By State Senator Page Walley
Our 2024 legislative session of the 113th General Assembly is up and running. The halls of the Cordell Hull Building are buzzing as hundreds of new bills are being drafted, announced and filed for consideration. Lawmakers returned to Capitol Hill on January 9 to gavel in for the first time this year. Education, public safety and the budget will be among the top issues addressed by lawmakers.
Years of consistent, conservative budgeting will aid lawmakers facing declining revenue
That first day, our Senate Finance, Ways and Means Committee, on which I sit, heard testimony from experts on the state’s budget and economy. Department of Finance and Administration Commissioner Jim Bryson laid out new budgeting challenges but reassured the committee that Tennessee is well-prepared to address those challenges. Bryson said that while the fundamentals of Tennessee’s economy are still good, revenue collections – which generate 54 percent of the state budget funds – are growing at a much slower pace for the first time in the last decade. While the slower growth is no surprise after years of record-high revenue, Bryson cautioned lawmakers that it means they will have to be more disciplined when crafting this year’s budget.
For almost a decade Tennessee’s record economic growth led to years of higher-than-expected revenue collections for the state. However, revenue collections for the current Fiscal Year 2023-2024 continue to come in below budgeted estimates. As a result, the Fiscal Year 2024-2025 budget could potentially have to make up for an estimated $718 million budget shortfall resulting from the disparity in actual versus expected revenue collections in Fiscal Year 22-23 and Fiscal Year 22-24.
Simplifying the franchise tax is on the 2024 agenda
Lawmakers this year are also preparing to simplify the state’s franchise tax, which is a business tax on net worth. This adjustment will offer tax relief to businesses, modernize the way the tax is calculated and manage newly discovered legal risks. Deputy Commissioner of the Tennessee Department of Revenue David Gerregano told our Senate Finance Committee that the Tennessee Attorney General has identified significant legal risks with the way the property measure aspect of the state’s franchise tax is calculated. The current property measure of the franchise tax is an alternative minimum tax on property used in Tennessee. Gerregano said the property measure disincentivizes investment in the state and has recently created additional legal challenges. In response, Governor Lee is proposing legislation to change Tennessee’s franchise tax to remove the property measure and authorize the Department of Revenue to issue refunds to taxpayers who have paid the franchise tax based on property located in the state.
Tennessee’s economy remains strong
Despite lower than expected revenue collections and record-high inflation, Tennessee’s economy continues to outperform the national average. In 2022 Tennessee was the second fastest growing state in terms of real GDP, with a real GDP growth rate of 4.3% compared with a national average of 2.1%.
Overall, the state remains in a strong financial position. Tennessee has a proud tradition of being a well-managed, fiscally conservative state with the lowest possible tax burden to residents, and that will certainly continue. The AAA-ranked Volunteer State is among the least indebted states in the nation and leads the nation for fiscal stability and low taxes.
To ensure the state’s financial stability is maintained in an economic downturn, lawmakers have continued to build Tennessee’s Rainy Day Fund, which serves as the state’s savings account. In 2023 the legislature invested $250 million into the Rainy Day Fund, bringing it to over $2 billion, the highest level in state history.
I will continue to update you on matters that are unfolding in our legislature. One of those will be the Governor’s proposal to basically expand the three-county education voucher pilot program to all 95 counties. There are serious unanswered questions about the impact on our public schools and the government’s accountability expectation for private and home schools should this occur. Healthcare, crime prevention, mental health service access and so many other issues will be on our agenda.
As always it is an honor to serve as our state senator. Please contact me at 615-741-2368 or sen.page.walley@capitol.tn.gov.
