TN leaders tout positive economic recovery at Legislative Conference

TML Communications Specialist

Gov. Bill Lee, Lt. Gov. Randy McNally, House Speaker Cameron Sexton, and Comptroller Jason Mumpower were among the state leaders who discussed the important issues facing Tennessee and its municipalities at the TML Legislative Conference held both virtually and in-person on March 15, 2021.

With participants both online and in the conference room of the Tennessee State Comptroller’s Office at the Cordell Hull Building, speakers hit on a variety of topics including the state budget, education, tax revenues, rural development, economic recovery, healthcare, and forthcoming federal stimulus dollars.

Gov. Bill Lee said the state has faced numerous challenges since March 2020 including tornados, the pandemic, civil unrest, and economic concerns.
“It has not been an easy year for you or any person in a leadership role right now,” Lee said. “It has certainly been a challenging year. But at the same time, it has created the opportunity for us to make decision that we think – together collectively with city leaders, our office, and the Legislature – will have a positive impact on Tennessee as we navigate through some tough waters.”

Lee highlighted how the state has maintained its commitment to low taxes, investing in financial reserves, and responsible management of funding despite the ongoing financial concerns created by the pandemic. Unlike nearly half the states in the U.S., Tennessee’s unemployment trust fund has remained solvent during this time.

“We have directly sent $200 million to businesses out of that CARES money and $150 million to nonprofits,” Lee said. “We set up an additional recovery grant program, the SURGE program, that has $150 million set aside. We recognize one of the most important things we needed to do was protect our businesses in the midst of this difficult economic time, so we made the decision to take the largest portion of our CARES money and put it in our unemployment trust fund because of the rapid use of the dollars in that fund and nearly 16% unemployment. We knew if we could keep that trust fund solvent that the rates that employers pay for unemployment trust insurance would not go up.”

As a result, Lee said Tennessee is one of seven states in America that has had a positive economic return since April 2020, which will allow the state to move forward with other priorities like healthcare, mental health resources, broadband expansion, and supporting businesses and communities.
Lee also said he would like to see more strong investments in foster care services, adoption services, health services for families, modernizing TANF, and other issues that impact children and families.

House Speaker Cameron Sexton discussed issues including the state’s budget, education, property taxes, and economic recovery from the pandemic. Sexton said he believes the Legislature is in favor of a proposal from Gov. Bill Lee to allocate $200 million in state funds in the form of local government grants.

“Whether it will be the whole $200 million, I’m not sure,” he said. “There will be some amount that will go to the cities and counties. I would just say to be cautious and not budget what you think you are going to get. Last time when the governor proposed this, we changed the formula to help the smaller and more rural areas.”
Sexton weighed in on a proposal that would cap property tax rates for municipalities in the state.

“There are a couple different ideas on this,” Sexton said. “One is from the Beacon Center and another is to change how we access property taxes in the state. Florida uses the market value of the house, a certain percentage of what the value is unlike how we currently do it. But mostly, our approach is not to control what cities do but to make sure you don’t price out senior citizens and lower-income people.”

Lt. Gov. Randy McNally said he is still anticipating an April adjournment for the Legislature despite early delays in the session from inclement weather. Education, the budget, rural development, and closing gaps in internet and cell service are some of the priorities McNally said the state will be tackling during the ongoing session.

McNally said there will be about $10.7 billion coming to the state from the Biden Administration for pandemic recovery that will be a combination of state, local, and direct aid to individuals. Of the $6.3 billion going to state and local governments, McNally said $3.85 billion is expected to go directly to the state, $1.3 billion to counties, $513 million to metro cities, and $431 million to non-metro cities.

McNally also gave an update on the state’s financial health.
“I would like to see us put more into the state’s rainy day fund,” McNally said. “Right now, we can run for about 25 days or so without any revenue. The standard is about 30 days. I would like to see that increase a little bit. The state took on no new debt in the past few years, and if you look at our overall indebtedness, we are at the very bottom of states that borrow money. We have a structurally balanced budget.”

