Legislature approves state budget, cut in Hall income tax

By Eric Schelzig, Associated Press
NASHVILLE, Tenn. — State lawmakers on Thursday approved a nearly $35 billion annual spending plan for the budget year beginning July 1, sending the measure to Republican Gov. Bill Haslam’s desk.

While hot button topics like social issues and guns tend to draw much attention during the legislative session, passing a balanced budget is the chief responsibility for members of the General Assembly.

The Senate voted 32-1 in favor of the budget, while the House approved it by an 87-7 margin.

Lawmakers had spent much of the week hammering out agreements over smaller budget items, while leaving intact most of the spending proposal Haslam proposed at the start of the session.

One last-minute measure approved by lawmakers is a 17 percent reduction in the state’s Hall tax on income on stocks and bonds. The change is projected to cause a loss of $28 million in state revenues, plus another $15 million from the communities where the tax is collected.

Some mayors of towns and cities that depend on the tax for a big portion of their budgets have warned they will have to try to make up the revenues elsewhere.

“We take that very seriously,” said House Speaker Beth Harwell, R-Nashville. “Although we have been notifying our local mayors all along to expect this to be fading away.”

About 205,000 Tennesseans paid Hall taxes in 2014 and the median payment was $266, according to the state Revenue Department.

Reducing the Hall tax was not among Haslam’s priorities, but the governor said he agreed to the change after lawmakers removed a provision that would have required the levy to be phased out over the next five years.

“I did not think that was wise, because you just don’t know where we’re going to be at that point,” Haslam said.

Other budget highlights include:

ROAD FUNDING: Lawmakers did not consider a gas tax increase this session, despite Haslam’s warnings that Tennessee faces a $6 billion backlog in road construction and maintenance. But the Legislature did approve a one-time $142 million in one-time money for state and local projects.

K-12 EDUCATION: Haslam has touted the $261 million in new spending as the largest investment in public education without a tax increase in the state’s history. It includes $105 million to pay for teacher raises, $30 million to bridge a one-month gap in health insurance and $14 million to hire more English language learning teachers and translators.

ECONOMIC DEVELOPMENT: The budget includes $30 million for an undisclosed economic development project that riled members of both parties as it moved through committees because officials wouldn’t disclose any details. Supporters argued that confidentiality is in keeping with the highly competitive world of corporate recruiting.

INSURE TENNESSEE: Legislative Republicans declined to revisit Haslam’s Insure Tennessee proposal to extend health coverage to 280,000 low-income people in the state, despite Democrats’ repeated calls to approve the two-year pilot program that would have drawn down $2.8 billion in federal Medicaid money.

LAW ENFORCEMENT: The Tennessee Highway Patrol has been allocated $1.2 million to hire 12 more troopers and the Tennessee Bureau of Investigation will receive $1.3 million to hire four agents specializing in processing electronic devices seized in criminal investigations.

CONSERVATIVE MEETING: Senate Democratic leader Lee Harris of Memphis tried to strike a $100,000 grant from the budget to subsidize a Tennessee meeting of the American Legislative Exchange Council, a conservative group made up of mostly Republican state lawmakers and big business groups. The chamber rejected that change after Republican Sen. Bill Ketron of Murfreesboro, an officer in the group, argued that the meeting will include more than 1,000 people who will “bring deep-pocket dollars and they spend their money.”

LOCAL PROJECTS: The House rejected a proposal by Democratic Rep. Antonio Parkinson to allocate $100,000 to each House member and $300,000 to each Senator to fund local projects. Parkinson said he wanted to ensure that all areas of the state benefit for improving state revenues, including his District 98 in Memphis. “District 98 wants some pork, too,” he said. “We want to eat. Let us eat.”