Tax Hikes, Fee Raises Once Again Rear Ugly Head: Beavers

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NASHVILLE – The focus on Capitol Hill this week turned to the budget as Governor Phil Bredesen unveiled his proposal to fund state government for the 2010-2011 fiscal year. Despite being one of the most difficult budgets to date, Senator Beavers expressed concern that the Governor presented a budget that did not go far enough in ensuring fiscal responsibility and adhering to Tennessee’s “pay-as-you-go” history. Beavers was also unhappy that the Governor requested the legislature approve $71.7 million in tax and fee increases, in addition to plugging holes in the budget with one-time stimulus and reserve funds.

Tax Hikes, Fee Raises, Stimulus and Reserve Funds Once Again Rear Ugly Head in Governor’s Proposed Budget

Tennessee’s revenue collections have continued to underperform at unprecedented levels as the national economy has declined. December tax collections represent the 19th consecutive month of negative sales tax growth. With the decline in revenue, the Governor is allowing the legislature to use money from the Rainy Day Fund – the state’s savings account to be used in cases of severe economic hardship. Yet, pulling money from the state’s reserve fund instead of living within our means and making the necessary spending reductions is very dangerous, especially when the fund will be essential if the economy worsens in the coming years.

“The legislature needs to ensure that the state makes realistic revenue projections and prioritizes its spending cuts, however to do things such as rely on stimulus money and reserve funds to plug holes will only make it harder for the next governor to operate when he takes office next year,” said Sen. Beavers.

The Governor’s tax proposals include a $21.3 million proposed sales tax on cable and satellite television services, $2 million to tax cable boxes, a $6.5 million increase in the rate charge on interstate and international business telecom service, $10 million to clarify ‘sale for resale’ provisions, and $10 million to repeal the dividend paid deduction on real estate investment trusts (REITs). In addition, the governor proposed a $2 per year increase for the cost of a Tennessee driver’s license.

Finally, in a move quite perplexing to many Republican lawmakers, the Governor proposed a raise to state employees – a move that comes when thousands of people are losing their jobs and places like Cloverbottom – a facility that cares for mentally disabled individuals – are being closed down.

Unlike Congress, the Tennessee General Assembly is constitutionally bound to balance the budget. The legislature will closely examine the budget over the next two months as the various agencies and departments are called before Senate committees to explain the details further. Senator Beavers believes that the weakened economy means lawmakers must be vigilant to make sure that taxpayer dollars are spent in the most efficient and effective manner.

Senator Beavers to Introduce Constitutional Amendment to make it Harder to Break “Copeland Cap” – Ensuring more Fiscally Responsible Budgets

In 1978, Tennessee legislators amended the constitution to attempt to prevent the problem of runaway spending, especially during times of economic hardship. The “Copeland Cap” is a provision that says that state spending can grow no faster than the annual growth in personal income. This move was supposed to make tax hikes unnecessary, and allow Tennessee to operate as a “pay-as-you-go” state with a balanced budget. Yet, the amendment allowed the legislature to break the cap with a simple majority vote in the House and Senate, a provision that has allowed the cap to be broken fourteen times for a total of more than $3.6 billion dollars in overspending since 1978.

Senator Beavers hopes to restore fiscal accountability and to control the growth of state government with a new amendment – a move that she hopes will restore Tennessee’s “pay-as-you-go” history that has brought much economic prosperity to the state over the years. Beavers’ amendment will require a 2/3 vote by the House and Senate to override the Copeland Cap, not a simple majority as it currently requires.

“It is time that we make it harder for administrations to drive this state further in debt in the form of bonds, tax hikes, and reserve spending,” said Beavers. “I think it’s inconsistent when legislators vote against breaking the Copeland Cap, and then vote for the budget that breaks the cap. This amendment will attempt to right that wrong.”

Tennessee Soldiers Honored

Tennessee’s soldiers serving in Iraq and Afghanistan were honored this week by the Governor and the General Assembly. In the State of the State Address, Governor Bredesen recognized several soldiers who were deployed, including some who have served multiple missions. Lawmakers stood in silence to recognize the 11 Tennesseans who lost their lives in the War on Terror over the past year and the 114 who have made the ultimate sacrifice since 2001. In addition, the yearly informational Tennessee Blue Book published by the Secretary of State’s office dedicated this year’s publication to those fallen brave men and women.
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