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No Copeland Cap Changes Recommended in State’s Review

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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NewsTracker

State Seeks ‘Solid Alternatives’ to Incarceration

Longer sentences, rising admissions to state prisons and a slowing in the number of inmates released are contributing to increased prison costs, the state’s top corrections department official said.

One way the state is trying to combat those trends is by developing “solid alternatives to sending somebody to prison,” like drug courts and day-reporting centers, Commissioner Derrick Schofield said during a state budget hearing earlier this month.

Gov. Bill Haslam pressed state prison officials for more detail on why the state’s cost of overseeing inmates is increasing.

“When we have responsibility for an offender, we have responsibility for them,” Haslam said. “I’m just trying to come back and figure out what’s driving that from a bigger picture. Are there other things we can and should be doing as a state?”

In January a new state facility set up to house 1,500 inmates is set to open in Bledsoe County. The prison is an expansion of the Southeastern Tennessee State Regional Correctional Facility.

The Department of Correction is responsible for 107,960 offenders, roughly the population of Murfreesboro, Schofield said. About 30,000 of those people are in prison. The remainder are on probation or parole or under community supervision.

To view other state budget hearings, click here.

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NewsTracker

Corn Prices Weigh on TN Livestock Farmers

While grain producers in Tennessee are having a bumper year, those same market forces are making feed more expensive for cattle and poultry farmers, the state’s top Agriculture official said.

“Various droughts around the world have reduced our inventories to the point that prices are extremely good for the grain farmers. We went through somewhat of a drought this year, but actually recovered with a decent crop in a lot of cases,” Agriculture Commissioner Julius Johnson said during a state budget hearing earlier this month.

“And then in a lot of cases, some farmers around Weakley County along the state line actually lost 100 percent of their corn crop, but came back with soybeans and so forth.”

Julius JohnsonJulius Johnson

Johnson continued: “If you’re feeding feed, this is where you get hit. And so the poultry industry in the state is being hit hard, livestock feeders and so forth, but a lot of the livestock prices have been strong to overcome some of that.”

Johnson is requesting $68.2 million in state funding for the Department of Agriculture for the next fiscal year, holding near steady with the amount the agency received this year and up about 5 percent from the $65 million state budget for fiscal year 2012.

The department’s purview includes food safety, agribusiness, conservation and wildfire prevention.

To view other state budget hearings, click here.

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NewsTracker Tax and Budget

TDOT Taking ‘Ford Fiesta’ Approach to Road Projects

Tennessee transportation officials say they want to put more emphasis on improving existing roadways, rather than building new projects that entail costly land acquisition and environmental reviews.

Tennessee Department of Transportation Commissioner John Schroer said during a state budget hearing Wednesday that an agency focus on “right-sizing” will save hundreds of millions of dollars over the next decade.

“We’re going to the very beginning and saying, OK, what’s the minimum we can do to fix this project?” Schroer said. “And it might not be ‘A,’ it might not be ‘B,’ it might be ‘C,’ but before we just go all the way to ‘X’ and say that’s what we’re going to build and everybody’s happy so we build a Cadillac, we might be building a Ford Fiesta.”

Schroer said the department is proposing to increase its budget next year by $61.4 million, based on increased federal funding, which makes up more than half the agency’s budget. State funding is projected to decrease, he said. The department’s projected budget for fiscal year 2014 is $1.8 billion.

The public can view state budget hearings, which continue next week, at TN.gov.

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Education Featured

Huffman Expects More Schools In State’s Achievement District

The state expects to add 10 or 12 schools next year to its specialized district aimed at helping schools that have fallen behind academically, Education Commissioner Kevin Huffman said during his department’s state budget hearing this week.

That would bring up to 18 schools operating under the umbrella of the Achievement School District, a state entity that has the power to take over failing schools. Like the schools already in the district, many of those additional schools will be in Memphis. Ten Memphis City schools, all in the bottom 5 percent of Tennessee schools in terms of achievement, were notified this week that they will be taken over by the district, the Commercial Appeal reported Wednesday.

Huffman said schools in the Achievement district are operating with longer days, teaching until 4:30 p.m., and using data more aggressively to drive instruction. Huffman discussed the progress so far.

“I think they feel positive about the direction that they’re going, but it’s hard work,” Huffman said. “And I think everybody who works for the (achievement district) understands the very long path they have to go, because their goal is not to have these schools simply be less bad. They want these schools to be good schools where people want to send their children.”

The district was approved by the Legislature in 2010 as part of the state’s successful efforts to win Race to the Top funding for education reform.

The state won $501 million in that contest sponsored by the Obama administration, and Haslam asked Huffman if education officials are planning for what happens after that money is spent. The deadline is in about 18 months, Huffman said.

“We know that we will have to figure out, there will be some ongoing costs that we’ll need to absorb and make room for those costs because it’s the right thing to do,” Huffman said of planning at the state level. Local districts will have to decide whether to continue funding positions like math coaches created under the Race to the Top initiatives.

“When the money runs out they either need to figure out that this is an ongoing priority that’s worth the investment and therefore they need to spend the money on it and not spend someplace else, or they need to transition out of it,” Huffman said.

Huffman has proposed a 2 percent increase in the state share of his department’s funding, from $4.1 billion in the current year to $4.2 billion in 2013-14, the Tennessean reported.

