Adjournment delayed– budget shortfall: Plans to close the 105th General Assembly were put on hold this week, as lawmakers continued to explore answers about the newly proposed budget regarding the state employee layoff and buyout plan. Action on several other key issues also remains to be resolved, including the proposed lottery scholarship distribution plan, a major open records bill, and legislation to reform the board that operates Tennessee's Veteran Nursing Homes.


Meanwhile, the Senate passed Governor Bredesen's "technical corrections bill" without the administration's provision calling for taxing family-owned, non-corporate entities, known as FONCEs. The governor had proposed removing the franchise and excise tax exemption on FONCEs, which are certain limited liability corporations and limited partnerships that derive passive income through commercial property. The provision, which would have raised 15-million dollars, was removed by the legislature due to concerns about the impact it would have on more than 8,000 family-owned businesses.


Funds collected for land conservation purchases could be used to bridge the gap left by removal of the FONCE provision. Some of the revenues collected by Tennessee on real estate transactions go into several land acquisition funds, including those to purchase wetlands. Currently 18-million dollars of the 30-million dollars available from collection of the tax is available on a recurring basis. Many legislators feel that a portion of these funds could be used during the economic downturn, as the state has been aggressively purchasing land over the past several years for conservation purposes.


The governor had already reverted 12-million dollars of the 30-million dollars realty transfer tax to the general fund. The 40-cent per pack of cigarettes tax increase, passed last year, that was purportedly to go for improvements to Tennessee's K-12 schools, has also been placed in the state's general fund. The tax was passed last year during a period of record high revenues, but it has not met projections and returns are continuing to diminish.


The proposed budget must have 468-million dollars in cuts from the governor's original appropriations bill in order to meet the state's constitutional mandate for a balanced budget. It must also include a 314-million dollar downward revision of state revenues for the current budget.


The proposal to cut state employees by offering voluntary buyouts would net the state an estimated 64-million dollars to help fill that gap. However, the governor announced that if the buyouts are unsuccessful, he must cut the state employee workforce to reach the elimination of slightly more than 2,000 state jobs needed to realize the savings. The lack of details about the buyout and how the governor would proceed to cut the positions has concerned many lawmakers about such items, like the monetary benefit of the buyout for the employee, how health insurance coverage might be extended and any other assistance that might be offered. The administration is expected to provide more information when the General Assembly returns for its final legislative week.


Lottery scholarships: More than 13,000 additional students would receive lottery scholarship funds under legislation considered by the Senate this week. The bill would extend the 2.75 GPA requirement for students to maintain the HOPE Scholarship through the end of their junior year. The bill also provides scholarship opportunities for non-traditional students, military veterans, military dependents, students dually enrolled in college and high school, students seeking medical degrees who agree to serve rural areas, and foster children.


The Senate also adopted legislation to use a portion of the excess funds to set up an "Energy Efficient Schools Program," aimed at helping school systems save money on energy bills. The bill is especially needed to help bolster the capital needs of local K-12 schools this year due to the administration's cuts in the Basic Education Program 2.0 (BEP) improvements that were slated for distribution.


The proposal partners the state with the Tennessee Valley Authority (TVA), Oak Ridge National Laboratories, and other energy experts by setting up a council that would guide schools in energy-saving options. The cuncil would establish the rules for distribution of the funds, which would be issued as grants and loans. The council could also tap into federal grants from TVA and the U.S. Department of Energy available for such "green energy" programs.


The program could result in a net savings of 18.5 per cent on energy bills, if the schools implement the upgrades and utilize some of the best practices for energy conservation. The measure is expected to save an estimated 29-million dollars in energy costs for Tennessee schools annually.


Currently, the lottery reserve account stands at 461.8-million dollars, of which 50-million dollars must be kept in savings under current law. The lottery reserve also benefits from ongoing net revenues of an estimated 11.4-million dollars more than is needed to continue the current programs funded by lottery proceeds.


The constitutional amendment creating Tennessee's lottery scholarship program adopted in 2002 approved the use of excess dollars for specific purposes– postsecondary student scholarships, K-12 construction, new pre-kindergarten classes, and after school programs. The Energy Efficient Schools program would fall under the K-12 construction provision, which is the only facet of the amendment yet to be enacted, even though it was listed first on the ballot.


