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House Will Get First Crack at Haslam’s Medicaid Expansion Plan

It looks as if the Tennessee House of Representatives will take the lead on deliberations over Gov. Bill Haslam’s proposal to expand state Medicaid eligibility using federal Obamacare dollars.

The General Assembly is scheduled to go into an “extraordinary session” beginning Feb. 2 to approve or reject the Haslam administration’s “Insure Tennessee” plan, the centerpiece of which is a system of Affordable Care Act-financed vouchers for lower income residents to purchase private-sector health insurance.

The “vehicle” in the Legislature for discussing Insure Tennessee will likely be a “joint resolution” originating in the House that’ll be carried by the chamber’s GOP majority leader, Gerald McCormick of Chattanooga.

Before it gets to the full floor of the 99-member chamber, though, the joint resolution will have to win approval from several committees and subcommittees, among them the House Insurance and Banking Committee, the Health Committee, the Finance Committee and the Calendar and Rules Committee, a spokeswoman for Speaker Beth Harwell, R-Nashville, told TNReport.

McCormick indicated this week that the vote-count within the House GOP caucus appears very tight at present. There are 73 Republicans and 26 Democrats in the House. Fifty votes are required to pass a measure out of the chamber.

Although the Senate will likely hold hearings and discussions about Insure Tennessee while the resolution is working its way through the House, upper-chamber Republican leaders said Senate committee-votes won’t be taken until after — and only if — the resolution clears the House.

“If it fails in the first House sub(committee), we’re done,” Lt. Gov. Ron Ramsey, R-Blountville, who presides over the Senate, told majority-party lawmakers during a caucus meeting Thursday afternoon.

Both Ramsey and Senate Majority Leader Mark Norris estimate that as many as three-quarters of their caucus remains undecided on the Haslam plan. Among them are Jack Johnson of Franklin and Randy McNally of Oak Ridge, who chair powerful committees that will likely handle the resolution.

Republicans outnumber Democrats in the Senate by a tally of 28-5. It takes 17 votes to pass a measure in the Senate.

“We have members who are outspokenly opposed to the proposal,” Norris said at the Senate GOP caucus gathering. “There are other members here supportive of it. But most members are just in the middle with open minds.”

Norris, who has himself voiced reservations about Haslam’s plan, said he’s hopeful there’s a full and robust discussion about all facets of the proposal. He described Insure Tennessee as “very complicated” in the way it touches on numerous aspects of state and federal law, the Internal Revenue Code and previous developments in the history of TennCare, the state’s program for administering the federal Medicaid system.

“All those things interrelate,” said Norris, a lawyer from Collierville. “Regardless of which side of the issue you may find yourself on, all these issues could be very important, whether you are against it, whether you are for it or whether you are unsure which way to go.”

He added, “What we are trying to do is lay out a timely and orderly process to get everyone through it in the best way possible, so that you can truly say that you are representing your constituents.”

Norris said one of the goals is to avoid the accusation of passing legislation “and not knowing what is in it.”

“Nobody wants to be in that situation,” he said.

Insure Tennessee has been offered by the administration as a two-year pilot program, and it includes incentives for healthier lifestyles. It is designed to enable the state to draw down Medicaid expansion funding through the Patient Protection and Affordable Care Act to cover people making up to 138 percent of the poverty level — which could translate to more than 450,000 potentially eligible Tennesseans.

Legislation Requiring Drug Testing of Judges Proposed

Press release from the Tennessee Senate Republican Caucus; November 15, 2013:

NASHVILLE, Tenn. — State Senator Randy McNally (R-Oak Ridge) and Representative Ryan Haynes (R-Knoxville) said today they will introduce legislation which calls for drug testing all Tennessee judges. McNally made the announcement after meeting yesterday with Knox County Prosecutor Leland Price and the families of Channon Christian and Chris Newsom. Christian and Newsom were raped, tortured and murdered by Lemaricus Davidson, Letalvis Cobbins, George Thomas and Vanessa Coleman seven years ago.

“For a family to have to go through one trial where it involves the torturous murder of their loved one is far too painful for anyone to endure,” said Senator McNally. “But, to have to go through two trials is inconceivable and inexcusable. This legislation addresses this so that no one will have to endure this kind of lengthy and excruciatingly painful court process again due to drug abuse by a judge.”

The families of Newsome and Christian had to endure two painful trials as a result of the misconduct of Judge Richard Baumgartner, who pleaded guilty to illegally taking narcotics during the first trial of the convicted murderers in which he presided. As a result of Baumgartner’s plea, the four defendants who had previously been found guilty, were retried and convicted again.

“I think it’s important that our citizens have confidence in our justice system,” said Representative Haynes. “It is pretty clear after what these two families have gone through that there are issues that need to be addressed.”

McNally said he also plans to introduce legislation which provides for harsher punishment for ethical misconduct by officers of the court that lie about crime victims in order to advance their case.

“Attorney are officers of the court and should not be allowed to lie in order to advance their case at the expense of the victim,” added McNally. “To do so amounts to a second crime against the victims and their families and should be treated as such.”

McNally said both pieces of legislation are still in the drafting stages.

“I am appalled at what these victims and their families endured during these trials,” added McNally. “We must make sure this never happens again.”

