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VOL. 41 | NO. 4 | Friday, January 27, 2017

Haslam presses case for gas tax hike, $37B budget proposal

By Sam Stockard

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Flush with money from previous budgeting, Republican Gov. Bill Haslam’s proposed $37 billion spending plan for next year includes a major project for the University of Memphis and a College of Applied Technology for Memphis.

Out of a total $836 million in capital investments, the governor’s budget plan contains a $44 million University of Memphis music center using $29 million of state funding and an $11.5 million Tennessee College of Applied Technology Memphis satellite campus.

Touting additional money to go toward K-12 and higher education with marked improvement in those areas, as well as millions more for TennCare, Haslam opened his sales pitch Monday in the State of the State address to lawmakers for approval of his major initiative, the IMPROVE Act. It combines fuel-tax increases and fees to chip away at $10.5 billion in backlogged bridge and road projects, the impact of which he wants to soften with business tax cuts for the fiscal 2017-18 proposal.

“Scores of mayors across Tennessee – cities and counties, rural and urban – have told me that, if we don’t do something to address the fuel tax, they will have no alternative but to raise the property tax in their municipalities,” says Haslam, whose proposal is designed to fund more than 960 projects statewide by 2030. Otherwise, he says, they could wait another 15 years or more.

Haslam’s budget plan is equipped with a $1.1 billion surplus in non-recurring money, and state leaders are projecting nearly $1 billion more in extra recurring money to use in the coming budget, most of which is already spoken for in the governor’s proposal.

The governor presented a total of $279 million in tax cuts through a half-percent reduction in the grocery food tax, decreases in business franchise and excise taxes and a 1.5 percent cut to the Hall income tax, dropping it to 3.5 percent in the coming year.

Those are designed to offset a total of $278 million in new revenue under the governor’s proposal to raise the gas tax by 7 cents and diesel tax by 12 cents, tack $5 on registration fees while adding fees on alternative-fuel vehicles such as electric cars.

Fuel-tax increases at a time the state government has extra money on hand are being met with opposition from numerous members in the House.

“I know some of you think we should transfer surplus money to the Highway Fun for transportation,” Haslam says. “We are – to the tune of $277 million in last year’s and this year’s budget combined.”

That money pays back transportation funds used to balance the budget in 2007, but the governor offers several reasons the state should raise fuel taxes and fees and not use its extra money for transportation projects.

“First, while we do have a surplus, we do not have a pile of money without a claim to it – as I mentioned earlier,” he says.

In addition, he contends a short-term surplus shouldn’t be used for long-term needs such as road work. Haslam says out-of-state motorists who stop to fuel up in Tennessee should help fund transportation projects, and he contends using surplus dollars would leave cities and counties strapped for transportation projects.

If his plan is approved, his administration will have cut $540 million in annual taxes since 2011, nine times more than the highest amount cut by any governor and Legislature in state history.

Haslam’s budget includes $656 million from revenue growth and savings in fiscal 2016 plus $511 million in projected surplus funds this fiscal year, totaling $1.1 billion in non-recurring surplus.

The governor’s proposed budget takes that $511 million and proposes a 3.17 percent revenue growth rate to bring in $366 million in fiscal 2018 plus other adjustments for $957 million in extra money. About $280 million of that would be subtracted for his proposed tax reductions, leaving $749 to pay for increases in state salaries and benefits, higher education, K-12 education, capital maintenance and other agencies. K-12 teachers, for instance, could see a 3 percent pay raise.

The plan invests a total of $214 million in TennCare and provides $132 million for the rainy day fund, bringing it to a record $800 million.

Haslam also addressed the Broadband Accessibility Act he introduced last week designed to let electric cooperatives enter the retail broadband market and to provide private companies with $45 million in grants and tax breaks over three years to reach more than 270,000 Tennesseans with weak or no Internet connection.

A total of $67.4 million in supplemental appropriations is included in the budget plan, with $1.7 million to go toward a lawsuit with the state of Mississippi over the Memphis aquifer. In its 13th year, the lawsuit filed by Mississippi seeks $615 million in damages, claiming Memphis Light, Gas and Water is improperly pumping millions of gallons of water from the Memphis Sand and Sparta Sand and leaving “cones of depression” in the water table.

In other funding proposed for higher education in Shelby County, the University of Memphis would receive $450,000 for a baseball addition, $1 million for engineering student service improvements, $800,000 for fieldhouse gym improvements and $1.5 million for research start-ups.

The University of Tennessee Health Science Center General Education Building phase II is planned to receive $8.3 million, and $6.5 million is scheduled for restroom upgrades.

Sam Stockard can be reached at sstockard44@gmail.com.

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