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’Tis the Season: Campaign Time on Taxpayer Dime

A Tennessee Senate staffer appears to have been doing political work while collecting a full-time state paycheck, an apparent violation of state law, public records and documents reviewed by TNReport show.

Derek Hummel has been executive secretary for Sen. Ophelia Ford, D-Memphis, since April of this year, drawing a $30,468 annual salary. Over the past three months, he has also been conducting political activities during state business hours on his state-issued computer, according to phone records and Facebook postings.

Hummel has identified himself as field director for the Phillip North for State Senate campaign. Hummel was paid $625 in September by the North campaign, according to campaign finance filings released last week.

When TNReport visited Ford’s office at the Capitol last week to interview Hummel, no one was present, but Hummel’s desk was strewn with what appeared to be campaign material, and political documents were visible on his taxpayer-funded desktop computer.

During an attempt to interview Hummel today, he accused TNReport of violating state law by calling him on his government-office phone.

“You’re an idiot,” Hummel told TNReport. “I’m calling Bill Fletcher,” he added, before abruptly hanging up. Fletcher is a prominent Tennessee Democratic campaign advertising specialist and political strategist.

A call and an email to the Phillip North campaign have gone unreturned. Attempts to leave a message with Sen. Ford at her Memphis office were unsuccessful because her voicemail box was full.

According to a state law call the “Little Hatch Act,” state employees are prohibited from “engaging in political activity not directly a part of that person’s employment during any period when the person should be conducting business of the state.” The law mirrors the federal Hatch Act.

Examples that suggest Hummel may have been conducting political activities while collecting a state paycheck include:

+Under a Tennessee Democratic Party Facebook post, Hummel on July 25 at 10:07 a.m. urged readers to sign a political petition. Records signed by Hummel show he was working for the state that day between 8 a.m. and 4:30 p.m.

+Under an ‘Americans Against the Tea Party’ Facebook post, Hummel on July 26 discussed a Tennessee Democratic Party petition at 11:15 a.m., 11:19 a.m. and 12:51 p.m. Records signed by Hummel show he was working for the state that day, again 8 to 4:30. On one of those posts he makes during business hours Hummel mentioned how an intern for the Democratic Party had drafted the petition dictated by him “because, by state law, we can’t meddle in politics during business hours.”

+During a phone call taken by Hummel on a non-state cell phone — a recording was provided to TNReport from someone who said they made the call on Sept. 24 during work hours — he talked about working throughout the week on ‘get out the vote’ efforts in his role as field director for the North campaign. State records show he was paid by the state that day.

+On a Tennessee Democratic Party Facebook post that links to North’s views on a Nashville school issue, Hummel commented on Sept. 18 at 3:48 p.m. State records show Hummel was paid by the state for working that day.

+On a ‘North for Senate’ Facebook post on Sept. 21 at 4:21 p.m., Hummel’s cell phone number is posted with a message asking volunteers to call. State records show that Hummel was paid for working that day.

+On Hummel’s desk and on web browser tabs on his state desktop computer, TNReport last week observed campaign documents connected to the North campaign and campaigning in general. (TNReport did not open any desk drawers or search the computer other than to look at the tabs that were open on the computer screen.)

It is not uncommon for staffers in the Tennessee General Assembly to participate in political work, but it is common practice for those staffers to provide notice to the Senate’s chief of staff or to Legislative Administration officials saying they are taking hours off, days off, or a leave of absence for that political work.

In the case of Hummel, it appears he did no such thing: The Senate “does not have any correspondence from Mr. Derek Hummel concerning leave of absences,” Connie Ridley, director of the Office of Legislative Administration, said via email in response to a records request from TNReport.

A spokesman for the lieutenant governor’s office, to whom all Senate staff officially report, declined comment.

Charges of elected officials and their staff using taxpayer dollars to boost political activities are heard occasionally throughout Tennessee.

For example, earlier this year, a reception sponsored by East Ridge city officials for a congressional candidate drew questions about how local taxpayer money was used.