McNally is the Chairman of the Senate Finance Committee and represents Senate District 5 in the Tennessee State Senate, which encompasses Anderson and Loudon Counties and portions of Knox County. Haynes is Chairman of the State Government Committee and represents portions of Knox County in the Tennessee House of Representatives.

Haslam Signs Hawkins-Wilson Act, Reforming TN’s Bond Authorization Law

Press release from the Tennessee Senate Republican Caucus; August 27, 2013:

(NASHVILLE, Tenn.) – Legislation enacted by the General Assembly this year ensuring Tennessee’s financial integrity was recognized recently at a ceremonial signing event in Nashville. The bill, sponsored by Senate Finance Committee Chairman Randy McNally (R-Oak Ridge), is named the Hawkins-Wilson Act, in recognition of Tennessee’s 22nd Governor, the late Alvin Hawkins, and Justin Wilson, who is currently serving his third term as the state’s Comptroller.

Hawkins served as Governor from 1881 to 1883. He favored full repayment of the state debt which was in default after the Reconstruction Era building of roads and bridges.

“The Hawkins-Wilson law reforms, clarifies and modifies Tennessee’s bond authorization statute to ensure the financial integrity of the state of Tennessee into the next century,” said Chairman McNally. “It also says the state’s annual debt service shall not exceed 10 percent of the total state revenue allocated to the general fund and the highway fund, setting out a clear, explainable debt service limitation to keep us on the right financial course.”

The new law is a rewrite of the state’s 1937 statute dealing with bond authorization. It also deals with changes in accounting practices to bring state law up to date. The bill was written utilizing best standards and practices nationwide.

“This new law is based on gold standard practices from various AAA states, including Virginia, Maryland and Utah,” added McNally. “It brings us into the 21st century with a renewed commitment to fiscal conservatism that has helped Tennessee become one of the most financially stable states in the nation. I am very pleased this new law has been enacted and that it will carry the names of two of our state’s most influential leaders in sound financial practices.”

State Employee Retirement Reboot Headed to Haslam

An overhaul of the state’s pension fund that changes the contribution system for future employees to one more closely resembling private-sector retirement plans has passed the Tennessee General Assembly.

The bill, HB948/SB1005, sponsored by Rep. Steve McManus,R-Cordova, and Sen. Randy McNally, R-Oak Ridge, intends to change the state employee retirement plan to a hybrid system to safeguard against possible future insolvency, as faced by many other states around the country.

The legislation, which goes into effect July 1, 2014, would require new state employees going forward to contribute a portion of their income to their pension fund. The employees can also decide whether to choose their own investments, or allow the state to continue managing the pension investments.

It applies to government employees hired after the law takes effect; current state employees and retirees would remain under the old plan.

“The fundamental goal of a hybrid plan is to require employers and employees to share in the investment risks and costs equitably,” McManus said on the House floor, after explaining the new contribution and benefit rates under the measure.

McManus added that another purpose of the bill was to allow Tennessee to continue to provide competitive benefits for “career public employees,” while protecting the state from “unfunded liabilities.”

The proposed change to the state’s pension fund received some pushback from Democrats on the House floor.

Although this legislation might be good for some states around the nation, House Minority Leader Craig Fitzhugh said that he did not think that it was necessary to make these changes to the Tennessee Consolidated Retirement System.

“This is a $35 billion TCRS that we collectively, and through the years, have worked hard to maintain,” said the Ripley Democrat. “It is in good shape. And, if we had to do something to split it and start over with new-hires having only a partial defined contribution plan and a partial defined benefit plan, that would be fine. But ladies and gentlemen, at this stage in the game, we don’t need to do that.”

However, according to McManus, the desire to overhaul the pension program comes from several factors considered by the Treasurer’s office.

These factors include things such as the volatility of the financial markets, new federal requirements for pension fund reporting and the strain placed on these programs by the increased life-expectancy of Americans.

The changes to the pension fund are also opposed, for reasons similar to those voiced by Fitzhugh, by representatives from state employee advocacy groups, such at the Tennessee Education Association.

“It puts an employee’s retirement security in jeopardy,” said Jerry Winters, a former lobbyist for the Tennessee Education Association who now works on government employee retirement issues. “Again, the only good thing here is that the current participants are protected, but going forward, I think young people are going to have to really look at where they’re going to be 20 and 30 years from now.”

The bill passed the House 71-16., and passed the Senate 32-0.

It’s now headed to Gov. Bill Haslam for his signature.

2 Veterans Courts Receive Grants from TN Legal Education Commission

Press release from the Tennessee Courts System; April 8, 2013:

Two Tennessee veterans courts are the recipients of $40,000 in total grants from the Tennessee Commission on Continuing Legal Education & Specialization. The move is a result of an ongoing effort on several fronts to address the issues facing veterans and service members, particularly in light of the ongoing drawdown.

The Tennessee General Assembly recently passed a resolution urging the Tennessee Supreme Court to educate Tennessee’s judges regarding the importance of justice-involved veterans and service members and to take appropriate measures to support the creation of new veterans treatment courts and dockets in the state.

Rep. John Ragan, R-Oak Ridge; Sen. Douglas Henry, D-Nashville; and Sen. Randy McNally, R-Oak Ridge all have been instrumental in supporting efforts to champion veterans treatment courts in Tennessee. These funds will further those efforts.

