Capitol Update – Week of March 14th
Committees and Subcommittees Push to Close
The General Assembly continues to push toward an April adjournment as some committees and subcommittees have announced their “final calendars.” This means if a legislator with a bill assigned to that committee does not put it on notice for consideration by the deadline, they will have to wait until next year for it to be heard. This causes the committee calendars to fill up and meetings to last longer. Often, there isn’t time for everything on the schedule to be heard. That was the case this week as many bills that the county associations were tracking were simply deferred for a week and will come back next week.
Budget Process Continues
The House Finance Committee has three hearings scheduled this week as it continues to work its way through all the various state department and agency budgets. We are starting to hear that the Governor’s supplemental budget amendment will likely be presented around the end of March. After introducing a proposed budget at the time of the State of the State address each year, the Governor files a supplemental amendment to address costs that have arisen during the session from legislation or other causes. This supplemental amendment may also propose how to spend any additional dollars the state has collected during the months of February and March. Once this amendment is filed, that generally signals that the adjournment of the session is two to three weeks away.
Real Estate Transfer Tax
County associations continue to have discussions behind the scenes on how the proposal to return a portion of the real estate transfer tax to counties could be funded. SB1080/HB649 proposes to shift 50% of the revenue from the tax from the state budget to counties. While collections fluctuate from year to year, this would be a reduction of around $125 to $150 million in recurring state revenue that is not currently accounted for in the Governor’s budget. To make it easier for the state to absorb this impact, there have been discussions around phasing in the change, adding provisions to the legislation to provide that the change is not implemented if the state fails to hit revenue projections or funding a portion of the shift on a non-recurring basis. In the next few weeks, the fate of this outcome will be decided as the General Assembly finalizes its budget negotiations. If you have not already, now is a great time to discuss this proposal with your legislators and ask them to signal their support by co-signing the bill.
Other Revenue Proposals
After being approved by the Senate State and Local Government Committee, SJR48, which ratifies a recommended rate increase in 911 fees from $1.50 to $1.86, is sitting in the Senate Finance Committee. This increase would bring Tennessee’s rate in line with some other surrounding states, and it helps provide sustainable funding for emergency communications operations. Local governments generally supplement the cost of operations for these call centers with local tax revenue, so it is essential for 911 fees to keep pace with costs to keep pressure off local budgets. The resolution has encountered some opposition in committees where Senators have questioned the need for the increase. Joint resolutions like this one must proceed through one chamber prior to moving into the other house. SJR48 needs to pass out of the Senate Finance Committee and on the Senate floor before proceeding to the House.
HB 695 by Rep. Baum, which raises the cap on mineral severance tax by $0.15 over a ten-year period, is headed to the House floor for a vote on Monday night. The companion bill, SB889 by Senator Reeves, was approved unanimously by the Senate State and Local Committee and referred to Finance where it awaits a hearing. The current cap is $0.15, so the bill effectively doubles the maximum tax rate. It would take a vote of the county commission to increase their current mineral severance tax to the new cap limits. This bill is a negotiated proposal supported by TCHOA, road builders, and members of the aggregate industry.
HB1329/SB1315 is a bill brought by Governor Lee’s administration to reduce the fee charged by the Department of Revenue for collecting and remitting various taxes to local governments. This concept has been supported for several years by TCSA, specifically regarding the administrative fee on the local option sales tax. The cost of this reduction is included in the Governor’s proposed budget. Since it is funded, the bill was approved last week by the House Finance Subcommittee and sent to the full Finance Committee. The bill was likewise approved by the Senate State and Local Government Committee this week and heads to the Senate Finance Committee.
SJR1 by Senator Haile proposes to amend the state constitution to prohibit the state from levying a property tax. It was approved by the Senate Finance Committee and sent to the calendar committee to be scheduled for a floor vote. The state has not levied a property tax since the sales tax was created in the mid-twentieth century. However, nothing currently prohibits the state from returning to this revenue source in the future. This joint resolution would put a referendum on the ballot for the voters to prohibit the state from ever levying a property tax again.
HB127/SB1307 is another proposal from the Lee administration to expand authority to raise certain taxes for transportation projects. When the IMPROVE act was passed during the Haslam administration, it included provisions that let urban and suburban counties hold referenda to raise revenues for mass transit. To date, only Nashville/Davidson county has passed such a referendum, with voters approving it in 2024. In this legislation coming from TDOT, the restrictions on which jurisdictions could use this authority are removed so that any city or county could use the provisions. The bill also changes the use of the revenue from mass transit projects to transportation projects generally. The law authorized raising local option sales tax, hotel/motel taxes, business taxes, wheel taxes and rental car taxes, however, existing caps on tax rates still remained in place. The referendum in Nashville worked because the county still had a half-cent of untapped local option sales tax. The majority of counties are at the 2.75% max already, with many of those below the cap having cities that are at the max. Many communities have also maxed out their occupancy taxes. Only one or two jurisdictions have authority to levy rental car fees. For these reasons, only a limited number of jurisdictions would likely be able to generate significant revenue from this proposal. Still, county associations support the idea if it “puts another tool in the toolbox” that could be helpful to some counties. The bill is scheduled for consideration in both the House and Senate Transportation Committees next week.
County Commission Meetings
HB22/SB178, which amends the law regarding public comment periods, was approved in a 60-30 vote on the House floor this week. The bill requires local governing bodies to allow speakers to talk about any subject germane to the county or city, rather than limiting presenters to items on the agenda for the meeting. The commission would still be allowed to limit the total amount of time for the comment period. The bill was scheduled for consideration in the Senate State and Local Committee next week but was deferred.
A proposal that has been before the General Assembly multiple times since the COVID pandemic is back again. HB152/SB136 would allow electronic participation in a meeting by individual members of a county commission who have a medical or family emergency, have been called into active military duty, or who cannot attend a meeting in person due to weather conditions. The bill requires county commissions to adopt these provisions by a ⅔ vote for this process to apply in a county. Under the bill, commissioners could only participate electronically up to three times per year and must meet certain conditions. The bill was approved by the House City and County Subcommittee and was scheduled to be heard by the House State and Local Committee this week but was deferred. It is not yet on notice in the Senate.
Committees Entering Critical Period
The next two weeks will determine the outcome for many proposals winding their way through the General Assembly. County associations are already responding to an array of measures as committee calendars have filled up. In addition, this is the time in the session when amendments show up to re-write generic “caption bills.” This can radically change a piece of legislation, and in many cases there is very little time to respond between the filing of the amendment and a committee or subcommittee voting on the bill. We will continue to monitor these developments closely. It makes for a few hectic weeks until the committees are closed and the focus turns to finalizing the state’s budget.