Concerning the lottery scholarship distribution plan, the bill sets aside 349.5-million dollars to create an interest-bearing endowment fund, which together with the 11.4-million dollars will fund all of the proposals in the bill, including one for TSAA need-based grants. TSAA is Tennessee's primary need-based student assistance program. Most of these students (90 per cent) have annual family incomes below 30,000 dollars. The endowment fund would provide 10-million dollars to issue these grants. The bill would provide more than 3,000 students with scholarship opportunities– more than any other plan submitted to date. This is in addition to the 950-thousand K-12 students that would benefit from the Energy Efficient Schools Program.


Some of the other highlights of the plan include:

  • Continuation funding of 25-million dollars for pre-indergarten (pre-K) programs;
  • Extension of the 120 credit hour limit to five years to accommodate any hours lost due to transfer, change of major, or majors requiring more than 120 hours of credit;
  • Removal of the home school requirement of two years;
  • Allowance of dependents of religious workers who are absent from the state but who are temporarily overseas to claim Tennessee as residence for scholarship purposes;
  • Making eligible students who attend two-year institutions with housing the four-year scholarship award;
  • Provision of Civic Education Scholarships for exemplary students; and
  • Establishment of a Laptop Pilot Program to help students access more online course opportunities.

The Senate sent the lottery scholarship distribution plan back to the Senate Finance, Ways and Means Committee due to a rule regarding the financial impact of a rural healthcare scholarship amendment added to the bill. That amendment would set up an endowment to fund scholarships for students pursuing a medical degree and who agree to practice in rural areas of Tennessee. If approved again by the Finance Committee as amended, the legislation would return for final approval by the Senate next week.


Judicial Selection Commission: Legislation that would continue the current Judicial Selection Commission stalled this week in the Senate Government Operations Committee, an action that would put the commission in wind down next year. The sponsor of legislation to continue the Commission for another year then announced his intention to bring the matter to a vote on the Senate floor. At a minimum, opposing senators wish to see a change in the way the commission functions, allowing more input from groups seeking membership on the commission. Currently, members of the commission are selected from a list of special interest groups as prescribed by law. Many senators believe there are important Constitutional issues which need to be addressed and that reform is needed to have a more fair and open process with greater accountability. They also believe that the Commission, which has not been reviewed in the sunset process, should go through the full and normal review process to ensure appropriate legislative oversight of the agency.


DUI Registry: The Senate approved legislation to create a registry of persons who have two or more DUI convictions with the Tennessee Bureau of Investigation, similar to that of the Sex Offender Registry. The bill aims to serve as a deterrant to driving under the influence, causing drunk drivers to think about the consequences of their actions. In 2006, there were 1,287 fatalities on Tennessee roadways, with 509 due to alcohol-related crashes. Motor vehicle crashes are the leading cause of death among persons between the ages of 3 and 33 years, with 50% of the victims killed in alcohol-related crashes.


Verified voter paper trail: The Senate passed legislation that would use federal funds to replace voting machines with voter-verified paper trails and a system to strengthen random auditing. The legislation would use Help America Vote Act (HAVA) funds to ensure that voting machines could be checked to verify that all votes are recorded correctly, detect possible election fraud or malfunction, and provide a means to audit the stored electronic results. Only two of Tennessee's 95 counties keep paper trails of ballots. Most counties use a direct recording electronic touch screen voting machine that does not allow for a paper record that can be audited or recounted in cases of suspected fraud.


Homelessness: The problem of chronic homelessness was the subject of a resolution approved by the Senate this week. The resolution calls for the Department of Mental Health and Developmental Disabilities to devise a ten-year plan to eliminate chronic homelessness in Tennessee. The most recent estimates on the number of homeless individuals, released by the United States Department of Housing and Urban Development, showed there were 9,560 homeless individuals in Tennessee. Of that number, 2,338 were classified as chronically homeless, which is defined by being homeless for twelve out of the past thirty-six months. Memphis, Nashville, Knoxville, and Chattanooga have each devised and implemented their own ten-year plans to eliminate homelessness. The resolution maintains that the state should adopt the same forward-thinking approach to addressing this problem.

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