One of the factors driving that increase is a projected $45 million bump to spending for local schools, Huffman said, based on the state law that proscribes state funding for local schools based on inflation and enrollment.

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NewsTracker Tax and Budget

State Revenues Returning to ‘07 Levels, Haslam Lays Out Budget

Gov. Bill Haslam said the budget he’ll pitch to legislators Monday evening is one that reflects the state’s priorities “with strategic investments, painful but necessary cuts and some savings for the future.”

The governor will reveal his budget proposal for the coming year tonight in his second State of the State address before a joint session of the state’s General Assembly.

In a preview of his address Monday morning, Haslam told reporters that increased flexibility in the budget-planning process due to “stronger than anticipated revenue” was balanced by $160 million in one-time federal money leaving the budget. While the state had more revenue to work with than the administration had expected, Haslam said the amount of money coming in is just now beginning to return to where it was in 2007.

Among the budget priorities highlighted by the governor were the restoration of a number of core services that had been cut in the previous budget and a continued effort to build up the rainy day fund. He also called attention to tax cuts he has proposed to the state’s grocery and estate taxes and said he will propose a pay increase for state employees. However, he did reiterate his opposition to across-the-board raises.

“I want to emphasize, I don’t think giving nominal, across-the-board raises is the best way in the long run to recruit, retain and reward great employees,” he said.

The governor has often compared his vision of an ideal government to that of a successful business and forecast a similar message for tonight’s address.

“What you’re going to hear from me tonight is this: State government’s role is to provide the very best service we can at the very lowest price for our citizens,” he said.

Follow @TNReport and #TNSotS on Twitter for live updates during the governor’s State of the State address, beginning at 6 p.m. tonight.

 

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Education Featured Tax and Budget

Higher Spending Requested for Higher Ed

Tennessee higher education officials, sensing the wind in the back of the state’s education reform efforts, boldly made their request to Gov. Bill Haslam Tuesday for a budget increase of $28.7 million.

Haslam has asked all state agencies to submit a contingency plan for 5 percent reductions, and the state’s higher education schools complied with an outline that would trim $55.1 million from their books.

But leaders of the state’s public colleges and universities seized upon the initiatives from K-12 education and higher education like the Complete College Act as a means of persuasion with the governor. The $28.7 million request represents a 2.7 percent increase in funds.

“This is an interesting time,” Richard G. Rhoda, executive director of the Tennessee Higher Education Commission, told Haslam during a budget hearing. “We have a new way of looking at it.

“The state has higher education serving the needs of the state. We have a new master plan. We have a new funding formula that reinforces that master plan based on outcomes. We’re seeing positive movement.”

Rhoda said there are indicators of more students completing degrees, better retention rates and improvements in the amount of remedial and developmental courses that have been falling to higher education. But even as a higher ed official, Rhoda pointed to the significance of what the state is doing in K-12 as the foundation for improvements in higher education.

“The reforms in higher education are great, but the bigger context is how it fits the other reforms in K-12,” Rhoda said. “For us to succeed really is predicated on those improvements in K-12. Just suffice it to say we very much support those.”

Rhoda sat between Tennessee Board of Regents Chancellor John Morgan and University of Tennessee President Joe DiPietro at the hearing at the Capitol in Nashville. All three seemed keenly aware of the daunting financial obstacles facing students and families in affording college. THEC approved its budget request last week, but it came along with proposed increases in tuition that would range from 3-10 percent depending on the schools in the state’s higher education system.

Morgan made a pitch similar to Rhoda’s.

“The combination of Race to the Top, the Complete College Act, the talk is right,” Morgan said.

“There’s a tremendous amount of energy out there and discussion going on and realization that it really is about the state’s future.”

The education officials knew they were preaching to the choir in Haslam, who has made the ties between education and job growth a major theme in his first year in office. But it didn’t make the governor’s job any easier in funding education requests. Haslam cut the budget for higher education in his first year in office by 2 percent, or $20 million.

But the three educators brought even more ammunition to the table. DiPietro pointed to efforts to operate more efficiently in universities. Morgan said the costs at schools actually haven’t gone up at the pace of what students are experiencing in paying tuition.

Rhoda broke down funding trends for Haslam. He told the governor that 10 years ago a university’s funding came roughly 60 percent from the state and 40 percent from the students, while community colleges received about 70 percent from the state at that time.

Now, the figures have been reversed, Rhoda said. The state provides about 36 percent while student tuition and fees cover 53 percent. Rhoda, like Morgan, said cost itself is not increasing for the schools. The change, he said, is in the mix of revenue, where students are having to pay more for their share.

Haslam told reporters after the hearing that he believes there will have to be some tuition increase but that he hopes to limit it. He said he didn’t anticipate being able to grant the colleges a $28.7 million increase but that he didn’t believe he would have to hold them to a 5 percent decrease either. Haslam also pointed to capital needs at colleges and universities.

Haslam said the recent improvements in revenue figures could help the state address a $360 million budget gap.

“I’m really, really hopeful we don’t have to go 5 percent,” Haslam said. “Some of those cuts are tough.

“I feel a little better now than I did three weeks ago, but I can’t sit here today and tell you it will be 3 percent or 1 percent, instead of 5. I just don’t know that yet.”

The state reported that revenue collections for October were $791 million, 8 percent above October in 2010.