The reception, for Scottie Mayfield, a Republican running for Tennessee’s 3rd District seat, took place while employees were on the clock, and about $80 in city funds were spent on snacks for the employees, according to the Chattanooga Times Free-Press.

City Manager Tim Gobble insisted that the reception was not meant to be an endorsement and was an attempt to be “hospitable,” but other city leaders have said it was an inappropriate use of city funds, according to the paper’s report.

And last year, Democrats accused Lt. Gov. Ron Ramsey, R-Blountville, of violating the Little Hatch Act, saying it was illegal for Ramsey to use his publicly funded office to promote his “Red Tape” initiative because it is funded by his political action committee, RAAMPAC.

Ramsey denied doing anything wrong, and soon after, Drew Rawlins, the executive director of the Tennessee Bureau of Ethics and Campaign Finance, said he saw no evidence of ethical wrongdoing.

But Rawlins also said his office does not handle alleged Little Hatch Act violations. Because the Little Hatch Act is a criminal statute, that task would fall to Tennessee’s district attorneys, as it did two years ago in Bradley County.

An investigation was launched after Bradley County’s Board of Education chairman and vice chairman sent an e-mail to 800 county school employees endorsing a county mayoral candidate in the Republican Primary, according to the Cleveland Daily Banner.

No charges were filed in that case.

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Featured Tax and Budget

About Half a Billion in Gov’t Bacon ID’d by Beacon

In Tennessee, taxpayer money has been used to dabble in the movie-making business, prop up car companies, and promote country music heritage — in Virginia.

Such projects are cataloged in a new Pork Report tracking $468 million in waste and public malfeasance in the past year, $216 million worth of loin, butt and chops at the state level, the Center says.

Authored by the Nashville-based Beacon Center, the report identified more than $182 million in what the center calls “corporate welfare.” Furthermore, “politicians went hog wild” spending the citizenry’s resources on what Beacon Center president Justin Owen described as “taxpayer-funded tourist traps,” including a country music museum in Virginia and a planned water-and-snow theme park in Nashville.

“Many times politicians try to convince us that somehow their visions are grander and more wonderful,” said Ben Cunningham, a Tea Party leader and spokesman for Tennessee Tax Revolt who Tuesday joined Owen at a press conference on Capitol Hill. “Sometimes they even try to convince us that they are a cut above — morally and intellectually above the rest of us — and that their grand, good intentions are somehow grander and more wonderful than the good intentions of the citizenry.

“But in fact, they’re ordinary human beings just like you and I, and they have to be held to the same standards that everybody else is held to.”

This is the seventh year the Beacon Center, formerly known as the Tennessee Center for Policy Research, has published the Pork Report. TCPR was founded in 2004 by Johnson City-native Drew Johnson, who next month will succeed 70-year veteran Tennessee newspaperman Lee Anderson as an opinion page editor for the Chattanooga Times-Free Press.

State spending Beacon’s 2012 Pork Report identified as wasteful included:

  • $2 million in film incentives in 2012.
  • $1.5 million in economic incentives for GM to expand its plant in Spring Hill.
  • $266,200 to Volkswagen to put a sign, only visible from the air, atop its plant in Chattanooga.
  • $500,000 for a planned country music museum in Bristol on the Virginia side of the state line adjacent to Lt. Gov. Ron Ramsey’s district.
  • $88.7 million for pre-kindergarten, which has “repeatedly failed to have a significant lasting impact on the education of Tennessee’s children.”

“This year state and local governments didn’t hold back when spending taxpayers’ money,” said Owen.

Political responsibility for much of the iffy spending and sketchy programs pegged in the report can be assigned to fiscally conservative-talking Republicans, who run state government and are not expected to lose their grip on power in this year’s legislative elections.

“Republicans spend just like Democrats do,” Owen said. “And when you’re spending someone else’s money, you have an incentive to spend it unwisely.”

Although the report points to spending made on Gov. Bill Haslam’s watch, the governor contends his administration is already on top of cutting out pork spending.

“I can promise you that government waste has got our full attention. Now, waste is obviously defined different ways by different folks,” Haslam told reporters Tuesday after defending spending on Pre-K, economic development and tourism.

