Written by Curtis Johnson
Tennessee State Representative
Nashville, TN – The first session of the 110th Tennessee General Assembly adjourned on May 10th, 2017, after passing major legislation that will benefit Tennesseans for generations to come. This is Part 1 of a 12 Part report.
This includes a measure making Tennessee the first state in the nation to offer all adults without a degree tuition-free access to community college; a new law rebuilding a safe and reliable transportation network, while reallocating revenues to maximize taxpayers’ return on that investment; and a bill which provides a responsible path to improve access to broadband through investment, deregulation, and education.
Action in the General Assembly also included passage of a balanced budget which takes on no new debt, as well as legislation protecting the elderly, enhancing the state’s robust job growth, cracking down on crime, and boosting efforts as the fastest improving state in the nation in K-12 student achievement. Following is a report on key legislation passed this year.
The $37.1 billion budget adopted during the 2017 legislative session cuts $257 million in taxes in the next fiscal year and more than $400 million at full implementation while maintaining Tennessee’s sound fiscal practices. For the second year in a row, the state budget does to take on any new debt. It also assumes a conservative annualized growth rate of 3.17 percent, based on an economic growth forecast of 4.5 percent.
Tennessee is one of only 11 states which have earned an AAA bond rating and has been ranked among the best-managed states in the nation.
Education, employment, economic opportunity, and enforcement of the law are the underlying drivers of Tennessee’s 2017-2018 state budget adopted by the General Assembly. The budget continues Tennessee’s strong commitment to education by providing an additional $200 million to fund the state’s Basic Education Program (BEP). The BEP includes $100 million to improve teacher salaries, $22 million to help schools serve high-need students, and an additional $15 million is provided for career and technical education equipment.
It also continues several important higher education initiatives in the Drive to 55 to make sure that 55 percent of Tennesseans have a postsecondary certificate or degree by the year 2025. The Drive to 55 includes the Reconnect Act and the STRONG (Support, Training, and Renewing Opportunity for National Guardsmen) Act.
The Reconnect Act is a last-dollar scholarship which makes Tennessee the first state in the nation to offer all adults without a degree tuition-free access to community college. The STRONG Act creates a pilot program for those who protect and serve their state and country in the Tennessee National Guard to receive tuition funding toward a first time bachelor degree.
Legislation on employment and economic opportunity provides $113 million in Franchise and Excise (F&E) tax cuts, which are available to over 500 manufacturers in Tennessee benefitting over 310,000 of their employees.
Also conducive to job creation is the $150 million in new, recurring revenue appropriated for improving Tennessee’s infrastructure, making the roads more usable, and inviting to new industries looking to locate in the state. The improvements are also essential for road safety.
Presently, 40 percent of the state’s major urban roads are in less than fair condition. Likewise, approximately 19 percent of Tennessee bridges are in need of repair, five percent are structurally deficient, and 14 percent are functionally obsolete.
On enforcement of the law, the budget provides 30 new positions for district attorneys, 18 new public defenders, 25 new Tennessee Highway Patrol troopers, and new funding to increase coverage for families of police and firefighters who lose their life in the line of duty.
It provides more than $2 million in recurring funds to incarcerate felons with firearms and abusers of the elderly and to enhance sentences against illegal aliens who commit unlawful acts. It also provides $5 million in funding to increase the per diem paid to local jails for housing state prisoners and $29.5 million for a new multi-agency law enforcement training center.
Other highlights of the budget include:
- $8 million for the Tennessee Bureau of Investigation to purchase an airplane to assist in criminal investigations and manhunts;
- $55 million for utilization grants for TennCare;
- 715 more slots to the Employment and Community First Choices (EFC) Program to provide long-term services and supports;
- $1 million for the OPTIONS program which gives home- and community-based service choices to the elderly, as well as adults with disabilities;
- $10.3 million to improve access to broadband in Tennessee;
- $8 million to increase the reimbursement rate for direct support professionals who provide home and community-based services through the Department of Intellectual Disabilities (DIDD);
- $11.5 million for substance abuse and crisis services;
- $21.7 million in a new money to help fund rural initiatives as recommended by the Rural Development Task Force Study;
- $40 million toward the cost of a new State Library and Archives building to collect and preserve Tennessee records of historical, documentary, and reference value;
- $10.65 million for disaster relief in Gatlinburg and Sevier County after the devastating wildfires in November 2016;
- $614 million in state dollars for maintenance and new buildings across general government and higher education;
- $25 million for higher education outcome formula increases of the Complete College Act;
- $132 million in non-recurring funds to the state’s Rainy Day Fund to an all-time high of $800 million, well on the way to a target of $1 billion;
- Full restoration of property tax relief for veterans, disabled, and the elderly; $18 million for the next state veterans’ home in West Tennessee;
- $77 million for state employee pay increases and market rate adjustments targeting high-turnover positions in state government;
- Implements $127.8 million in budget reductions; and,
- Fully funds the state’s contribution requirements for pensions and retiree insurance.