The CLE Commission has earmarked a total of $100,000 for use as an incentive for courts throughout the state to seek education, training, and administrative support for these specialized courts and dockets serving veterans.

“Our organization is privileged to have the opportunity to support local courts and communities in providing these much-needed services to local veterans,” said Judy Bond-McKissack, Executive Director of the CLE Commission.

Veterans courts are specialized problem-solving courts that go beyond traditional judicial methods. They are long-term, judicially supervised, multi-phase courts designed to assist persons who have served (or are currently serving) in the military, who have been charged with a criminal offense, who are at high risk for reoffending absent intensive intervention, and who have significant mental health and/or substance abuse issues. Essentially, a veterans treatment court is a veteran-specific hybrid of a drug treatment court and a mental health treatment court.

In 2012, at the request of the Tennessee General Assembly, the Administrative Office of the Courts conducted an extensive study regarding the feasibility of creating a statewide system of veterans treatment courts.

The AOC found that allowing individual courts flexibility in handling the needs of the community was key to the success of the courts. The study went on to say that the most effective and cost-efficient method of assisting the largest number of men and women who have served this country is to permit each judicial district to incorporate the veteran-specific services into the court system’s existing framework, including the existing drug and mental health treatment courts.

“The Judiciary of the State of Tennessee is especially committed to seeking solutions for those within the criminal justice system who have given a portion of their lives to the service of their country,” said Tennessee Supreme Court Chief Justice Gary R. Wade.

The Supreme Court, with the encouragement of the General Assembly, recently launched a task force charged with creating a veterans court model for future use in trial and general sessions courts throughout the state. Many of the members of the task force are judges who are active members of the National Guard.

Montgomery and Shelby counties are the only two Tennessee counties that have a freestanding veterans treatment court, and each will receive $20,000 from the CLE Commission to support training, operating and administrative costs.

“The CLE Commission believes this funding provides the support that is much needed to further the efforts of these very important segments of our judiciary,” said Tennessee Supreme Court Justice Cornelia A. Clark, who serves as the Supreme Court’s liaison to the commission.

The Tennessee Commission on Continuing Legal Education & Specialization monitors CLE requirements and administers the specialization program for attorneys in the state of Tennessee. The funds are from administrative and non-compliance fees the commission has collected over several years. Members of the commission are appointed by the Tennessee Supreme Court.

Disorder in the Court

As Knox County prosecutors gird themselves for a potential onslaught of appeals in convictions they obtained before a disgraced and now disbarred criminal court judge, political fallout at the state level is just beginning.

State lawmakers who chair the House and Senate judiciary committees say the saga of Judge Richard Baumgartner’s ignominious descent into drug addiction, criminality and professional impropriety will almost certainly strengthen calls for sweeping judicial ethics reform in Tennessee.

“Surely the people that worked around him knew that he was on drugs,” said Senate Judiciary Chairwoman Mae Beavers. “So what’s their obligation to report it? We’ve really got to look at our system and what’s going on.”

Added House Judiciary Chairman Eric Watson, “Something’s going to have to be done.”

On Dec. 1, a judge ordered retrials for all four defendants convicted in the kidnapping, rape and torture slayings of Channon Christian, 21, and Christopher Newsom, 23.

The 2007 crimes were shocking for their extraordinary violence and sexual brutality. The fact that the defendants were black and the victims white sparked racial tensions in the community. Three men and one woman were tried separately before Judge Baumgartner for their roles in the crimes. One of the men convicted in the case was sentenced to die, and the others received prison terms ranging from 53 years to life without parole. A fourth man was convicted in federal court of aiding one of the perpetrators and sentenced to 22 years.

But retrials were ordered for all the state-court convicted defendants after a Tennessee Bureau of Investigation probe into Judge Baumgartner’s activities revealed that he had, over the course of several years, been illegally buying and abusing prescription painkillers in his chambers. The investigation revealed Judge Baumgartner was likely under the influence of drugs when he presided over the Christian/Newsom trials, and many other cases.

Baumgartner was one of the founders of the Knox County Drug Court program. First appointed to the bench by Gov. Ned McWherter in 1992, Baumgartner presided over the high-profile murder trials of Thomas Dee “Zoo Man” Huskey and Raynella Dossett Leath.

The state’s legal apparatus for detecting and dealing with unethical judges, the Tennessee Court of the Judiciary, took no action against Judge Baumgartner until after he pleaded guilty on March 10 to one count of “official misconduct,” a Class E felony. As part of the plea agreement offered by Al Schmutzer, Jr., a former Cocke County district attorney who served as a special prosecutor, Baumgartner agreed to resign his post as a Knox County Criminal Court judge.

On March 29, Baumgartner was placed on “interim suspension” by the Tennessee Court of the Judiciary.

That the Court of the Judiciary didn’t catch wind earlier of the ongoing judicial meltdown in Tennessee’s third most populace county is further evidence all is not well in the state court system, suggested Beavers. The Court of the Judiciary is scheduled to “sunset” as of July 1, unless the Tennessee General Assembly passes legislation that says otherwise.

In the event that the COJ is disbanded — an increasingly likely outcome, said Beavers — responsibility for investigating and disciplining judges would revert to the Legislature.

