(NASHVILLE, Tenn.), April 3, 2014 — The State Senate approved major law and order legislation this week as the General Assembly worked diligently towards adjournment of the 2014 legislative session. The state budget also moved front and center this week, as Governor Bill Haslam presented an amendment to his fiscal year 2014-2015 spending plan, identifying $160 million in reductions due to an ongoing decline in revenue collections.
The governor presented a budget in February addressing a $126 million gap in the current budget year which ends on June 30. The new budget amendment provides for an additional $150 million needed to cover the gap in the 2013-14 fiscal year, which has now grown to $276 million. This will be covered by capitalizing on efficiencies departments have been making throughout the year and right-sizing several reserve funds.
Unlike the federal government, the Tennessee Constitution requires state government to balance its budget every year. This careful budgeting practice has kept the state in better shape to withstand periods of revenue downfalls.
Sales tax revenue collections have lagged behind budget projections due to a modest holiday season, followed by a long, cold winter that kept shoppers indoors. The state also had an estimated revenue loss of nearly $332 million due to online commerce. This is in addition to less than expected losses of franchise and excise tax revenues which were down $215 million due to overpayments by businesses last year that are now resulting in credits and refunds. Franchise and excise taxes are privilege taxes on corporations, limited partnerships, limited liability companies and business trusts doing business in Tennessee which often fluctuate.
Other revisions to the governor’s budget proposal include:
• Savings from automating TennCare’s eligibility system – $6.5 million
• Contract reductions to Families First vendors – $4.75 million
• TennCare provider rate reduction – $18.5 million
• Eliminating pay increases for state employees and teachers – $72 million
• Reducing next year’s funding for Higher Education to the current funding level, eliminating proposed increase – $12.9 million
• Reduction of the BEP Growth Fund – $5 million
• Recognizing savings in the Career Ladder program – $4 million
• Reducing proposed funding for the Rainy Day Fund by $4.8 million, which preserves an investment of $35.5 million bringing the state’s savings account to $491.5 million on June 30, 2015.
The amendment eliminates a proposed increase to health insurance premiums for state employees and teachers to provide them some compensation. It keeps funding increases intact for key areas which serve some of Tennessee’s most vulnerable citizens such as the Department of Children’s Services and the Department of Intellectual and Developmental Disabilities and local property tax relief for disabled veterans and elderly disabled citizens. It also preserves funding for the Basic Education Program’s (BEP) salary equity fund. Senate Bill 2596 is expected to be on the Senate floor for final consideration as early as next Thursday.
In other action affecting the appropriations bill this week, State Senators gave final approval to legislation which supports the budget by continuing the Hospital Coverage Assessment. Senate Bill 1908 prevents more than $800 million in potentially catastrophic TennCare cuts from taking effect on July 1, 2014. The cuts would negatively affect hospitals, physicians, patients and enrollees across the state. The budget was drafted on the assumption the assessment would be continued for the 2014-2015 fiscal year.
The assessment, which has saved Tennessee over $1 billion over the last four years, is used to draw down federal funds available through a Medicaid match program approved by the Centers for Medicare and Medicaid Services (CMS). The bill’s language ensures that the coverage assessment cannot be passed along to patients.