Lawmakers approve $27.8 billion budget, send it to Bredesen

The Tennessee Legislature on Tuesday sent Gov. Phil Bredesen a $27.8 billion spending plan that includes a half-cent reduction in the sales tax on food and education improvements funded by a higher cigarette tax.

The Senate concurred 28-4 with a few changes the House made when both chambers passed the measure Monday night. Passing the budget is the only duty required of lawmakers by the Tennessee Constitution.

Both proposals would lower the sales tax on most grocery items from 6 percent to 5.5 percent, costing the state a projected $41 million in lost revenue.

Senate Republicans had been pushing a plan to use excess revenue to temporarily eliminate the food tax for six to eight weeks at the end of the year.

But both parties agreed to permanently reduce the tax to 5.5 percent and to provide an additional sales tax holiday over the Easter weekend. One is currently held in August for back-to-school purposes.

Tennessee has no state income tax so it relies heavily on a general sales tax.

Forty-five states have a general sales tax, but 30 don't tax food purchased for consumption at home. Tennessee is among seven states that tax groceries at a lower rate than other goods, and Arkansas will join that group July 1.

Alabama and Mississippi are the only states that apply their full state sales tax to groceries, without any relief for poor families.

Tennessee Sen. Mae Beavers, R-Mt. Juliet, had proposed a bill this session that would remove the food sales tax a half-cent a year until it's gone, but she ended up compromising with the governor's plan.

"I'm pleased that the tax relief is in there, but it's not nearly enough," said Beavers, who voted against the budget. "I'll be back next year with my bill."

Tennessee's budget would also put property tax relief in place for senior citizens and extend relief to veterans who are disabled due to service-connected injuries.

"We were blessed to have significant amounts of money this year and we managed our money wisely," said Senate Democratic Leader Jim Kyle of Memphis, the bill's sponsor.

Some of the additional state spending included in the budget comes from an education package proposed by Bredesen that will overhaul the state's complex school funding formula and increase accountability standards for failing schools. Bredesen has signed both measures into law.

The education changes will be funded by revenue from a 42-cent increase in the current 20-cent-per-pack cigarette tax. Bredesen has also signed that bill into law.

Kyle said the governor's education initiatives are necessary to help improve Tennessee's poor national ranking concerning educating its youth.

"This budget meets the challenge presented to us by the governor to turn this state away from (being ranked) 49," he said.

The differences in the two budget versions were minor. For instance, the House voted to add an additional $11 million for equipment to technology centers throughout the state and $10 million to the state's road fund.

An agreement on the budget became possible because of a compromise between parties that would set up a pool of money for local projects.

Under the proposal, local governments and nonprofit groups could apply for grants from the secretary of state. That differed from the original plan in the House to give each lawmaker $100,000 to earmark for local projects that some critics decried as pork-barrel spending.

"We've taken what this good economy of our state has given us and used the dollars for good investment for the future," said Rep. Mark Maddox, D-Dresden.

Other budget provisions agreed to by most lawmakers include:

$82 million to acquire 124,000 acres of forest land on the Cumberland Plateau.

$63 million on biofuel projects, anchored by a $40 million pilot switchgrass ethanol plant.

$24 million for enhanced sentencing for certain gun crimes and gang crimes.

$6 million for more prosecutors and public defenders

3 percent pay raise for state employees and an increase in the state match on their 401k's to $50 a month.

Read the full text of SB2334 on the General Assembly's Web site at: http://www.legislature.state.tn.us