The latest Tennessee government tax collection tallies that came out last week suggest state government is, for the time being anyway, awash in unanticipated revenues.
While the budget year is still young, not yet three months old, early indications are that significantly more money is coming in than lawmakers and the governor were expecting when they plotted out the state’s spending plan last winter.
In September alone, the second month of the fiscal year, the state collected $113.4 million more than the budgeted estimate. That’s $82.2 million more than in September last year, according to a Department of Finance and Administration press release issued Oct. 14.
“Year-to date collections for two months were $132.5 million more than the budgeted estimate,” the administration reported. “The general fund was over collected by $116.8 million and the four other funds that share in state tax revenues were over collected by $15.7 million.”
The state also over-collected more than half a billion dollars last fiscal year.
For advocates of raising the state’s per-gallon taxes on gasoline and diesel — an idea Republican Gov. Bill Haslam has been test-driving around Tennessee — the fact that the government’s tank of revenue is overflowing will probably tend to make it tougher to convince skeptical lawmakers that it makes sense now to hit road-users with a tax hike.
High-ranking House Republicans like Speaker Beth Harwell, Majority Leader Gerald McCormick and GOP Caucus Chairman Glen Casada appear particularly unified in their opposition to raising fuel taxes in 2016.
Tennessee’s 21.4 cents per gallon tax on gasoline has been in place since 1989, as has the 18.4 cents per gallon diesel tax.
In a statement emailed to TNReport by her media spokeswoman on Friday, Harwell said she’s “encouraged by the revenue numbers, and believe(s) that we should use a portion of the surplus to replace the funds that were taken over the years from the highway fund.”
The speaker has for a while been indicating she’s more inclined to talk about putting “one-time money” toward transportation infrastructure than raising taxes on fuel.
Leader McCormick echoed that sentiment earlier this month.
Talking about the quality of Tennessee roads and transportation funding in general “is a legitimate discussion to have,” McCormick told TNReport on Oct. 6.
But when the conversation turns to widening revenue-collection avenues, his instinct is to hit the brakes.
“I am not convinced we need to raise taxes to fund the road program right now,” McCormick said. “We do have to pay for it, and at some point we will have to address that, and we want to study it very closely and make sure we are doing the right thing. A tax increase is a last resort, not a first resort.”
Rep. Casada said Friday that House Republican leadership is aligned behind the idea that “we need to take the excess (general fund) revenue and put it toward the Department of Transportation to meet those immediate needs.”
He said majority-party lawmakers who oppose raising the gas tax are not unsympathetic to Haslam administration transportation officials who’re arguing that road improvement ought to be prioritized. But raising any tax is a tough sell when the citizenry has already over-contributed resources for what state government budgeted, he said.
“We have a surplus now and we had a surplus last year,” Casada said. “Let’s deal with that first and not take more money from the taxpayers.”
Casada doubts there’s enough support even on the House Transportation Committee to move legislation that aims to take more money from truckers and motorists at Tennessee fuel pumps.
“This is not the year to raise the gas tax,” he said.
Shelbyville Republican Jim Tracy, the Senate’s Transportation Committee chairman, has been, like Haslam did earlier this year, touring the state to talk about issues related to road infrastructure needs and financing.
Political and public willingness to entertain a tax increase is simply lacking, he said recently.
“We are not ready to do it yet,” said Tracy, who was in Knoxville and Fentress County for road-funding roundtables last week. “I don’t think the legislators are convinced of the need yet. I don’t think the citizens are convinced of the need.”
Tracy said he does however sense “a big movement” in support of setting aside a minimum of $260,000 million from the state’s general fund next year for transportation spending. That’s the amount he and others, like Harwell, say was inappropriately drained from gas-tax collections a decade ago and spent on other government programs.
Five of the Senate Transportation Committee’s nine members are in fact on record in opposition to raising the gas tax. In total, 15 of the General Assembly’s 33 senators have pledged not to vote for a fuel-tax hike should the Haslam administration propose one next year.
Over in the House, Casada, McCormick and Harwell are joined by 40 other representatives who have made assurances to the Tennessee chapter of Americans for Prosperity that they won’t support raising the gas tax in 2016 — and perhaps even beyond. All but one are Republicans: Kevin Dunlap, D-Rock Island, who won election to an open General Assembly seat in 2014 by just 54 votes over his GOP competitor.
A nationwide organization that lobbies for lower taxes and smaller government, AFP has been challenging the Haslam administration’s road-funds-are-lacking narrative through their “Ax the Tax” initiative.
Fanning up grassroots opposition against increasing the cost of gas hasn’t been too difficult, said Tori Venable, the group’s communications director.
“You have Gov. Haslam trying to raise taxes on the state, you have Sen. (Bob) Corker trying to raise taxes on the federal level,” she said. “This is potentially a double-whammy for Tennessee taxpayers.”
One of the main themes the governor and proponents of raising the gas tax are using to try and convince people that revenues are lagging is that cars these days get appreciably better gas mileage than three decades ago. The state therefore gets less money per vehicle-mile driven on Tennessee roads, they say.
But Venable said that’s not a one-way argument.
“When it comes down to it, the middle class and the working poor are the ones who drive older cars and they also drive further to work,” she said. “People who live in rural areas, people who have a fixed income, they are the ones who are going to be hurt worst by raising the gas tax.”
In an op-ed published Friday by the national political news website, The Hill, AFPTN director Andrew Ogles wrote that with gas prices at their lowest in years, there’s a predictable trend among state and federal lawmakers across the country to push for raising gas taxes.
“That’s certainly been the case in my home state of Tennessee,” wrote Ogles. “Gov. Bill Haslam (R) is currently gallivanting across the state calling for an increase to our gas tax. Joining him are various special interests — including building and construction companies — that stand to gain handsomely if his plan goes through.”
Ogles, who garnered significant state and national media attention for his role in leading AFPTN’s successful campaign against Haslam’s “Insure Tennessee” Medicaid expansion plan last legislative session, contends that road-and-bridge decay wasn’t a key priority when the governor and lawmakers approved the state budget a few months back.
“(I)n April state legislators diverted $120 million in surplus funds to construct a new state museum,” wrote Ogles. “If infrastructure funding is truly in peril, this state-level ‘Smithsonian’—as (Lt. Gov. Ron Ramsey) characterized it — could certainly be put on hold. Other examples abound, as well.”
Haslam has said that while he’s amenable to using at least part of any state revenue surplus for transportation funding, there’s always ample political competition for government funding — and oftentimes in fat years more so than lean.
“It is interesting when you have a surplus how many people have an idea for how to spend it,” Haslam said at a Transportation Coalition of Tennessee conference in Murfreesboro earlier this month.
The governor said he’s “very willing to consider” pumping the $260 million back into the transportation budget that was siphoned off under the two previous governors, Republican Don Sundquist and Democrat Phil Bredesen.
But as with all sales-tax-driven general fund revenue, “that money needs to compete with a lot of other things that are raising their hands for that money,” said Haslam.
“We have about $4 billion worth of deferred maintenance on our buildings in the state, so we are trying to take a chunk out of that — because, literally, chunks have been falling out of our buildings. That is one of those very non-glamerous, non-sexy things, but we have to do those,” the governor said.
Haslam administration officials maintain that more than $6 billion dollars in “very seriously vetted” road projects around Tennessee are currently in a state of unfunded “backlog.”
The governor and state transportation officials, as well as the state comptroller, argue the current gas and diesel tax rates are insufficient to meet longterm transportation construction and maintenance needs.