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No Copeland Cap Changes Recommended in State’s Review

Still, fiscally conservative TN think tank suggests certain revisions could save taxpayers money

Tennessee Comptroller Justin Wilson told lawmakers Tuesday that the state’s constitutional spending cap is actually designed more to improve political accountability in the Legislature than it is to restrain government budget growth.

Wilson delivered a report from the State Funding Board, which was tasked with studying the effectiveness of the so-called “Copeland Cap.”

“It’s not my position at all that you should never exceed the Copeland Cap,” Wilson said at a meeting of the state House Finance, Ways and Means Committee. “It is my position that you should know exactly what you’re doing and why you’re doing it if you decide to do that.”

The funding board’s December report concluded that no substantive alterations or reforms to the cap are needed presently.

One group that is suggesting changes, though, is the Beacon Center of Tennessee, a think tank that advocates for free markets and smaller government. In a policy brief released Tuesday, the Beacon Center recommends boosting the vote requirement for lawmakers to exceed the cap from a majority to two-thirds. The center is also suggesting a new method of calculating the cap that it says would save the state money.

Passed by Tennessee voters in 1978 after being recommended in the Limited Constitutional Convention of 1977, the language of the Copeland Cap reads, “In no year shall the rate of growth of appropriations from state tax revenues exceed the estimated rate of growth of the state’s economy as determined by law. No appropriation in excess of this limitation shall be made unless the General Assembly shall, by law containing no other subject matter, set forth the dollar amount and the rate by which the limit will be exceeded.”

While it was conceived as a check against overspending is state government, the Copeland Cap has been criticized over the years for being too easy to skirt.

“Thanks to the leadership of (former state Rep. David) Copeland, Tennessee’s spending cap has ensured limited growth in Tennessee’s budget, but in hindsight, it could be an even more effective tool to curb state spending—allowing hard-working Tennesseans to keep more of their own money,” Beacon Center CEO Justin Owen said Tuesday in a press release, which noted that since being adopted in 1978, “the Copeland Cap has been exceeded with regularity — only 18 times in 35 years has the Legislature failed to exceed the cap.”

Last year the General Assembly passed legislation on near unanimous votes in both chambers calling for an inquiry into whether some kind of redesign of the Copeland Cap is warranted. Nashville Democratic Sen. Douglas Henry, the longest serving lawmaker in the General Assembly, said studying and potentially recommending changes to the Copeland Cap would better enable it to “hopefully do what it was designed to do.”

Since it was enacted in the late 1970s, the Copeland Cap has been busted 17 times, according to state budget figures, most recently by 1 percent, or $132.5 million, in 2013.

But the funding board’s report notes, however, that it’s something of a “misconception” that the Copeland Cap is actually meant to “restrain spending.” Really, it is more accurately understood as a tool for transparency in state budget writing, the report indicated.

“The Cap is actually meant to create accountability and to let the General Assembly know when spending is growing faster than the economy that supports it,” according to the report. State law calls for economic growth to be measured by Tennesseans’ personal income, which includes wages, rental, and dividend and interest income.

To that end, the state finance commissioner, Larry Martin, said in a Dec. 17 memo contained in the funding board report that in order to improve transparency, the department will prepare a report when Gov. Bill Haslam presents his budget indicating whether the Cap will require busting, at least with respect to the governor’s proposed budget.

Usually, there is no clear indication whether the Copeland Cap will be set aside until late in the session just before a final budget is passed.

The Beacon Center says in its report that the personal income measure allows the government to spend too much during good economic times. The center favors using a measure of population growth plus inflation.

“Population changes most significantly influence government spending. If Tennessee becomes more populous, the number of people using government services (driving on roads, receiving welfare services, etc.) will therefore likely increase. Such population growth could drive up government spending as a result. Further, inflation also impacts the value of the dollar, therefore affecting government expenditures.”

The Center estimates its method would have saved state taxpayers $38.4 billion.

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