Other lawmakers are taking issue with Baumgartner’s ability to keep his taxpayer-funded pension. In spite of laws passed in the wake of the Tennessee Waltz scandal requiring public officials to forfeit that income in the event of an office-related conviction, because Baumgartner was granted judicial diversion there won’t likely be a conviction entered into the record to trigger the pension revocation — provided he stays out of further trouble for the next two years.

Senate Finance Committee Chairman Randy McNally said he is drafting legislation requiring government officials to surrender their pensions even if granted diversion for a felony charge, an issue Gov. Bill Haslam said Tuesday is “worthy of discussion.”

McNally is also asking U.S. Attorney William C. Killian to investigate whether there are federal charges that could be brought against Baumgartner — which could also lead to him losing his pension. McNally’s also asking the Tennessee State Comptroller to investigate payments the judge authorized to defense attorneys in the Christian/Newsom murder trials.

News outlets in Knoxville reported last week that anywhere between dozens and thousands of cases that went through Judge Baumgartner’s courtroom in the past several years could be subject to review.

Attorney General Robert Cooper confirmed to TNReport that his office is aiding the Knox County District Attorney’s Office to try to get a handle and read on the magnitude of the legal disaster they’re facing.

The Knoxville News Sentinel reported last week that Judge Baumgartner disposed 3,341 cases in the timeframe in which he is suspected to have been “doctor-shopping” and cavorting with known felons, including a drug dealer convicted in his court.

WBIR-TV in Knoxville reported that the Knox County District Attorney General’s Office believes that “less than 40” retrials are likely.

Special Judge Jon Kerry Blackwood earlier this month ordered the release of 155 pages of TBI interview summaries and transcripts that formed the basis of his decision to order retrials in the Christian/Newsom case.

Those TBI files reveal that many court employees and lawyers, including prosecutors with the District Attorney’s Office and a sitting judge, knew for a long time something was amiss with Judge Baumgartner, but apparently took no steps to have him officially investigated or removed from the bench.

Judge Baumgartner’s administrative assistant, Jennifer Judy, told the TBI it was widely known around the courthouse that Baumgartner was often mentally incapable of presiding over cases.

“Judy stated on some days he was so impaired that his court clerk or the District Attorney’s office would reset matters scheduled for that day,” according to one TBI interview report.

The TBI report further stated:

Judy said sometimes Judge Baumgartner would ‘buck up’ if he thought he was fine and that she had threatened him before that if he went into the courtroom impaired, she was not going in with him and be subjected to the ridicule from others in the court. She stated that she felt that his peers, other lawyers, including the District Attorney’s office, knew what was going on but they did not confront him about his issues because he was ‘the Judge.’

Within the TBI files is also a summary of interviews conducted with Assistant District Attorneys Leland Price and TaKisha Fitzgerald, lead prosecutors in the case against Vanessa Coleman, the female defendant in the Christian/Newsom murders.

Price and Fitzgerald were traveling together back to Knoxville from Nashville after a court proceeding in the spring of 2010 when they observed Judge Baumgartner in a vehicle ahead of them. According to the TBI’s interview with Price:

Price stated that the Judge was weaving all over the road and driving very erratic to the point of almost causing an accident. Price stated they tried to call him on his cell phone but he would not answer. He said they contacted Jennifer Judy who then called [Baumgartner] and asked him to pull over at the next exit. Price said he believed that [Baungartner] did comply with the request, but [Price] and [Assistant DA Fitzgerald] did not stop at the exit.

Fitzgerald’s account of the incident along I-40, which occurred near Cookeville, is consistent with what Price told the TBI. “[Fitzgerald] stated that [Baumgartner] was all over the road and was a danger to other drivers,” according to the TBI report, written by Darren B. DeArmond.

The TBI file indicates Judge Baumgartner later summoned the two Knox County DA’s assistants into his office and admitted they’d witnessed him driving while impaired:

[Price] advised that on Monday, April 12, 2010, [Baumgartner] called him and ADA Fitzgerald into his chambers and discussed the events of the previous Friday. [Baumgartner] told them he was having some back problems and had taken some medication and should not have been driving.

Price also told the TBI that during courtroom preparations for jury selection in the Coleman trial, Judge Baumgartner seemed “not right,” possibly mentally impaired or “under the influence,” according to DeArmond’s report.

“[Price] said the Judge’s speech was slurred and he seemed incoherent at times and was having problems putting sentences together,” wrote DeArmond, who conducted his interview with the prosecutors on Feb. 3.

“Price stated that he was aware of times when trials have been reset in Division I Court when Judge Baumgartner was not fit to be on the bench,” the TBI report states.

Nevertheless, the Coleman case went forward with Judge Baumgartner presiding. Coleman was ultimately convicted of helping facilitate the rape, torture and murder of Channon Christian. In July 2010 she was sentenced to 53 years in prison.

No date has been set for her retrial.

Reached by phone on Tuesday, John Gill, special counsel and chief assistant to Knox County District Attorney Randy Nichols, defended prosecutors’ handling of the Judge Baumgartner affair.

“We were aware that he had some health problems, but not that he was abusing drugs or addicted to drugs at all,” Gill told TNReport.

The TBI began investigating Judge Baumgartner in the fall of 2010, after a Knoxville woman reported to local police that her ex-husband had burglarized her home — and that if law enforcement authorities investigated him they’d find he was dealing drugs to a local judge. The incident was reported to the TBI by Jennifer Welch, also a prosecutor with the Knox County District Attorney’s Office.

