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 11 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.
Business / Economy / Labor
On the economic development front, efforts during the 2017 legislative session focused on keeping Tennessee moving forward as the fastest growing state in the Southeast in job creation. Over the past several years, several job-killing regulations have been repealed, tort reform and worker’s compensation have been overhauled, and the state has become a national leader in education and job training.
Action taken this year enhances Tennessee’s laws and regulatory environment, making it more attractive to businesses.
The 2017-2018 budget, through the IMPROVE (Improving, Manufacturing, Public Roads and Opportunities) Act / 2017 Tax Cut Act, provides $113 million in Franchise and Excise (F&E) tax cuts. The cuts 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 roads, making them inviting to new industries looking to locate in the state. Other budget appropriations aiding economic development include $21.7 million for rural development, $10 million in grants to expand broadband services, $60 million in Fast Track funds, and $22.3 million in infrastructure grants.
Taxpayer-friendly Reforms / F&E Taxes
Legislation was approved during the 2017 session making three taxpayer-friendly reforms to Tennessee’s Franchise and Excise (F&E) tax estimated requirements. It provides F&E taxpayers with the option of calculating their estimated payments based on an annualized method, taking into account realized revenue throughout a given tax year.
It also extends the time period for the filing of F&E exemption applications to the 15th day of the fourth month following the close of the first tax year for which the exemption is claimed. In addition, it reduces the penalty for filing late F&E exemption applications from $1,000 to $200.00.
Freedom to Prosper Act
The “Freedom to Prosper Act” advanced through the General Assembly this year. This act prohibits local entities from imposing fees on occupations that go beyond the state’s requirements, except those associated with first responders and emergency service providers.
The legislation follows the Right to Earn a Living Act which passed the General Assembly last year that compelled various licensing authorities to review their entry regulations in various occupations and report such to the Senate Government Operations Committee. Once reviewed, the committee can make recommendations to remove some of the unnecessary restrictions and demands.
Excessive Regulations / Shampooing
Similarly, a new law was passed that exempts those whose sole professional responsibility is that of shampooing hair from having to have a barber or cosmetology license. It is part of the effort to relieve the burden of excessive regulation on the right of an individual to pursue a chosen business or profession when it does not directly pertain to the health, safety, and welfare of the general public.
Burdensome Business Restrictions
Another bill passed this year prevents any local government from establishing “predictive or restrictive scheduling” laws. This new law especially protects small business owners who often cannot anticipate their needs days in advance because staffing of projects must occur on short notice to meet the needs of their customers
Legislation was approved which primarily cleans up language from the major workers’ compensation reform law passed in 2013. This new law also establishes a penalty for entering false information on a construction service provider’s application to the Secretary of State Exemption registry and if an employer of a construction services provider fails to present proof of workers’ compensation insurance coverage.
The penalty fee is limited to a maximum of $500 for first time offenders. In addition, the legislation provides an educational benefit for injured employees who are not able to return to their pre-injury job. These individuals will be provided with a $5,000 benefit for vocational training that is capped at $20,000 per worker and $500,000 in any year for the entire program.
Guides to Practice / Professions
State legislators gave final approval to legislation that requires all professions which adopt guides to practice under Tennessee law, to promulgate rules subject to the state’s Uniform Administrative Procedures Act (UAPA). The action means that any rules or code of ethics developed or approved by a private organization or association must be adopted in accordance with the new statute.
Under the UAPA, a hearing on the rules to formally adopt a code of ethics is generally held by the department of state government which governs the profession. The rules draft is reviewed by the State Attorney General to determine its legality and constitutionality before moving forward to a hearing by the legislature’s Joint Committee on Government Operations where the public has an opportunity to comment.
Government Operations / Accountability
The new 2017-2018 budget continues Tennessee’s sound fiscal practices which are responsible for placing the state among the best managed states in the nation. It includes no new debt and sets the state’s Rainy Day Fund, which acts as the state’s saving account to weather or potential future downturns in the economy, at $800 million. This is the largest level ever and is well on the way to a target of $1 billion.
It also recognizes $127.8 million in reductions to the base budget, fully funds the Tennessee Consolidated Retirement System (TCRS) required contribution, as well as fully funding the state’s Other Post-Employment Benefits (OPEB) for the first time.
The General Assembly approved legislation providing for additional accountability for state agencies. The new law assists the Comptroller’s office in working with state agencies to achieve corrective actions, reduce audit findings and avoid repeat findings. This plan will address each audit finding and give an explanation of what the agency has done or will do to correct the finding, the persons responsible for correcting the finding, and a timeline for the corrections to be completed.
Taxpayer Money / Audit Findings
Legislation aiding taxpayers passed this year calling for a plan of action when a local government entity is audited and problems, or findings, are cited. The new statute adds to the Local Government Modernization Act of 2005 to require a local government receiving annual audit findings to submit its annual budget and a corrective action plan to the Comptroller of the Treasury.
