January 11, 2024 Legislative Update

General Assembly returns to Capitol Hill to begin work of 2024 Legislative Session

The 2024 legislative session of the 113th General Assembly is up and running, and 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 Tuesday 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

On Tuesday, the Senate Finance, Ways and Means Committee 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.

“We have recently experienced unprecedented budget growth north of 10 percent over the last three to four years – in and coming out of the pandemic – which is significantly higher than the historic growth of close to three percent annually,” said Bryson. “In some ways our economy and our budget are coming back to earth.”

Every November the State Funding Board meets to establish revenue projections for the upcoming fiscal year. In November 2023, the Funding Board lowered the revenue projections for Fiscal Year 2023-2024 from 3.7 percent growth to -0.5 to 0 percent growth and projected revenue growth for the upcoming Fiscal Year 2024-2025 of -0.5 to 0.5 percent.

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 the Senate Finance Committee Tuesday 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.

Consistent Conservative Budgeting

Because of consistent conservative budgeting practices, Tennessee is well-positioned to handle this issue. For the past few years, lawmakers have intentionally used recurring revenue to pay for nonrecurring budget expenses. For Fiscal Year 2024 this budgeting practice has freed up $2.6 billion in recurring revenue not committed to any expenses.

“Although the report on the franchise tax has caught us a little off guard, we have done a really good job at managing the state’s money,” said Senate Finance Committee Chairman Bo Watson (R-Hixson). “I am very confident about our ability to work with the executive branch and address the expected and unexpected budget challenges we face this year. Taxpayers in Tennessee can rest assured we are prepared and will continue our commitment to consistent conservative budgeting, while maintaining Tennessee’s status as one of the lowest taxed states in the nation.”

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 2nd 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.

Senator Art Swann announces retirement

On the opening day of the 2024 legislative session, State Senator Art Swann (R-Maryville) announced his retirement from the Senate. Swann, a retired business owner who represents Blount, Monroe, Polk, and part of Bradley Counties, told his colleagues he will not seek reelection in Senate District 2 this year.

Swann began his political career on the Blount County Commission from 1978 - 1982. After that, he served two terms in the Tennessee House of Representatives, representing Blount County until 1988. In 2010, Swann returned to the House, winning a four-way GOP primary with 39% of the vote. And in 2017 Swann was appointed by the Blount County Commission to represent District 2 in the Tennessee Senate after former State Senator Doug Overbey vacated the seat to become the U.S. attorney for the Eastern District of Tennessee.

Swann is the vice chair for the Senate Commerce and Labor Committee and a member of the  Health and Welfare Committee. His fellow senators shared the significant role Swann played during his time in the Tennessee General Assembly.

“I have served with Senator Art Swann for more years than I care to mention,” said Lt. Governor Randy McNally. “He has been an excellent representative for his constituents and a great friend. His experience and statesmanship will be greatly missed. I’m grateful for the opportunity to serve one more session with him and wish him well in his retirement.”

“Our body’s reputation is enhanced by members like Art Swann - a man with integrity, a man of independence, and a man who speaks his mind,” said Chairman Yager. “I thank Senator Swann for his efforts to make Tennessee a better place to live, work, and raise a family.”

Education Commissioner updates Senate committee on early literacy improvement

Over the last decade, the state has invested more than $3.35 billion in public education, and education continues to be a priority for the General Assembly. This week the Senate Education Committee received an update from the new Tennessee Department of Education Commissioner (TDOE) Lyzette Reynolds on the implementation and impact of those investments.  

In 2022, lawmakers strengthened educational opportunities for students by prioritizing the individual needs of every student through the landmark Tennessee Investment in Student Achievement Act. The 2023/2024 school year marks the first year schools were funded using the new funding formula, which invested an additional $1 billion in K-12 education to improve outcomes for all students based on their unique needs.

Reynolds praised the General Assembly for its swift action during the COVID-19 pandemic to pass legislation that timely delivered critical literacy support to increase opportunities for learning and instruction. The 2021 Literacy Success Act developed guidelines and pathways for struggling students to advance to 4th grade with additional support. Additionally, the Tennessee Learning Loss Remediation and Student Acceleration Act, also passed in 2021, established tutoring, after-school programs and summer learning loss bridge camps focused on foundational reading skills and improving literacy rates.

