June 12, 2007

Bredesen Administration Launches New Assault on the "Copeland Cap"

As I warned back in April, Gov. Phil Bredesen's administration indeed has pushed legislation through the General Assembly to once again break the state constitution's cap on the year-over-year growth of the state budget in order to fund Gov. Phil Bredesen's $28 billion spending plan.

At the same time, the Bredesen administration has launched a new assualt on the Copeland Cap itself that could effectively gut what's left of the 1978 constitutional amendment that was designed to keep the state budget from growing faster than the incomes of the people of Tennessee.

The legislators who carry Gov. Phil Bredesen's legislative agenda in the House and Senate filed legislation in February to authorize spending in excess of the Copeland Cap limit. That legislation was amended and passed by both houses of the legislature Monday night and authorizes the Bredesen administration to spend $46 million in excess of the "Copeland Cap" in the current fiscal year - which ends in 18 days - and to spend another $53.7 million above the cap in the new fiscal year.

This will mark the 14th and 15th times in the last 23 fiscal years in which the Copeland Cap - which limits the annual rate of growth of appropriations from state tax revenues to the rate of growth in the state's economy - has been ignored.

In all, now, a series of legislatures and Democratic and Republican governors have used a loophole in the Copeland Cap to increase the budget by a combined $3.371 billion dollars. (For the history of the Copeland Cap since it was passed by voters in 1978, see Spending Spree: The Bipartisan Assault That is Killing The Constitutional Cap on the Growth of Tennessee's State Budget, a research paper that contains information the mainstream media almost never includes in its reports about the state budget.)

If the Copeland Cap had been strictly adhered to over the years, Bredesen's $28.billion budget would be less than $25 billion - a savings for taxpayers that would allow the elimination of the state sales tax on food and a reduction in the overall sales tax from 7 cents on the dollar to about 4.5 cents.

The Bredesen administration claims the budget does not exceed the Copeland Cap because the excess spending is really money being put into the state's "Rainy Day" fund, rather than being spent. But if the administration's effort to exempt allocations to the "Rainy Day" fund from Copeland succeed, the Bredesen administration will have effectively gutted the Copeland Cap.

Here's why: The Bredesen budget treats the Rainy Day fund as merely a temporary parking place for extra revenue that it fully intends to spend, and spend soon.

As Ben Cunningham wrote a few days ago, based on a WPLN report on the legislature's budget decisions, the Bredesen budget departs from previous budgetary practice regarding the state's reserve fund.

Before this year the rainy day fund was simply a fund for unexpected downturns in revenue

But now, says Cunningham, because the Bredesen budget is based on the high end of official state revenue projections, the money is being banked in the reserve fund to cover "revenue fluctuations" in the coming fiscal year. In other words, the Bredesen administration believes that its revenue projections may be too high and it anticipates needing to dip into the reserve fund in the coming year. Cunningham:

"Bredesen and the General Assembly regard the rainy day fund like a slush fund that will almost certainly be needed for what are clearly inflated revenue estimates for the coming budget year. (and probably deflated spending estimates) This goes way beyond mismanagement. This is intentionally misleading taxpayers about their future liability.

Translation: The State Funding Board is preparing to declare that Rainy Day fund allocations are exempt from the Copeland Cap. And what little protection the taxpayers of Tennessee have against excessive government spending will be obliterated.

Media coverage: The mainstream media almost never mentions the Copeland Cap in its stories about the state budget. The Tennessean's story today on the state budget doesn't mention the Copeland Cap at all, although the City Paper's story does. But neither paper explores the implications of the Bredesen administration's claim - counter to all past budget practices - that allocations to the reserve fund are exempt from Copeland.

A Google News search reveals that the Copeland Cap is rarely mentioned in mainstream media news coverage. Even Knoxville News Sentinel reporter Tom Humphrey fails to mention the Copeland Cap in his story today despite his recent insistence to me that details about the Copeland Cap have been "reported, time and again" by the Tennessee media - all evidence to the contrary - "and will be again, I'm sure, as things go along this session."