|Legislators Approve of $42.6 Billion Dollar Budget
Last week the Tennessee General Assembly approved a $42.6 billion budget, a much more robust spending plan compared to last year’s “bare bones” budget of $39.45 billion. In formulating the spending plan, Governor Bill Lee and his administration worked with the stated goal of returning to pre-pandemic priorities while keeping government limited. The budget is fairly unique, given the focus on using one time funds for capital maintenance and infrastructure for a total of $238 million.
As expected, the legislature placed its own stamp on the budget, making some alterations to the Governor’s original plan by slashing several proposals in half and increasing others. The Lee administration proposed allocating $200 million to broadband infrastructure, but the legislature slashed that amount to $100 million, with members claiming that the reduction could be made up from expected federal dollars. The legislature trimmed the Governor’s proposed tax free holiday on restaurants and grocery stores to $50 million, and cutting the holiday to one week instead of two. The Governor’s proposed $200 million for cities and counties was also cut in half; however, leaders said that by virtue of that cut local entities would receive the money sooner with no strings attached. Nashville Democrats expressed concerns of equity, with smaller counties expecting to receive more funds per resident than the larger counties in the state.
By cutting those three funds in half, legislators were able to deposit $250 million in one-time funds into the state pension funds for state employees, a move deemed to be wiser than a $60 million recurring deposit. Legislators also doubled the Governor’s proposed deposit in to the rainy day fund, taking the total in the fund to a record $1.55 billion. The legislative changes did not seem to dampen the Governor’s spirits however, as he issued a statement immediately upon final passage that both praised the budget and thanked the General Assembly for its support.
Despite the legislative changes, the Governor did succeed in getting several of his original proposals funded. Legislators approved of $190 million in additional FastTrack economic development grants, $900 million for upgrades to state buildings, $30 million in state park maintenance and $250 million for the K-12 Mental Health Trust Fund. And while legislators eliminated the Governor’s line item proposal to reduce the professional privilege tax paid by professions such as physicians, lobbyists and attorneys by $100 dollars, legislative leaders expressed a resolve to repeal the tax in its entirety next year.
Only a few pieces of non-administration legislation with large price tags received funding once the dust had settled. The fortunate few included: a measure to add more members to the Public Utility Commission, a bill to provide additional funds for graduate medical education, exemption of gun safes and safety devices from sales tax for one year, a measure to create the framework for receiving and spending funds from opioid settlements, Certificate of Need reform, and changes regarding Pharmacy Benefit Managers.
Overall, Tennessee’s FY21-22 budget reflects the state’s economic growth and stability in the past year. The state saw positive growth since April 2020, only one of seven states to experience gain. Tennessee was also able to actually grow its reserves instead of drawing them due to the pandemic. Lawmakers continue to credit the state’s conservative fiscal policies for its success. The state also continues to attract top businesses, including the continued proliferation of Amazon distribution centers in rural counties, not to mention as the company’s twin office towers being constructed in downtown Nashville, an unexpected offshoot of Amazon’s decision to scrap its “HQ2” in New York. That facility alone will bring 5,000 jobs to the area. Not to be outdone, the software giant Oracle announced in early April that it planned to invest $1.2 billion to build a major operations campus just north of downtown Nashville, employing roughly 8,500 and amounting to the biggest economic development announcement in Tennessee history. Many believe that the Amazon and Oracle investments, following major investments by tech-heavy companies such as Philips Healthcare, will incentivize similar, tech-heavy companies to follow suit, making Nashville, one of the emerging technology centers in the country.
Lawmakers Attempt Major Changes in Judicial System in Tennessee
With Nashville becoming increasingly blue in recent years as the surrounding counties and a vast majority of the state remain deep red, a number of political dynamics have emerged as a byproduct of that friction. Perhaps nowhere is that more apparent than with the Chancery Courts of Davidson County, which by law are the trial courts for most cases involving the State of Tennessee. The judges presiding over those courts (referred to as Chancellors) have been subject to increasing scrutiny in recent years as a number of high profile decisions — including decisions on Governor Lee’s educational savings account bill, a voting registration bill, and a very prominent decision on absentee balloting — have gone against the state/administration/GOP positions. That led to a number of legislative proposals this year that targeted either a specific Chancellor or the system itself.
