May 2, 2006

Spending Cap on Finance Committee Agenda TODAY

AFTERNOON UPDATE: It's beginning to look like state Sen. Doug Henry, chairman of the Senate Finance, Ways and Means Committee, doesn't want to have to vote on Senate Joint Resolution 629, state Sen. Jim Bryson's proposed constitutional amendment to fix the flaw in the state constitution's cap on the rate of growth of the state budget. The bill was on today's committee meeting agenda but was rolled to next week's meeting. Henry is considered the swing vote on the bill.

Here's what I posted this morning:

State Sen. Jim Bryson's proposed constitutional amendment to fix the flaw in the state constitution's cap on the rate of growth of the state budget is on the calendar for today's meeting of the Senate Finance, Ways and Means committee.

The bill has 17 Senate sponsors, a majority of the members of the Senate. It has been referred to the Senate Finance, Ways and Means committee. Five of the 11 members of the Finance committee are co-sponsors of Bryson's amendment. It needs six votes. The chairman of the committee is Sen. Doug Henry. It will be interesting to see how he handles SJR 629 now that he is facing real opposition for his re-election.

The current cap allows the legislature to increase spending at the rate of growth of personal income in Tennessee, but also allows them to bust the cap by a simple majority vote. As this research paper shows, the Democratic-led legislature, and governors of both parties - including the current governor - routinely exceed the cap.

Exceeding the cap pushes the budget to a level that is unsustainable in economic downturns without a tax increase. Sen. Bryson's amendment proposes to require the legislature approve breaking the cap by a two-thirds majority, and to otherwise retain surpluses in the state's rainy day fund to be available to offset tax revenue shortfalls in lean economic times - shortfalls that might otherwise cause the legislature to approve "temporary" tax increases that, somehow, never get repealed. Gov. Bredesen is on record opposing spending cap reform.

Incidentally, when Bryson's opponents say his proposal for reforming the constitution's "Copeland Cap" restricting the growth of the state budget to the rate of growth of the state's economy is unworkable, remind them that the Tennessee Tax Structure Study Commission's sixth recommendation said this:

The size of State tax-funded State government should be limited to a percentage of the State's overall economy.

The Commission also said excess revenue should be rebated to taxpayers or deposited in the state's Rainy Day Fund.

Bryson's proposed constitutional amendment would reform the state constitution's existing spending growth cap to require a two-thirds majority vote in the legislature to exceed the cap, which is based on the growth of personal income in the state, a standard measure of economic growth. Excess revenue under Bryson's proposal also would be placed in the reserve fund, and some excess revenue also would be used to reduce and eventually eliminate the sales tax on groceries.

Bryson's proposed amendment recognizes what the Commission fails to admit: that overspending is what leads to budget crises. The Commission's final report said this:

Between 1999 and 2002, Tennessee suffered from significant revenue shortfalls due to the recession that came in the wake of the downturn in the economy.

The truth is this: Between 1999 and 2002, Tennessee suffered from significant revenue shortfalls due to overspending in previous fiscal years in which governors of both parties - including the incumbent - in collusion with the legislature evaded the constitutional cap on the annual year-over-year growth of spending, costing Tennessee taxpayers billions of dollars in current and future taxes.

If the Sundquist administration had lived within the Copeland Cap limits, rather than exceeding it by a combined $1.096 billion, there would have been no revenue shortfall and no need to pass a billion-dollar sales tax increase.

Overspending, not the recession, caused the 1999-2002 state budget fiscal crisis.

Bryson's proposed amendment would fix that flaw. The Tennessee Tax Structure Study Commission endorsed Bryson's basic concept, even though it won't admit the real problem.

There's much more information about SJR 629 here.