Capitol Update – Week of April 25th
Legislature Leaves Town with Some Issues Unresolved
After passing the budget last week, the General Assembly concluded its business for the year and adjourned around 7:00 p.m. on Tuesday night of this week. The legislature will return next January, unless another special session is called. Several controversial items that looked poised to pass this year ended up in limbo as the session ended. These included HB793/SB836, regarding the education of undocumented students in K-12 public schools. In the Senate, the bill narrowly passed earlier this month with 19 votes. In the House, the bill was placed behind the budget by the Finance Subcommittee last week and never resurfaced. The House sponsor, Rep. William Lamberth, indicated he would be seeking clarification from the Trump administration on whether the bill would jeopardize federal education funding.
The U.S. Supreme Court ruled in the Plyler v. Doe case in 1982 that it was illegal to deny students a free public education based on their immigration status. For now, that is the law of the land. The legislation considered by the General Assembly this year was promoted in part as a way to get the issue back before the court for reconsideration. Apparently, members of the House Finance Committee did not want to risk more than a billion dollars in federal funds that Tennessee receives for K-12 education.
Another hotly debated issue in the waning days of the session related to the potential for oversight of a failing school district. HB662/SB714 was brought by two Shelby County legislators to provide a means for the state to intervene in the management of a troubled school system. The bill had statewide application, but included limitations that made it likely to apply only to Shelby County schools for now. The House and Senate both passed versions of the bill, but they had significant differences. The House version created an oversight board that would meet publicly and could veto certain decisions of the elected school board. The Senate version called for an advisory board that would not initially have control over school district decisions, but could assume more responsibility in certain circumstances. It would meet in private. There were such significant differences between the two versions that no conference committee was ever appointed to try and resolve the differences.
TACIR Studies
Based on actions of the General Assembly, the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) will be conducting a number of studies in the coming months that will be of interest to county governments.
- SB703/HB736 directs TACIR to study sustainable funding sources that would meet this state’s future transportation infrastructure needs and submit its recommendations to the legislature.
- SB160/HB83 has been amended to call for TACIR to study the issue of ambulance reimbursement and costs. As originally introduced, the bill required municipalities that did not provide EMS to share in the cost of services with the county.
The TACIR organization will have staff on hand at the upcoming Legislative Conference to discuss these studies and other research projects they are undertaking on matters affecting counties, including opportunities for county officials to participate in the process.
A.G. Oversight of Local Governments
A bill (SB 845/HB1097) sponsored by House Speaker Cameron Sexton and Senator Adam Lowe creates a process for the Attorney General to investigate allegations that local governments have acted illegally or in violation of the constitution. It was apparently inspired by legislators’ frustrations over the city of Memphis holding referendums related to gun regulations. The House and Senate passed the bill with slight differences, which were resolved through a conference committee on the last day of session. In the House version, if the Attorney General determined that the local government had violated the law and did not correct the action after notification, the A.G. could direct the Commissioner of Finance to withhold state funding to the local government until the matter is corrected.
In the Senate version, the Attorney General would bring the matter to a three-judge panel, which would review his investigation and make a determination as to whether the local government was acting illegally. If so, the judicial panel can order the withholding of state funds. Once any illegality is corrected, the funds are restored. The conference committee report more closely followed the Senate version of the bill, requiring judicial review prior to any funds being withheld. It was adopted by both chambers on Tuesday.