“One of the value judgements you make every year in the budget is, what are you going to fund out of a lot of potential good things and what are you going to cut out of several things that people have an opinion about whether that’s critical or just nice to have.”

The Center thinks much remains in the latter category and says the state should adopt a law to return excess revenues to taxpayers and set up a state spending commission to root out waste.

The Center advocates strengthening a 1978 state constitutional provision meant to rein in growth. If the state is considering spending that exceeds the growth rate in personal income, lawmakers are required to take a separate vote on the amount beyond that cap. The Center says this vote should require a two-thirds approval, rather than the current majority, and that the measure of personal income growth should be replaced by a figure based on population growth plus inflation.

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Business and Economy Featured News Tax and Budget Transparency and Elections

Tax Cut Proposals Aplenty

Expect a tax cut, Tennessee’s high-ranking lawmakers are telling the public. In fact, expect as many as four.

Capitol Hill leaders are all but promising that Tennesseans should expect to pay less taxes on everything from their groceries to inherited multimillion-dollar estates.

“The important thing is we are sticking to the basic philosophy of our party, which is when additional revenue comes into the state, we look for ways to return it to the taxpayers instead of spending it,” said House Speaker Harwell, R-Nashville.

In past years under Gov. Phil Bredesen, a Democrat, lawmakers had considered raising taxes, such as by removing the local sales tax cap on high-priced items like boats and furs. With the GOP taking control of both chambers and the governor’s office last year, the Legislature reversed course and cut taxes by giving seniors a tax break on income from investments.

“It’s absolutely the right thing to do,” said Ben Cunningham, spokesman for Tennessee Tax Revolt, a fiscally conservative public advocacy group, and a persistent critic of heavy taxpayer burdens.

“During the good times, which is what it looks like we’re entering into now, we’re reducing taxes and expanding our economy and expanding our tax base in the future. And that’s the way to go,” he said.

In recovering from the recession that began in 2008, state revenues are now up 4.8 percent compared to a year ago, giving state officials the flexibility to decide how — or if — they’ll spend that unexpected taxpayer money. But Dick Williams of the left-leaning Tennesseans for Fair Taxation says the state should avoid rushing to reduce taxes without finding a way to offset the revenue, calling this year’s tax reform “low-hanging fruit for winning elections.”

“The whole concept of just lower taxes as low as you can ignores the fact we all rely on … roads and schools and services government provides,” said Williams, TFT chairman and an advocate for reducing the food tax in exchange for a broad-based income tax. “We just think it’s bad policy and shouldn’t be used as just a popular re-election or election tool.”

The proposed cuts enjoy varying levels of support from the two political camps and would touch all sorts of Tennesseans. Plans range from wiping away the tax on gifts like hand-me-down family cars or multimillion-dollar inheritances, reducing costs at the grocery store and giving seniors a break on taxes from earnings on stocks and bonds.

Tennessee Democrats say they’re generally in favor of cutting taxes, too, but would rather spread any tax breaks out to a larger audience by reducing the sales tax on food — even if the savings would appear small.

“As far as having an effect on people, it doesn’t have near the effect that a reduction in the sales tax on food would have, for instance,” said leading House Democrat Craig Fitzhugh, of Ripley.

Here are the four major tax cuts lawmakers are considering this year and a breakdown of how much taxpayers are currently dishing out to pay them:

“Inheritance Tax” SB3762/HB3760

This tax kicks in only when someone inherits wealth or a property worth more than $1 million. Any dollar over the $1 million threshold is taxed at progressive rates from 5.5 percent to 9.5 percent. Gov. Bill Haslam wants to gradually raise the exemption to $1.25 million beginning next year.

For example, coming into a property worth $1.04 million costs $2,200 in taxes. However, being left a property worth $5 million would cost $368,400 to inherit. Under Haslam’s plan, the $1.04 million property could be passed down tax-free next year, and the $5 million property would cost $344,650 in taxes.