Chris Craft, who presides over the Court of the Judiciary, told TNReport that the Judge Baumgartner situation was in no way mishandled by the COJ — and that the case in fact ought to demonstrate how important the COJ is to the justice system in Tennessee.

“As far as what we’re doing, we need to keep doing what we’re doing, and we’re doing a good job,” he said.

Craft said that in the case of Judge Baumgartner, the Court of the Judiciary “did everything they were supposed to do.”

“I can think of absolutely nothing we failed to do in this case,” he said.

When the COJ was made aware of the nature of Judge Baumgartner’s behavior — namely, after Baumgartner accepted the plea bargain last March — it acted, said Craft.

Craft would neither confirm nor deny whether the COJ received any complaints against Baumgartner prior to March 10 because that information would only be made public if the COJ filed charges or issued a public reprimand, which it did not.

Craft noted, though, that he’s heard of no one who has come forward publicly and said they filed a complaint against Baumgartner with the COJ that the COJ failed to investigate.

In a letter dated Dec. 6, Senate Finance Committee Chairman McNally requested the COJ release “copies of any complaints filed against Judge Richard Baumgartner since 2007 related to drug or alcohol abuse.” McNally said Monday he’s yet to receive a response.

Judge Craft added that all lawyers — prosecutors, defense attorneys and other judges alike — have an “absolute duty” under the Tennessee Supreme Court’s Rules of Professional Conduct to report judicial misbehavior or misconduct whenever they suspect or witness it.

“At the Court of the Judiciary, we understand that many attorneys are hesitant to file a written complaint on a judge, so we will take anonymous complaints from attorneys over the phone if we need to in order to get enough information to investigate,” Craft wrote in an email to TNReport. “We can then talk to others who observe the judge and courtroom daily to make sure nothing is happening that is impairing the judge’s performance. There may be an entirely innocent reason the judge is acting differently, such as advancing age, back pain, illness or lack of sleep due to a family illness or other issue, but we still need to know, if it is in fact affecting that judge’s performance.”

Baumgartner could not be reached for comment on this article.

In a story that aired on Knoxville station WBIR-TV back in August, the former judge can be seen addressing members of the Knoxville Metropolitan Drug Commission in a taped video presentation. In it Baumgartner touches on some of the circumstances surrounding his admitted addiction to pain pills.

“I kind of wish that people had been tougher on me and said, ‘What’s going on here?’,” Baumgartner said. “Because I think if more people had done that, I might have gotten the message sooner.”

Andrea Zelinski and Mark Engler contributed to this report.

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In Wake of Comptroller’s Report on Farr, Haslam says Consistency Needed in Tax-Variance Decisions

Gov. Bill Haslam said Monday the best reaction to a comptroller’s report widely seen as critical of former Department of Revenue Commissioner Reagan Farr is to establish clearly defined procedures for tax variances granted by the commissioner.

“I just got a copy and read it over the weekend,” Haslam said of the report (pdf).

“For us, I think the important thing is to say: What are we going to do going forward? I think the clear message to us was: We want to have well-documented, clearly organized procedures for how you handle any variances.”

Haslam said he and current Revenue Commissioner Richard Roberts have talked about the issue and that Roberts agrees with him on the proper approach.

Haslam said he does not know if he will advocate any legislation to address procedures for tax variances, however. He said all of his department chiefs are reporting to him with any proposals for legislation they may have for next year and that he will address the Department of Revenue later this week.

A key element of the issue, however, has been the private nature of Revenue decisions, which affect individual taxpayers.

Comptroller Justin Wilson’s report, dated Oct. 17, is accompanied by a letter to Lt. Gov. Ron Ramsey, Speaker of the House Beth Harwell, Sen. Randy McNally of Oak Ridge and Rep. Charles Sargent of Franklin, saying the report is in response to their request. All four of the legislators are Republicans. McNally and Sargent are chairmen of their chambers’ respective finance committees.

Wilson is a Republican. Farr served in the administration of former Gov. Phil Bredesen, a Democrat.

The comptroller’s report looked at tax variances from 2000-2011 and involved a review of 59 variances — 40 requested by the taxpayer, 19 by the commissioner. The report said approvals of taxpayer-requested variances increased during the tenure of Loren Chumley, who served in 2002-2007, and Farr, who served in 2007-2010. It noted a frequency in recent years where variance award letters involved references to economic development.

“Specifically, taxpayers would use job creation and economic impact as part of their argument for why they should be awarded a variance,” the report said, adding that requests used tax treatment as a “negotiation tool.”

The report said key department employees were sometimes excluded from the decision-making process. The report recommends that the Legislature consider legislation requiring additional approvals to variances, that the department should proceed with a new tracking system for variances and that the department develop a process for reviewing awarded variances.

Haslam acknowledged Monday the difficulty of dealing with privacy issues of agreements with taxpayers balanced with transparency in government.

“That is one of the difficulties, because obviously it deals with private taxpayers’ information,” Haslam said. “But I think the important thing for us to do is make certain, again, that there is a process that is clear and predictable and we’re letting people know everything we can — absent private taxpayers’ information.

“We really are trying to do that.”