The budget’s fiscal year begins on July 1st, 2017, and ends on June 30th, 2018.
Tennessee Broadband Accessibility Act
One of the highlights of the 2017 legislative year was the passage of the Tennessee Broadband Accessibility Act which proposes a responsible path to improve access to broadband through investment, deregulation, and education. The measure is designed to spur deployment in rural unserved areas, opening them up to economic investment and job growth.
Tennessee currently ranks 29th in the U.S. for broadband access, with 13 percent of the state lacking accessibility. While only two percent of the state’s urban citizens lack access, 34 percent of rural residents are without coverage at recognized minimum standards due to low population density and challenging geography.
The legislation calls for a three-year investment of $45 million in grants and tax credits that prioritize expansion in the state’s unserved areas.
On deregulation, the new law permits the state’s private, nonprofit electric co-operatives to provide broadband and cable video services. The co-ops are currently restricted from providing retail broadband services. To protect co-op ratepayers, it prevents the use of electric system assets to subsidize broadband services.
Education is a key component of the broadband legislation as the digital divide is preventing thousands of Tennessee students in unserved areas from being able to do homework that requires Internet access. The new law expands opportunities for education by providing grants to the state’s local libraries to help residents improve their digital literacy skills and maximize the benefits of broadband. The grants are in addition to education efforts by the state’s Rural Task Force and other groups to drive broadband adoption in unserved areas of Tennessee.
In addition to increasing education opportunities to unserved communities, the improved connectivity also assists in promoting agriculture advancements and providing health care options like telemedicine.
Transportation Need / Tax Relief
Another key bill passed during the 2017 legislative session is the Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy (IMPROVE) Act, which is also named the “2017 Tax Cut Act.” The purpose of the legislation is to maintain and expand Tennessee’s safe and reliable transportation network by reallocating revenues to maximize taxpayers’ return on that investment to meet current and future transportation needs.
While one category, highway user fees, increases by 6 cents on a gallon of gas and 10 cents on diesel phased in over three years, the legislation cuts $428 million in taxes which is the largest single tax cut in Tennessee history.
Tennessee is one of only five states which do not use debt to fund its roads. This pay-as-you-go practice has been credited as one of the reasons for the state’s top financial rankings. Up to half of the tax dollars collected on diesel fuel and 30 percent on gasoline come from out-of-state drivers, who share in the cost of keeping up Tennessee roads. Proceeds from the fee increases, which have not been raised in 28 years, are dedicated to the highway fund.
The $350 million in funds will deliver 962 road and bridge projects across all 95 Tennessee counties to alleviate a $10.5 billion backlog in transportation projects.
The $428 million in tax cuts included in the new law are:
- A 20 percent reduction in the food tax from five to four percent;
- Hall Income Tax relief from five percent to four percent with language to reduce it by one percent until it is gone;
- An optional move to the single sales factor for Franchise and Excise (F & E) tax paying manufacturers; and,
- Tax relief for disabled veterans, elderly, and disabled homeowners by raising the home value threshold from $100,000 to $175,000 for disabled veterans and $23,500 to $27,000 for the elderly and disabled.
The legislation is the sixth in a series of laws passed by the General Assembly since 2011 which resulted in tax cuts, with the previous amounting to $438 million in reductions. The reductions include repealing the gift tax, killing the death tax, reducing the sales tax on food, exempting the sales tax on certain machinery and medical supplies, and a one percent reduction in the Hall Income Tax.
House Bill 534 / Status: PC 181 / Effective Date: Sections 1, 27, 35, and 36 of this act shall take effect upon becoming law, the public welfare requiring it. Sections 13, 14, 15, 28, and 29 of this act shall take effect upon becoming law, the public welfare requiring it, and shall apply to tax years beginning on or after January 1, 2017. All other sections of this act shall take effect July 1st, 2017.