Senate State and Local Committee Chairman Sen. Richard Briggs said he believes working in local government is one of the toughest jobs but also one of the most important
“I’ve always said the toughest elected jobs in government – other than being president of the U.S. - are those local government jobs,” he said. “If you’re on the local school board, the county commission, the city councilmen and aldermen have to make these really tough decisions at every meeting that effect the people who live there. On top of that, when you go to church or go shopping, you run into those people and have to look them in the eye about making those decisions.”

Briggs said this is why he feels it is important for the state to leave many issues up to local decision makers.

“We have so many preemption laws,” he said. “What I try to do when we have the opportunity is to do what we call permission bills or local option bills. I don’t like mandated bills, especially the unfunded mandates. Local governments know the needs, the personality of the local community, and how the people there like their government run.”

House Local Government Committee Chairman Rep. John Crawford said one of the issues the legislature is looking at is how the need for electronic meetings during the pandemic has changed the way some governments and constituents want to see government business conducted.

“Looking at the data that has been provided to me, it seems to me that those participating in electronic meetings have seen both the attendance of local officials go up and there has been an increase in attendance by the public,” Crawford said. “If Mom or Dad have to get home and fix dinner for the kids, they don’t have time to run out to the local city council meeting. If they can pull it up on their computer, they can hear what is being said and still be a part of what is happening in their community.”

Comptroller Jason Mumpower said municipalities have an important role in the overall financial health of the state.

“It is important to the state of Tennessee that local governments are successful,” he said. “Every year – except last year – we go to New York City in person, and we place the state’s credit rating up for review in front of the major bond fundraising agencies. We did this virtually this year, but whether it’s virtual or in person, the way it has started for the past many years has been the same. They start by asking us what is the health of cities and counties in Tennessee, what is the standing of your local governments. They understand the sum of the parts is key to understanding the health of the whole.”

The impact of stimulus money is another issue Mumpower said his office is working on with local governments. Mumpower reported previous stimulus funds are one of the reasons why sales tax revenues increased in nearly every city and county in the state when compared to last year despite the pandemic and helped contribute to the state being more than $1 billion over original estimates in terms of revenue.

The new round of stimulus money recently approved by the federal government will provide relief as well as challenges, he said.
“What a great load of money it is, but that is also a little scary,” Mumpower said. “And if cities aren’t also a little scared about this bucket of money being dropped in your lap, you aren’t taking it seriously enough. While it is a program that will allow tens of millions, hundreds of millions of dollars to flow to Tennessee’s cities and counties, it is a great responsibility. You must be careful in how you choose to use it, spend it, and invest it so as to create benefit for your community but not create an ongoing challenge by using this one-time money.”

Department of Revenue Commissioner David Gerregano discussed the financial impact the pandemic has had on the state. One surprise was the increase in sales tax revenues reported amid the pandemic.

“The state was very concerned at the start of the pandemic, and as collections have come in, we have been cautiously optimistic – with an emphasis on caution – as we move forward,” Gerregano said. “Some of this consumption may have been driven by the federal stimulus money that has come in, in context of sales tax in particular. I think unemployment benefits have been a huge help in maintaining consumption of sales taxable items. One thing in talking with the Labor Department a little while back is that they typically pay out $200 million in unemployment insurance benefits in a calendar year. In October, they had already paid out $6 billion.”

The revenue department has also seen the way the pandemic is changing how Tennesseans are choosing to spend money.

“While overall collections are up and that is really great news, that doesn’t mean every sector has fared the same,” Gerregano said. “We have certainly seen that in collections. Grocery store sales are up while restaurants are dramatically down and have been down through this whole period. Of course, these things are constantly evolving. Sales tax from liquor-by-the-drink is down dramatically, but sales tax at package liquor stores is up. There is an obvious shift. What is interesting is building materials and durable goods are up significantly. A lot of people are staying home and doing home improvement projects, building out or refurbishing home offices. Home furnishing and appliance sales are up, which is driven by stimulus and unemployment payments.”

Complete coverage of all of the speakers’ remarks can be found on TML’s website