insights (2006-21)

State Legislature’s Accomplishments

The Moving Finger hasn’t writ the final word yet on this year’s session of the state Legislature, and it could turn fickle. But every indication as the Legislature moves frenetically toward adjournment by the end of the week points toward a record of significant accomplishments.

A robust economy is generating state revenues well in excess of previous budget forecasts, allowing for a $700 million increase in state appropriations for the fiscal year ahead—by far the largest growth in any of Gov. Phil Bredesen’s four years in office. At the same time, Bredesen’s severe—some would say draconian—cuts in TennCare have put a clamp on that program’s propensity to suck up an ever increasing portion of state revenues. As a result, the Legislature has been able to turn its attention to bolstering funding for education and other state priorities such as employee pay and economic development. Bredesen has also guided through several worthy health care initiatives drawing on funding derived from TennCare savings.

Equally salient, the Legislature has resisted pressures and temptations to make appealing but short-sighted uses of the extra money such as restoring TennCare cuts or cutting the sales tax on groceries.

Legislative exertions have also gone a long way toward bringing the governor around to support two much-needed steps he’d been opposing: namely, costly revisions in the state’s grossly inequitable formula for allocating public school funding and an increase in the state’s shamefully low cigarette tax that could help pay for them. Action on those two fronts will have to wait until next year, but a foundation has been laid.

Because of space constraints and my own sense of priorities, this week’s column addresses only legislative initiatives on the education front that go beyond the governor’s original budget recommendations. A prime mover in those initiatives has been the chair of the Senate Education Committee, Jamie Woodson. Early in the session, Sen. Woodson guided a bill through her committee that provided for the first increase in operating funds for higher education since 1998. The $28 million in the bill was nowhere to be found in the governor’s original budget, but with the escalation in state revenue projections, additional support for universities and community colleges has increased to $40 million.

That represents a 3 percent increase in higher education operating funds, which is only a partial restoration of the 9 percent cut that Bredesen imposed in 2003. Still, it’s a meaningful step in the right direction, even though its backers are insisting it be accompanied by pledges from UT and the Board of Regents to hold down on tuition increases.

Woodson also started the year with a resolve to revamp the state’s convoluted public school funding formula known as the BEP. Under the BEP, a fixed amount of state funding is allocated among school systems based on their respective fiscal capacities, as determined primarily by their property and sales tax bases per pupil. School systems with lower capacities get a higher percentage of their costs covered by the state and the converse.

A long-recognized flaw in the BEP formula is that it only measures the fiscal capacities of the state’s 95 counties. That means municipal school systems within a county have the same entitlements as their county systems, including pro rata sharing of county revenues, without giving any recognition to the fact that municipalities have their own tax bases to draw upon in funding their schools.

Last fall, the BEP Review Committee of the state Board of Education recommended moving from a 95-county fixed capacity model to a model that would measure separate fiscal capacities for each of the state’s 136 school systems. The system-level model recommended by the Tennessee Advisory Commission on Intergovernmental Relations predictably would reallocate money—about $80 million in the aggregate—primarily from municipal to county school systems. Knox County schools would stand to gain about $3.7 million, and the state’s other major urban counties even more.

Woodson’s attempt to implement the BEP Review Committee’s recommendations that also included other formula changes ran into two roadblocks. For one, Bredesen cold-shouldered them, perhaps in part because they could create turmoil in an election year. Moreover, the municipalities that stood to lose money vilified the TACIR model as unduly penalizing them for their extra effort in supporting their schools and forcing them to make cuts or even shut down their school systems.

By the end of the session, though, Woodson and like-minded legislators, had managed to gain Bredesen’s support for a resolution adopted with near unanimity that’s intended to set the stage for BEP revampment next year. The resolution stipulates that, “the BEP Review Committee shall develop a consensus recommendation on a system-level fiscal capacity model which provides a phase-in process and hold-harmless provisions.” A cynical view is that the provision for consensus is akin to mandating an Israeli-Palestinian peace accord. But Knoxville’s Woodson observes that “consensus doesn’t mean unanimity.”

A hold-harmless provision would preserve present funding levels for systems that would otherwise lose money under the formula revisions. And the $80 million cost of this protection is perhaps more than the state can afford in a single year. Hence, the provision for a phase in.

Knox County schools are already benefiting from about $8 million in annual hold-harmless payments resulting from the last set of changes in the BEP in 2004. Those changes stemmed from a state Supreme Court directive to more nearly equalize teacher pay across the state. In order to fund a big boost in teachers’ base pay in poorer counties without inordinate cost, the state’s share of instructional costs was slashed across the board from 75 percent to 65 percent. That slash would have reduced Knox County school funding under the BEP by about $8 million, except for the hold-harmless provision.

What’s poorly understood by other elected officials who are clamoring for Knox County to get a bigger share of state funding is that the county won’t get any benefit from other revisions in the BEP until it gets out of this $8 million hole. Woodson fully grasps that and, in collaboration with the state’s astute Comptroller John Morgan, provision was made at the end of the session for taking a first step toward doing so. That step would raise the state’s instructional share to 66.7 percent at a cost of $22 million—one sixth of the way toward covering the $150 million cost of restoring it to 75 percent. Each percentage point increase in the state share is worth about $2 million to Knox County. So if and when it reaches 69 percent, the county will be out of the hole and start benefiting from other BEP revisions as well as full restoration of state instructional share. That could take several years, but a long-overdue increase in the state’s cigarette tax could cover the full cost of restorations and revisions in one fell swoop.

Both the increase in operating funds for higher education and raising the K-12 instructional share came in lieu of including teachers in augmented pay raises that the Legislature has provided from the revenue surplus for state employees. Additional raises for teachers would have been the expedient way to go, but Woodson and her colleagues deserve great credit for making far more strategic use of the dollars involved.