Amazon Compromise Mirrors McNally’s ‘Grace Period’ Idea

Sen. Randy McNally, chairman of the Senate finance committee, says retailers still upset with Amazon’s tax agreement with the state aren’t likely to get a better deal than the one negotiated by the Haslam administration.

McNally, R-Oak Ridge, one of the key figures in trying to have the company start collecting sales tax from Tennesseans, said further action in opposition to the deal is up to those other retailers, but he said, “Certainly, if I was asked to give them advice, I would tell them that this is far and away the best deal they could get.”

Gov. Bill Haslam announced Thursday that the state has a new deal with Amazon, in which the online retailer will begin collecting sales taxes in 2014, while Amazon commits to increasing its job total in the state to 3,500 positions on an investment of up to $350 million.

McNally said he hopes this will settle the matter of Amazon’s tax status and suggests that the overall online sales tax issue should go through the courts to be resolved nationally, because he believes Congress is unlikely to act to bring uniformity to the collection of state sales taxes.

Recent reports say Amazon has its sights on locations in Rutherford and Wilson counties, as it seeks to grow its presence in Middle Tennessee, the latest development in a story that began last fall when former Gov. Phil Bredesen gave Amazon the ability to avoid collecting taxes in exchange for building distribution centers in Hamilton and Bradley counties. Haslam’s administration and Amazon negotiated the new arrangement.

The retail group Alliance for Main Street Fairness immediately objected to the Haslam agreement, saying 2014 is too long to wait, noting in particular that the deal gives Amazon three holiday shopping seasons before it has to collect. The brick-and-mortar retailers continued their campaign over the weekend with newspaper advertising objecting to the deal, saying California got an agreement for Amazon to collect beginning in 2012 and that the same should apply in Tennessee.

Haslam said he will submit the new deal in the form of legislation, to be considered when the General Assembly convenes in January. McNally and Rep. Charles Sargent, R-Franklin, chairman of the House finance committee, had initiated legislation this year and twice submitted requests for opinions from state Attorney General Robert Cooper on the matter. Cooper’s most recent opinion said no retailer can escape responsibility to collect the tax, although he said the commissioner of Revenue has wide discretion.

Haslam saw McNally at the funeral in Madisonville Oct. 2 for Lance Cpl. Frankie Watson, a Marine killed in Afghanistan. The governor told McNally that day he wanted to talk to him a couple of days later about Amazon. McNally was scheduled for surgery in Oak Ridge that Tuesday, so Haslam filled him in then on the plan. The surgery was why McNally did not attend the press conference at the Capitol on Thursday.

Haslam told McNally of the two-year forgiveness period on the tax collections and that after that the playing field would be level. McNally had suggested a two-year “grace period” as a possible solution to the matter in July. McNally said Friday he was taking no credit for the final agreement and that Haslam had not suggested that McNally’s idea was the catalyst for the deal. Neither did McNally ask if his idea had been the foundation of the arrangement.

“It just seemed to be in the best interest of the state,” McNally said.

One of the key elements of Amazon’s strategy appears to be centered on geographical factors.

The Nashville Business Journal posted a story online Friday morning saying Amazon will choose a site in Murfreesboro off Joe B. Jackson Boulevard for a facility involving 1,100 jobs and a capital investment of $87.5 million. Another facility, the Business Journal reported, would be in Lebanon, near Interstate 840, that would create up to 450 full-time jobs, a $51.5 million investment.

“I know they’re looking at sites that are close to Interstates,” Sargent said Saturday. “The same with Lebanon. They can get on Interstate 40, they can get on Interstate 840 and go all the way across to I-65 and I-24.

“Transportation is a big thing to them.”

Access to multiple Interstate highways, waterways and other modes of transportation, especially the presence of FedEx in Memphis, make Tennessee an attractive location for many different companies, state officials say.

In a recent interview with TNReport, Economic and Community Development Commissioner Bill Hagerty said logistics, one of the six major clusters of businesses the administration has identified in the state, is the premier cluster, even ahead of auto manufacturing and health care.

“You’ll see a theme running through all the clusters,” Hagerty said. “You’d be surprised. Even with health care, if you look at all the medical device operations around Memphis, they’re there because FedEx is there.

“An orthopedic firm can have their products on a plane and in a surgical field tomorrow. So they can inventory all these expensive things there, make them to order if they need to, and have it in the operating room the next day.”

Neither McNally, Sargent nor Sen. Bo Watson, R-Hixson, Senate speaker pro tempore, said they were aware Friday of sites being chosen by Amazon. Sargent said he got the chance for the first time Thursday to sit down and talk to Paul Misener, vice president for global public policy for Amazon, after a press conference at the Capitol on Thursday announcing the deal.

“They’re very excited about it,” Sargent said.

The Business Journal reported the Rutherford Industrial Development Board approved a 20-year tax break for Amazon. The Tennessean in Nashville reported the same tax break for the potential site in La Vergne or Murfreesboro, as well as a 15-year tax break for Amazon for a second, smaller facility in Rutherford County.

The Tennessean also reported incentives in Wilson County that include a $3.8-million tax break offered by the county and a break of $439,000 to $550,000 in property tax breaks by the city of Lebanon, with Amazon agreeing to make an annual payment of $28,900. State officials have said there are no state incentives in their deal with Amazon beyond standard incentives for job training and infrastructure.

Rep. Joe Carr, R-Lascassas, emphasized Friday that the deal was not done and that reports he was hearing of were premature.