The corrective action plan must provide the name or names of the contact person or persons responsible for the corrective action, the corrective action taken or planned, and the anticipated completion date. If the local government does not agree with an audit finding, or believes corrective action is not required, the corrective action plan must state the reasons and justifications for disagreement or belief.
Accountability / Federal Funds
A new law passed this year requires departments that receive federal financial assistance to report to the Department of Finance and Administration and the Comptroller any notices of non-compliance with federal rules, regulations, etc. This ensures notification due to the risk of losing future funding or possibly being forced to return federal dollars.
Tennessee Public Utility Commission
The General Assembly voted this year to change the name of the Tennessee Regulatory Authority (TRA) to the Tennessee Public Utility Commission. The TRA is charged with the responsibility of setting the rates and service standards of privately owned telephone, natural gas, electric, and water utilities. The new law also redesignates the current TRA directors as Public Utility Commission commissioners, a move that will put Tennessee in line with similar regulatory agencies throughout the nation.
State Parks / Personal Information of Guests
The State Senate and House of Representatives have approved a new statute to protect the personal information of Tennessee tourists who visit state parks. Presently, Tennessee state parks must disclose personal information of its guests when it receives a public records request because there is no exemption protecting this information.
This legislation promotes privacy and security for all state park guests by creating an exemption to the current public records requirement, putting them on equal footing with the private sector regarding the privacy of personal information of guests.
Welfare / Fraud
Legislation designed to combat welfare fraud in Tennessee received final approval. The Program Integrity Act of 2017 requires agencies within state government to communicate with each other to identify people who are receiving benefits for which they are not eligible.
The law creates a new system of enhanced verification in Tennessee, requiring the Department of Human Services (DHS) to conduct quarterly data matches against information databases to help eliminate fraudulent payments that are being made. It also authorizes DHS to join a multistate cooperative for identifying individuals who currently receive Tennessee benefits but who live in other states.
In addition, the Bureau of TennCare is required to verify wage and income information, immigration status, and vital records information for each applicant or enrollee once their new automated electronic eligibility system is operational. The state has been continuing development of the Tennessee Eligibility Determination System (TEDS) to help detect those who misuse the welfare system.
The legislation also requires the Tennessee Education Lottery Corporation to make a monthly report to DHS of all individuals who collect a prize of more than $5,000 to ensure that those who exceed income requirements do not continue to collect taxpayer-supported payments. Studies estimate Tennessee loses approximately $123 million per year in fraudulent payments to people who are not qualified to receive benefits.
TennCare / Fraud
A new law has passed providing that enforcement officers who have successfully completed a specific training course are authorized to make arrest for offenses involving criminal fraud and abuse of the TennCare program and any other violations in state criminal law relating to TennCare.
Legislation allowing for consensual non-contiguous annexation has passed. The new law applies when both parties mutually agree on the annexation of property in writing.
The state budget provides a salary policy pool of three percent and one percent for Tennessee Excellence, Accountability and Management (TEAM) Act Agencies; three percent for non-TEAM Act Agencies. For K-12, the budget provides a four percent increase to the Basic Education Program (BEP) salary component. The budget continues to actuarially fund the state’s retirement program and continues the $50.00 match for the 401(k) program on a recurring basis.
State Employees / Outsourcing
Legislation has passed that makes changes to the 2012 TEAM Act. The new law sets forth rights that any individual would expect in their chosen career by adding transparency to the hiring process, especially for veterans. It requires the Tennessee Department of Human Services to be included in all staffing matters pertaining to outsourcing or reduction in force or hours.
It also requires the chairmen of the Senate State and Local and the House State Government Committees be notified when a reduction in force takes place. In addition, it requires the charging letter to include the specifics of an employee’s termination and makes null and void any discipline record of an employee after two years if no other discipline had been taken against the employee.
This legislation authorizes the commissioner to provide input on all contracts with the private sector involving positions of basic clerical, unskilled or semiskilled labor, or domestic, attendant, or custodial work. In addition, the commissioner may be involved in communications with employees whose jobs may be terminated as a result of a contract with a private party.
Hybrid Pension Plan / State Employees and Teachers
Finally, as Tennessee’s pension plan for state employees and teachers moves up the ranks from fifth best to fourth in the nation, the 110th General Assembly continued this year to push efforts to improve the state’s ranking. The legislation passed this year moves the stabilization reserve account, currently part of the state hybrid pension plan, into a separate trust that would maximize investments and returns.
The new law creates the State Employee Legacy Stabilization Trust Fund for the purpose of protecting the participants and beneficiaries of the hybrid retirement plan from a reduction or loss of benefits with the implementation of cost controls contained in present law. The Legacy Pension Stabilization Reserve Fund will be established and funded through appropriations made in the General Appropriations Act from time to time for such purpose.