Prior to the pandemic, Tennessee struggled to overcome low literacy rates, with only a third of 3rd grade students reading on grade level. The pandemic exacerbated that struggle.

Following the implementation of these new laws the 3rd grade reading proficiency rate increased from 32 percent in 2021 to 40 percent in 2023.

“The gains made to improve 3rd grade literacy says a lot about the dedication of Tennessee students, families and teachers,” said Senate Education Chairman Jon Lundberg (R-Bristol). “Though at a 40 percent proficiency rate, there is more work to be done. I am hopeful that in the coming years we will see even higher proficiency rates.”

Education Savings Account Pilot Program

Commissioner Reynolds also provided an update on the status of Tennessee’s successful Education Savings Account (ESA) Pilot Program. ESAs allow eligible students who are zoned to attend a Shelby County district school, a Metro Nashville public school, a Hamilton County public school, or a school that was in the Achievement School District (ASD) as of May 24, 2019, to enroll in a nonpublic school or to support approved education-related expenses.

Interest in the program is growing since it was first implemented in the summer of 2022. The number of approvable applications increased from 53% for the 22-23 school year, to 75% for the 23-24 school year. Parents of children enrolled in the program have given positive feedback. Based on parent satisfaction survey responses, over 90% are extremely satisfied or very satisfied with the overall experience of the program.

In the 2024 legislative session, lawmakers will continue to work towards expanding school choice opportunities to meet each student’s individual needs. The General Assembly will consider a proposal from Governor Bill Lee to give Tennessee families more control over how their tax dollars are used for their child’s education.  The Education Freedom Scholarship Act would expand school choice throughout the state and ultimately establish universal school choice.

Tennessee First in the Nation to Address AI Impact on Music Industry

On Wednesday, Senate Majority Leader Jack Johnson (R-Franklin) joined Tennessee Governor Bill Lee to announce the Ensuring Likeness Voice and Image Security (ELVIS) Act, a bill updating Tennessee’s Protection of Personal Rights law to include protections for songwriters, performers, and music industry professionals’ voice from the misuse of artificial intelligence (AI).

Tennessee’s music industry supports more than 61,617 jobs across the state, contributes $5.8 billion to the state’s GDP, and fills over 4,500 music venues.

“While the rapid advancement of artificial intelligence is exciting in many ways it also presents new challenges -- especially for singers, songwriters and other music professionals,” said Leader Johnson. “Tennessee is well-known for being home to some of the most talented music artists in the world. It is crucial our laws protect these artists from AI-generated synthetic media which threatens their unique voices and creative content. I appreciate Governor Lee for proposing this first-of-its-kind legislation to protect the music industry in our state. I look forward to working with Leader Lamberth and my colleagues in the Senate on this important issue.”

Tennessee’s existing law protects name, image and likeness, but it doesn’t specifically address new, personalized generative AI cloning models and services that enable human impersonation and allow users to make unauthorized fake works in the image and voice of others. Artists and musicians at all levels are facing exploitation and the theft of their integrity, identity, and humanity. This threatens the future of Tennessee’s creators, the jobs that they support across the state and country, and the bonds between fans and their favorite bands.

The ELVIS Act would be the first legislation of its kind in the nation to build upon existing state rules protecting against the unauthorized use of someone’s likeness by adding “voice” to the realm it protects.

Speaker Pro Tem Haile hosts Faith and State Panel 

On Wednesday, Senate Speaker Pro Tempore Ferrell Haile (R-Gallatin) moderated a panel on faith and state at the Capitol with religious, legal, and political leaders to discuss the important long-standing relationship between government and religion.

“We as Christians have a responsibility to forgive and issue mercy,” Haile said. “The state has the responsibility to issue justice and those are two entirely different things.”

The three panel members were Tennessee Attorney General Jonathan Skrmetti, former State Representative and Minister John DeBerry, and Tennessee Minister David Young. The state officials and ministers deliberated about how the church and state have distinct roles in society that at times can work together and at other times be opposed. The panel discussed the importance of the state and church relationship, especially in the legislative body made up of individuals with their own faith and convictions. 

“It is important [the legislators] bring their full identity that they carry into this building for the work they do and that includes very prominently their faith,” said Attorney General Skrmetti. “That is a good thing, that is a sound thing consistent with the story of America and we should celebrate that.”

The hour-long panel was open to the public and can be viewed here.