“The last thing you want to hear is reports out of Rutherford County that Rutherford County got the deal and two weeks later learn that we didn’t get the deal,” Carr said.

Carr confirmed, however, that Rutherford County is very much in the running for sites to be chosen.

McNally, who had issued a formal statement on Friday expressing his support of the Haslam deal, seemed pleased with the outcome but voiced continued concern about the bigger picture.

“I think, hopefully, this would settle the issue with Amazon,” McNally said. “Now, long-term there is an enormous issue about out-of-state retailers that don’t have a presence in Tennessee that aren’t collecting the sales tax and how the states can address that.

“It’s been my theory that they ought to try to go back through the courts again. That probably would be the best option, because I doubt Congress would touch this with a 10-foot pole.”

The issue has been litigated most notably with a 1992 case involving Quill Corp., a mail-order company that made catalog sales. The North Dakota Supreme Court ruled there was sufficient presence, or nexus, of Quill in North Dakota that required Quill to collect the sales tax there. But the U.S. Supreme Court overruled the state court, saying the case did not represent sufficient nexus as it related to the commerce clause in the U.S. Constitution.

For years, states have turned an eye to Congress to settle the matter legislatively, but many observers, including McNally, see Congress as unlikely to get involved in an issue that would increase tax collections for the states. Haslam called again Thursday for a national solution.

New Amazon Deal Praised As Improvement On Deal, Not Backtracking

When all was said and done in the announcement Thursday that Amazon will collect sales taxes in Tennessee beginning in 2014, the state was in a different place from its original agreement with the online sales giant.

The original plan had been that Tennessee would get hundreds of jobs from two distribution centers in the Chattanooga area, so in return the state would let Amazon avoid collecting sales taxes on purchases. The deal was subject to debate almost from the time it became known.

Now, with a commitment that will bring the total number of Amazon jobs to 3,500 in the state, Amazon will have to collect sales taxes, although it is not soon enough for some critics of the deal.

So by negotiating a new deal with the company, taxes included, does that mean that in the big picture Tennessee went back on its word?

“No, absolutely not,” said Speaker of the House Beth Harwell, pointing to the efforts of Gov. Bill Haslam and Commissioner of Revenue Richard Roberts. “I’m proud the governor and the commissioner were able to sit down with Amazon and work out an arrangement that is pleasing not only to Amazon but also to the taxpayers of this state.

“I think it is a fair way to bring a large number of jobs to the state of Tennessee.”

Lt. Gov. Ron Ramsey, R-Blountville, called the announcement Thursday a “big win for unified Republican government on the jobs front.”

“The governor has negotiated a deal that promotes economic growth and jobs creation while protecting the interests of brick-and-mortar businesses who are the backbone of our economy,” Ramsey said in a formal statement.

“This is a good solution for the state of Tennessee, and I commend the governor for resolving this.”

Deputy Gov. Claude Ramsey said the deal simply means an improvement on what the state had before.

“It didn’t go back on its word. It just worked out a better deal,” Claude Ramsey said.

The deputy governor was asked if the new deal would in any way be detrimental to future negotiations with other companies.

“No, sir,” he said. “Because I think it shows that there is a solution. We worked to a solution.”

The original deal was struck by a Democratic governor, Phil Bredesen, who told Haslam of his plans and the reasons behind them: Get the jobs and collect no taxes, or lose the jobs and collect no taxes. Haslam, a Republican and newly elected when Bredesen told him of the deal, told Bredesen he would honor the agreement.

But ultimately, the Haslam administration engaged Amazon in an entirely new discussion. The result was an arrangement where Amazon not only would be collecting the sales tax but would be adding jobs to the point its total commitment had grown to 3,500 jobs and $350 million.

The entire scenario involved a Democratic administration sacrificing a substantial amount of revenue and a Republican administration doing everything it could to collect owed taxes — shifts from the stereotypical depictions of Democrats as tax-and-spenders and Republicans as advocates of revenue reduction.

Republicans did so in the name of tax fairness, yet other retailers were not satisfied that Amazon still gets until 2014 to start collecting and remitting.

In the Legislature, it was a Republican duo, Sen. Randy McNally of Oak Ridge and Rep. Charles Sargent of Franklin, who had contemplated legislation to force the tax collections.

Sen. Bo Watson, R-Hixson, speaker pro tem, said the new deal does not go against the original deal.

“I don’t think you can say it’s anything against the original agreement,” Watson said. “I think this is a continuation of dialogue that’s been going on between the administration and Amazon since the original agreement was discussed.

“All along, as this whole debate has been occurring, many of us, me being one, have been saying that conversations have been continuing, and this is just a continuation of that conversation.”

Democrats held a press conference Thursday, calling for $15 million toward a jobs plan. When they were asked about the Amazon deal, House Democratic Leader Craig Fitzhugh did what Haslam did and emphasized the part of the deal that was about jobs, not taxes.

“I think the primary focus is on the jobs, the jobs that the Bredesen administration brought here through Amazon, and through an agreement that has to do with the revenue, that there’s going to be another 2,000 jobs on top of that,” Fitzhugh said.

“So I think that’s the key thing we have to focus on in these times, which as everybody has said, is jobs.”

Mike Turner, the House Democratic Caucus chairman, said, “The law is already on the books. You’re supposed to be paying that tax as it is now.

