May 3, 2004

Tennessee Legislature Aims To Break Spending Cap - Again

NASHVILLE - In the past 20 years, the Tennessee legislature has passed budgets that exceeded the state constitution's cap on the growth of spending 11 times, costing Tennessee taxpayers a cumulative $3.1 billion. Now the legislature is getting ready to do it again, to the tune of $105.1 million.

HobbsOnline has the details of a story you haven't seen in any major news media in Tennessee.

Legislation is pending in the state House and state Senate that would allow the Legislature to use a loophole in the constitutional cap in order to increase state spending this coming fiscal year by $105.1 million more than the constitution permits. The constitution caps annual spending growth to the estimated growth rate of the state's economy, which is measured by personal income growth. But the constitution allows the legislature to override the cap by a simple majority vote - the same vote it takes to pass a budget or any spending measure. It is a weak cap.

The budget for the current fiscal year, 2003-04, was balanced without raising taxes and without exceeding the spending cap. However, some Democrats in the state legislature, eyeing a fast-growing revenue surplus, have decided with just three months remaining in the fiscal year that they want to exceed the spending cap.

Senate Bill 3456 and the companion House Bill 3549 would allow the legislature to increase spending over the cap by a whopping $105.1 million. The legislation reads:

The index of appropriations from state tax revenues for the 2003-2004 fiscal year may exceed the index of estimated growth in the state’s economy by one hundred five million one hundred thousand dollars ($105,100,000) or one and eleven-hundredths percent
(1.11%).

During the last six years of the administration of Gov. Don Sundquist, the governor and the legislature agreed to exceed the cap three times by a cumulative $1.096 billion. Is it any wonder that, by the end of Sundquist's second term, he was demanding a billion-dollar tax increase?

SB 3456 is sponsored by senators Ward Crutchfield, Douglas Henry, and Jim Kyle, all Democrats. It is on the calendar of the Senate Finance, Ways & Means Committee for Tuesday, May 4. HB 3549 is sponsored by state Reps. Kim McMillan, Tommy Head, Craig Fitzhugh, and Harry Tindell, all Democrats. It is on the agenda of the House Finance, Ways & Means Committee for Tuesday, May 4.

If it passes, it makes a tax increase more likely in the future for Tennessee taxpayers.

The legislation - and the legislature's history with exceeding the spending cap - is a powerful argument for enacting an amendment to the state constitution that would make the spending cap tougher to break.

Sen. Jim Bryson, a Republican, has a proposed constitutional amendment called the Taxpayers Bill of Rights that, in its current form, would raise the bar for overriding the cap by requiring approval by two thirds of each house of the legislature, not just a simple majority vote. It is pending in the legislature as Senate Joint Resolution 88.

However, passing that legislation won't do anything to stop this fiscal mistake - a constitutional amendment must be passed by two successive legislatures and then approved by voters during the next gubernatorial election. That's three years from now at a minimum.

The short-term solution is for the legislature to refuse to pass this excessive-spending measure.

I have written extensively about the Taxpayers Bill of Rights, and you can find all of those posts here. I also wrote a 17-page research paper on Tennessee's ineffective spending-growth limit and possible remedies for it, which you can read here. It's from January 2003, so some of the data needs updating, but it's still basically accurate. An excerpt follows...

Since 1978 Tennessee has a constitutional TEL [tax and expenditure limit] called the Copeland Cap after former state legislator David Copeland who wrote it, that limits the growth of spending to personal income growth. But it's a weak cap – it can be broken by a simple majority of the legislature. That's a loophole that has swallowed the law – and the Copeland Cap has been exceeded numerous times. The legislature has exceeded the cap by a cumulative $3 billion since fiscal 1985, including $1,096,000,000 (one-billion-and-96-million dollars) during the Sundquist administration. Because much of that extra spending was for recurring programs, the actual cost to taxpayers far exceeds $3 billion and continues to mount year after year.

One year ago, Gov. Sundquist proposed a budget for fiscal 2002-03 that would've exceeded the state constitution's cap by a whopping $1.27 billion dollars. The legislature cut his budget request by some $500 million, yet Sundquist's legacy remains that he signed into law a budget that includes the largest spending in excess of the constitutional cap in the history of Tennessee - a whopping $771 million. That's 9 percent more spending than the constitutional cap allows.5 That's $771 million in just the first year. Because each year's budget increase is built on top of the previous year's budget, exceeding the cap by $771 million this year means next year's budget will also be $771 million higher than it would have been if the constitutional spending cap had been respected. And the next year's budget. And the one after that, etc... Over the next 10 years, this year's busted spending cap will cost Tennessee taxpayers an astonishing $7.71 BILLION dollars in additional taxes, unless something is done.

In breaking the Copeland Cap, Sundquist was only following tradition. The Copeland Cap was added to the constitution in 1978 and legislators and governors of both parties respected it for a few years. But since 1984-85 fiscal year, spending has exceeded the cap ten times, by a total of just under $3 billion. The cap was exceeded twice during the Gov. Lamar Alexander years - by $446.1 million in fiscal year 1985, and $100 million in fiscal year 1987, and five times under Gov. Ned McWherter - $101 million in fiscal year 1989, $74 million in fiscal year 1990, a whopping $703.1 million in fiscal year 1992, and $450 million in fiscal year 1993. Gov Sundquist has been just as irresponsible, pushing budgets that ultimately lead the legislature to over-spend the cap by $55 million in fiscal year 1997, $270 million in fiscal year 2000, and $771 million in this fiscal year.