable, the committee had to vote and ended up adjourning for the evening without taking action on the legislation. 

In the Senate, the bill came out of the Education Committee last week and was referred to Senate Finance. It was not scheduled for a hearing this week as the Finance Committee expected to spend most of its time reviewing the administration’s supplemental budget proposal. It is on the Finance Committee calendar for next week.

Budget Update from Governor Lee

On Tuesday, Finance and Administration Commissioner Butch Eley presented an updated proposed budget. This included a number of provisions of interest to county governments. Most noteworthy was a proposed grocery tax relief provision that the Governor had announced earlier. The proposal is to hold a one-month tax holiday on state and local sales tax on grocery purchases. Eley confirmed in his presentation and in response to questions that the state would hold local governments harmless for the loss of local option sales taxes. He indicated that the budget included $80 million to pay for this proposal. Of that amount, $49 million would represent the loss of state sales tax. An additional $31 million is placed in the budget for the state to reimburse local governments for the tax cut. It is not yet determined which month will be the holiday, but Eley suggested it may be in August.

Another provision of note related to broadband grants. With the state now planning to use $500 million in ARP funds to expand broadband access in Tennessee, it is pulling back $100 million in state funds previously allocated for this purpose in the budget. New improvements included $78.1 million in grants to airports from the general fund to help offset the effects of a cap on the aviation fuel tax enacted a few years ago, $20 million for improving docks at the city of Memphis, and $17 million for a grant to Tourism to help land an additional NASCAR race in Nashville. One proposal that drew a great deal of attention was a proposal to float $500 million in bonds to help pay for the construction of a new stadium in Nashville for the Tennessee Titans NFL franchise. The administration has stipulated that a condition of the funding would be on the stadium having a roof so that it would have a better chance of landing major national events like the Superbowl, NCAA Final Four and other major concerts and sporting events. 

When asked whether the administration considered any other tax cuts, Eley responded that the administration is not looking to cut gas taxes. Sen. Gardenhire of Hamilton County questioned the wisdom of a 25% reduction in the professional privilege tax when most of the professionals who pay the tax live out of state. Sen. Lundberg noted the huge amount of new capital improvements proposed by higher education institutions. This led to setting up a Finance Committee hearing next week specifically to review these proposals. Sen. Yarbro asked why the state wasn’t proposing higher raises for state employees when several of our neighboring states are doing more. Eley answered that they felt the raise was appropriate given the fact that Tennessee gave raises last year when many states did not.

 Preemption of Local Land Use Regulations

Slaughterhouses and Dairies

After this bill passed out of the House Agriculture Committee on a voice vote, the proposal to exempt slaughterhouses from zoning is scheduled to be heard in the Local Government committee on Tuesday. HB2740 would exempt slaughterhouses that are located outside municipalities from zoning as long as they only process 100 animal units per week. An animal unit is defined as 1 cow, 2 pigs or 4 sheep. A facility that can process 100 head of cattle in a week is by no means a small operation. This would allow something that is closer to an industrial operation to locate in a residential area. As we have encouraged in the past, you should talk to your legislators about this bill if you have concerns about how it would affect your county. The bill has been referred to the Calendar Committee in the Senate, but it is not yet scheduled for a floor vote. 

Loss of Value Due to Land Use Regulations

The Homebuilders Association has been pushing legislation to create an additional cause of action for a landowner who believes their property value has been reduced as a result of a local government regulation. The bill (HB2435/SB2116) by Rep. Curcio and Sen. Bell, as amended, says that a landowner is entitled to just compensation for any reduction in value that results from a local government enacting or enforcing a land use regulation. If a county adopts new zoning regulations in an effort to manage growth or preserve the character of a residential or agricultural area, a landowner has three years to demand compensation for a change in the value of their property. If they can get an appraiser to say the property could have been worth more prior to the change, they can send notice to the county mayor demanding payment. Unless the county repeals the land use regulation or chooses not to enforce it against this property owner, they have to pay the landowner or deny that any compensation is due, which then triggers a lawsuit where the property owner is entitled to attorney’s fees. The landowner could have even requested that the land be down-zoned or have a lower density, then turn around and demand payment from the county for the change. As originally discussed, the process is only available to landowners whose damages are a minimum of $50,000, so it is aimed at helping big developers while shutting the average citizen out of the process. Some amendments have proposed dropping that threshold. The bill was once again scheduled for a hearing in the full House Civil Justice Committee this week, as well as the Senate Judiciary Committee. Like last week, it was not heard in either committee, but was deferred. Local government associations believe they have the votes to defeat the bill in the House Committee, which is why the proponents keep asking the sponsor to postpone discussion of the bill. We will continue to communicate with members of the committees to try and prevent this bill from moving forward.

Funding for Proposals

As the session winds down, there are a number of proposals that TCSA has been supporting that would require significant funding. These include the Single Article Cap proposal that would revert some funding from the state sales tax base to the local option sales tax, proposals to make grants to county highway departments, proposals to fund additional educational supplements for correctional officers, and more. With the governor’s supplemental budget proposal, very few funds were left available for legislators to spend on their priorities. It will require cuts and negotiations to free up funding in the state budget to add any of these priorities. We will continue to work with legislative leaders to see if some of these priorities can make it into the final adopted budget.

End of Session Nearing? 

A general rule is that it takes the General Assembly about three weeks to pass the budget after receiving the Governor’s supplemental budget. Then, there are usually one or two more weeks to clean up whatever bills were left “behind the budget” once it is determined whether there is funding left to pay for the measures. If things stay on pace, this could mean that the legislature wraps up its session around the end of April. Legislators are certainly hoping for this as many of them face re-election in newly drawn legislative districts. This progress is fragile however, and could easily be derailed if major initiatives run into problems. This could include Governor Lee’s TISA proposal which is drawing a great deal of scrutiny and questions. 

Legislators Announcing Retirement and Other Changes