The first salvo, a House resolution to remove Chancellor Ellen Lyle from the bench through a little-used provision in the state constitution, came largely as a result of Lyle’s rulings in August 2020 over election law issues. The effort attracted a great deal of attention from a number of judicial interests, including the Tennessee Bar Association, which strongly opposed the bill on the grounds that it would erode the balance of powers and have a chilling effect on an independent judiciary. The resolution subsequently died in the House Civil Justice Subcommittee, a surprising outcome given that the resolution had originally drawn some 70 co-sponsors. The vote to defeat the resolution was one of the more dramatic moments of session, as resolution sponsor Tim Rudd (R-Murfreesboro) angrily addressed the subcommittee following the vote, and subsequently confronted subcommittee chairman Andrew Farmer (R-Sevierville) in the hallway after the hearing had adjourned.
The defeat of the Lyle resolution by no means marked the end of the battle, however. In subsequent weeks a number of proposals emerged to change the means by which cases involving the state are handled, often through amendments to bills that initially had other purposes. Those proposals included a measure to have cases involving the state brought in the plaintiff’s home county and cases involving out of state plaintiffs brought in Sumner County, a predominantly Republican county just north of Nashville. There was also a measure to have a three judge panel appointed to hear cases challenging the validity of an act of the general assembly apportioning or redistricting state legislative or congressional districts, with two of the judges appointed by the Supreme Court, and coming from both of the remaining grand divisions from the one in which the case was filed. While both of those measures passed the House but were shelved in the Senate — at least initially.
A number of judicial-related initiatives took prominent roles in the closing days of session. One successful initiative provided that in cases where the state or an agency or official of the state is a party and a lower court grants an injunction or dissolves an injunction, the Attorney General has an immediate right of appeal of the lower court’s non-final ruling rather than having to wait until granted permission by the trial court. The purpose of the bill is to expedite the escalation of such cases into the appellate court system if needed, and can provide the state with quick relief as to lower court election law rulings. Proponents argued the bill was necessary since under current law, appeals of non-final decisions can only be done with the permission of the trial court, which can potentially tie up and/or delay matters of great importance to the state.
Then there was the matter of how to handle trial court-level cases concerning the state, which endured until the closing moments of session. The Senate proposed a concept that creates a statewide three-judge panel of chancery court judges to hear cases involving the state, with judges initially appointed by the governor and subsequently subject to statewide, partisan elections. That concept, which was heavily pushed by Lt. Governor Randy McNally (R-Oak Ridge) and Senate Judiciary Committee Chairman Mike Bell (R-Riceville), was based on the premise that Davidson County judges – and the voters that elect them – should not be permitted to be the trial court for matters affecting the state. As Sen. Bell asked rhetorically in committee, “why should judges who are elected by the most liberal constituency in the state…why should they be the ones deciding cases that affect the state in general?”
Meanwhile the House had its own ideas. In its version of the same bill, which also passed on the closing day, opted against the statewide chancery and instead created a Court of Special Appeals to handle the narrow band of cases at the appellate court level. That court would be comprised of three judges, appointed by the governor, that would be subject to a statewide retention election, just as is the case with other appellate judges. With differing versions of the bill and neither chamber willing to budge, the respective speakers appointed a conference committee in the final hours of session to try to iron out the differences, and the compromise proved to be the last bill taken up by the General Assembly in 2021. In the end, the conference committee crafted a measure that created a three judge panel of trial court judges, two of whom are to be appointed by the Supreme Court and must hail from the other two grand divisions, to handle constitutional challenges and declaratory/injunctive claims against the state, a department/agency of the state, and/or one of its officers. The measure, which combined a number of elements of previously unsuccessful bills – including the venue for out of state plaintiffs to be held in Sumner County – passed the House 67-22-1 and the Senate 27-2 just minutes before adjournment. Democrats in both chambers railed against the measure, opposing both the drastic changes to the current procedure for handling cases and the last-second nature of those changes.
Certificate of Need Reform Reaches Finish Line
After grinding to a halt on the figurative one yard line in 2020 due to a last-minute deadlock between the two chambers, Certificate of Need reform finally crossed the goal line this year, constituting a significant step in health care in Tennessee. The soon-to-be-enacted law will strive to remove barriers to competition, improve access to care, promote consumerism and improve rural health. It changes the Certificate of Need process by eliminating the economic feasibility requirement for projects, expediting approval from 135 to 60 days, limiting CON opposition to competitors within a 35-mile radius, eliminating frivolous appeals by competitors, and requiring CON competitors to disclose grounds for opposition before the application is heard before the Board of the Health Services and Development Agency. It was sponsored by Sen. Shane Reeves (R-Murfreesboro) and Rep. Clark Boyd (R-Lebanon).