Haslam and Republican lawmakers want to phase out this so-called “death tax” over the next four years, saying it hampers farm and business owners and forces some to relocate so their heirs can avoid paying the tax when they die. Democrats agree with deleting the tax in principle but say they’d rather see the state take a bigger bite out of the tax on food.

Inheritance Tax Stats:

  • In fiscal year 2011, people paid $97,875,967 in inheritance taxes.
  • In 2010, people paid: $75,887,698 in inheritance taxes.
  • That’s a 28.9% increase in the last year.
  • Reducing the tax next year will mean $14.1 million less for state government.

“Grocery Tax” SB3763/HB3761

While most other products in Tennessee carry a 7 percent state tax, non-restaurant food is taxed at 5.5 percent. The tax doesn’t apply to all groceries, like diapers or garbage bags, but only food products like meat, vegetables and bread.

Haslam wants to reduce the tax to 5.3 percent in hopes to drop it to 5 percent in three years. However, there is so far no legislation that would require the state to follow the governor’s timeline.

A family of four buying $884 a month in groceries would save $21.22 in the first year under Haslam’s proposal. Dropping the tax to 5 percent would mean that family would save $53.04 annually, and eliminating it completely would translate to $583.44 in savings a year.

Both parties are on board with this tax cut, although Democrats and some Republicans want to take a larger slice out of the tax. Some want to drop it to 5 percent next year and others want to get rid of it all together.

Food Tax Stats:

  • In fiscal year 2011, people paid $489,939,858 in taxes on non-restaurant food.
  • In 2010, people paid $476,875,314 in taxes on non-restaurant food.
  • That’s a 2.7 percent increase in the last year.
  • Reducing the tax next year to 5.3 percent would mean $17.1 million less for state government to spend.

“Gift Tax,” SB2777/HB2840

This is the newest tax cut on the block this session. This bill would repeal the state’s current 5.5 percent to 16 percent tax on gifts to individuals, like cars, boats and real estate.

The tax rate and an exemption depend on the value of the gift and who it’s given to.

For example, a father can give his daughter his old Volkswagon, and she won’t have to pay the gift tax on it unless it’s worth more than $13,000. If it is worth, say $20,000, she’d have to pay $385 in taxes. If the father gave a car to his friend’s unrelated goddaughter and it’s worth more than $3,000, she’d get stuck paying the tax. That same $20,000 car would cost her $1,105 in taxes.

Harwell added this repeal to the list of priority tax cuts earlier this month, saying it would round out the types of taxes the state should no longer impose. The governor said lawmakers have approached him about doing away with this tax, and he’s working to see whether the state can afford it.

“Gift Tax” Stats:

  • In fiscal year 2011, people paid $15,472,738 in gift taxes.
  • In 2010, people paid $11,448,443 in gift taxes.
  • That’s a 35.2 percent increase in the last year.
  • Reducing the tax next year would mean $14.9 million less for state government.

“Hall Tax,” SB2535/B3423 and SB2536/HB2972

Named after its creator Sen. Frank Hall, who pushed the bill in the late 1920s, this tax focuses on income from interest on bonds and notes and dividends from stock. That interest is taxed at 6 percent, but lower income people over 65 are exempt.

For 2011 income and the tax filing coming up next month, individuals over 65 with total income less than $16,200 and couples making less than $27,000 last year are exempt.

For 2012, the senior citizen exemptions are higher, at $26,200 for individuals or $37,000 for couples.

Lt. Gov. Ron Ramsey was behind the expanded exemption and says he wants to go further this year, although Harwell and Haslam aren’t so sure. The governor said he’s still trying to figure out what the state can afford to do.

Ramsey wants to either up the exemption by $1,000 for both single filers and couples or require that the exemption keep pace with the rate of inflation.

“Hall Tax” Stats:

  • In fiscal year 2011, people paid $189,518,032 in Hall taxes.
  • In 2010, people paid 172,459,343 in Hall taxes.
  • That’s a 9.9 percent increase in the last year.
  • Increasing the exemption by $1,000 under SB2536 would mean $88 million less in state government.
  • Increasing the exemption to keep up with inflation under SB2536 would mean $1 million less in state government.