“There’s no new taxes being added to the books because of what we’re doing.”

Andrea Zelinski contributed to this report.

McNally Pleased with Haslam’s Handling of Amazon Sales Tax Issues

Sen. Randy McNally, R-Oak Ridge, who has worked to require Amazon.com to collect sales taxes on its online sales, said Monday he endorses Gov. Bill Haslam’s efforts to resolve the issue, calling it a potential “win-win” solution for the state.

McNally also said he appreciates efforts in the Haslam administration to set new guidelines on the handling of private letter rulings — or written agreements specific to the taxpayer — which might make the process more transparent yet still protect a taxpayer’s confidentiality.

McNally, chairman of the Senate Finance Ways and Means Committee, noted new clout among members of the Legislature from the Chattanooga area, where two of the three distribution centers in the state announced by Amazon will be located. A third center has been announced for Lebanon in Wilson County.

Haslam says his administration is in negotiations with representatives of Amazon on establishing a long-term relationship on sales tax collections. The governor’s efforts come in the wake of an agreement between his predecessor, Phil Bredesen, and Amazon, where the company was granted permission to operate its facilities in the state without collecting sales taxes. The reason given for the deal was that the creation of hundreds of jobs in Tennessee made up for the tax issue and that without the deal Amazon would go to another state.

Haslam said last week he wants an agreement with Amazon where the company can expand in Tennessee and at the same time come with an understanding on the collection of taxes. Haslam said if such an agreement were reached the public would be able to know about the deal. Much of the arrangement under the Bredesen administration has been secretive.

“To the extent they can work something out that allows them (Amazon) to operate facilities and provide the jobs and then would, in the end, have them collecting and remitting sales tax, that’s a win-win,” McNally said. “I’m pleased with what the governor has said.”

Commissioner of Revenue Richard Roberts said last week he cannot comment on talks with Amazon, even to confirm or deny that negotiations are occurring.

“He can’t really discuss it unless Amazon gives him permission to,” McNally said.

But Haslam has spoken openly about the discussions, expressing his personal desire that Amazon collect the tax. Haslam publicly voiced his support for the original agreement, as have many lawmakers, citing the importance of the state protecting its reputation for keeping its word.

“Whether the governor, in talking to Amazon, says, ‘This is going to be on the record, and our discussions are not protected by confidentiality,’ I don’t know,” McNally said. “There is a statutory provision that protects taxpayer confidentiality for the Department of Revenue officials.”

McNally said his understanding is that the Department of Revenue is working with Sen. Bo Watson, R-Hixson, speaker pro tem of the Senate, and others about how to handle private letter rulings that are key to the confidentiality matter.

An effort to reach Watson on Monday was unsuccessful.

McNally said he believes such an agreement at the department could be possible while still providing some protection to the taxpayer — “whether that’s through redaction, or whether it’s through having the confidentiality provision expire after a certain length of time, or whether that’s through a mechanism where the commissioner of Revenue would say he’s issuing the ruling regarding ‘XYZ’ provision of the revenue rules, and his ruling is such-and-such without mentioning the taxpayer.”

McNally said such an effort at the Department of Revenue is a positive change. He also expressed confidence that a new long-term deal would be spelled out publicly, as Haslam assured.

McNally at one time suggested a two-year “grace period” for requiring Amazon to collect sales tax, but Haslam responded that it would leave uncertainty on the issue.

One of the developments in the Amazon issue has been the recent emergence of power among some lawmakers from the Chattanooga area. Amazon has announced distribution centers in Hamilton County and Bradley County in the southeast corner of the state.

Watson was recently named speaker pro tem in the Senate after Sen. Jamie Woodson, R-Knoxville, who had had the role, announced her departure to take a job as head of the State Collaborative on Reforming Education. Rep. Gerald McCormick, R-Chattanooga, was elected House majority leader this year, and Rep. Eric Watson, R-Cleveland, is chairman of the House Judiciary Committee.

“I know there are some very strong advocates, certainly very powerful individuals in that area,” McNally said. “They’ve got some real power in Chattanooga that it hasn’t had in a number of years.

“At the same time, they’re reasonable individuals. They realize you’ve got jobs and capital investment on one side of the ledger sheet, and you’ve got potential erosion of the sales tax base on the other. So, all of our conversations have been cordial, but they’re very strong advocates of their position.”

McNally and Rep. Charles Sargent, R-Franklin, chairman of the House Finance Ways and Means Committee, sponsored legislation this year seeking a requirement that Amazon collect the tax. They postponed it.

On Aug. 1, McNally and Sargent requested an opinion from Attorney General Robert Cooper on whether the state may waive the obligation of an out-of-state retailer to collect the sales tax. That followed an earlier request for an opinion from Cooper on whether Amazon had established sufficient retail presence — a legal threshold called nexus — to warrant collection of the tax and whether their legislation requiring it was constitutional. Cooper opined that sufficient nexus was present to warrant the tax collection and that the legislation was constitutionally defensible.

McNally was asked Monday his current opinion on the prospects for his legislation being passed.

“I’d say it’s an uphill battle,” he said.

But he sounded upbeat about Haslam’s recent approach.

“I appreciate the governor trying to work toward an equitable solution for the state, for that region, as far as jobs and capital investment,” he said.

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