Real Estate Transfer Bill Does Not Pass as State Revenues are Down
County associations advocated throughout the session for the state to send a portion of the real estate transfer tax back to the counties where the tax was collected. An amendment added to the proposal (SB1080/HB649) would have phased the shift of funds in over three years, with 0% distributed back to counties in the FY 25-26 budget, 25% in FY26-27, and 50% in FY27-28. Even with this concession, legislators were concerned about binding future General Assemblies to pay for a measure when they were budgeting no funding for it this year. While the final outcome was disappointing, the proposal faced a difficult path this year as the state’s revenues have not seen the growth of recent years. When the March revenue report (reflecting collections from February’s economic activity) came out last week, the state’s collections were actually $10.5 million below budget estimates for the first eight months of the fiscal year. Although the legislature could not find funds to enact the real estate transfer tax change in this budget, numerous legislators expressed their intent to raise the issue with the Governor and ask him to include the proposal in his budget next year. TCSA and its affiliates appreciate all the hard work the bill sponsors, other legislators and county officials put into this effort. We plan to continue pushing this initiative over the coming year.
Final Outcomes of Major Initiatives Affecting Counties
- HB1329/SB1315 Reduces the fee charged by the Department of Revenue for collecting and remitting various taxes to local governments from 1.125% to 0.75%. PASSED
- HB 695/SB889 – Raises the cap on mineral severance tax by $0.15 over ten years. PASSED
- SB136/HB152 Authorizes local governments to allow limited electronic participation in meetings by their members due to illness, family emergencies or military service. PASSED
- SB 845/HB1097 – A.G. investigations of local governments – PASSED AS AMENDED
- SB212/HB885 As initially filed, required local governments to post agendas in advance of the meetings of any and all “governing bodies.” As amended, the bill adds school boards, planning commissions, boards of zoning appeals, election commissions, budget committees, industrial development boards, housing authorities, and public utility boards to the requirement and leaves out the rest. PASSED AS AMENDED
- SB629/HB627 Hotel/motel taxes. The bill proposed some changes to uses of the funds, added additional reporting requirements on local governments and would set a maximum cap of 8% on local occupancy taxes. As amended, preserves the rate and uses of any taxes adopted prior to May 1, 2025. The 8% combined cap remained in the bill, but only applies to new taxes enacted after May 1st. PASSED AS AMENDED
- SJR48, which would have ratified a recommended rate increase in 911 fees from $1.50 to $1.86. The resolution was approved by the Senate, but not presented in the House. DELAYED
- SB1080/HB649 – Returns a portion of the real estate transfer tax to the counties where it is collected. DID NOT PASS
- HB348/SB614) Education Maintenance of Effort – As amended, the bill provided that if revenue collections for a county fail to generate the budgeted maintenance of effort for the school system, the county cannot increase funding for other offices with a maintenance of effort requirement (mayor, highway, sheriff and election commission) until it restores the shortfall in the education budget. The bill passed the Senate, but did not pass the House. DID NOT PASS
- HB793/SB836 Undocumented students in K-12 public schools. DID NOT PASS
- SB593/HB224 Authorizes school district capital improvement trusts. DID NOT PASS
- HB662/SB714 State oversight of school systems. DID NOT PASS
- SB731/HB795 Prohibited local governments from requiring developers to make concessions on a proposed development unless they were “essential” to the project. DID NOT PASS
- SB624/HB618 Prohibits holding two offices. The bill passed the House but was taken off notice in the Senate for the year. DID NOT PASS
- SB771/HB733 Changes rules on property tax appeals. DID NOT PASS
- HB4/SB418 Increases governmental tort liability limits. DID NOT PASS
- HB845/SB1037 Authorizes rebuttal periods during public meetings. DID NOT PASS
- HB319/SB327 Changes rules for assessment of residential property. DID NOT PASS
- SB526/HB889 Reclassifies time shares from commercial to residential. DID NOT PASS
- SB1061/HB1083 Waives collection of some personal property taxes. DID NOT PASS
Thanks to Our Members
As is always the case, we thank our members for their engagement and for discussing important issues with their legislators. Your relationships with Senators and Representatives are key in helping us promote county government issues and priorities with the General Assembly. We hope to see many of you in Gatlinburg next month, where the issues in this update and more will be discussed in greater detail. On behalf of everyone at TCSA, TCCA, TCHOA, and ACM, it is an honor to be able to represent you in Nashville.