The bill also provides exemptions for economically distressed counties without a hospital and further provides that mental health hospitals can no longer be subject to CON regulation. Moreover, non-pediatric MRI services, PET scan services, and outpatient diagnostic centers (ODCs) would no longer be subject to CON regulation in counties with a population in excess of 175,000 (Shelby, Davidson, Hamilton, Rutherford, Williamson, Sumner, Montgomery, and Knox), and existing facilities would be able to increase and redistribute their acute, psychiatric, and rehabilitation beds without CON regulation.
Legislators Pass Key Education Legislation in Special Session
Following the organizational week of session in mid-January, Governor Lee called a special session to address education matters that arose from the COVID-19 pandemic. Lawmakers made quick work, passing legislation to address the learning loss students have experienced since March 2020 by creating summer camps to aid students below proficiency in language arts and math, as well as establishing a tutoring program for the districts and that requires third graders to be held back if the student is not reading on grade level. Legislators also passed phonic-based reading and instruction legislation, requiring districts to provide foundational literacy skills instruction, provide reading intervention and administer reading screeners for students in kindergarten through third grade.
In the final major piece of special-session legislation, lawmakers ensured that teachers, students, and districts would not be held accountable for standardized testing results. At the end of the 2019-20 school year, Governor Lee enacted a hold harmless provision to ensure there are no negative consequences associated with poor student assessments, and legislation passed during the special session extends that to include the current school year. The General Assembly also approved legislation to raise teacher salaries by 4%.
Once the regular session got underway, the General Assembly continued to address educational concerns that arose from the pandemic. Lawmakers passed a bill early in session that gave the governor the ability to bring students back to the classroom, bypassing the local school boards. Another successful measure ensured that local education agencies do not receive less funding from lower student attendance that occurred from the pandemic; however, they would receive more funds if they experienced growth in student attendance.
Medical Labs to See Relaxed Employee Requirements
Medical laboratories in Tennessee should find it easier to recruit in the near future, following passage of a bill to increase the amount of lab workers within the state. House Bill 226 amends the Tennessee Medical Laboratory Act for pharmacies and private laboratories, and now only requires workers to have a bachelor’s degree, with the receipt of additional training onsite. The pandemic has illuminated the importance of fully employed laboratories within the state, as well as the staffing challenges the labs face. The legislation received widespread support from labs within the state, which sees the legislation as a vehicle to help them recruit more personnel.
Governor Lee Achieves Goal of Key Criminal Justice Reform
Fulfilling one of his top priorities dating back to his gubernatorial campaign of 2017-18, Governor Lee was able to pass substantial criminal justice reform this year with the passage of two major pieces of reform legislation. The Governor has long advocated justice reform, calling upon his experiences performing volunteer work for re-entry nonprofits prior to entering the political world. While the issue has been a front-burner priority for the Governor since first taking office, many plans were put on hold due to initial hesitancy by key members of the General Assembly, and later because of the pandemic. This year the Governor was able to pass two major pieces of legislation, both of which won broad support.
The first bill, which offers alternatives to incarceration, aims to use best practices for community supervision and focus on community resources rather than keeping non-violent felons in jail. Eligibility for recovery courts such as veteran courts, mental health courts and drug courts will be expanded for those charged for nonviolent offenses. Probation times will be shortened to eight years instead of ten for those with a single conviction. It also prevents a technical violation from being the sole reason for probation being revoked. The bill aims to generate more consistency among judges in the state and to lower incarceration rates and costs.
The second piece of legislation, the Reentry Success Act of 2021, focuses on inmates as they leave prison to ensure a successful reentry to civilian life. Currently about half of Tennessee felons will return to prison within three years. The legislation ensures that following their first year after release, non-violent or low level felons will be supervised by an employee of the Tennessee Department of Corrections. Inmates would also be able to work towards completing their pre-release conditions while still in jail and will ensure their release on their release date. It also entices employers to hire those recently released from prison by offering immunity on negligence lawsuits.
Opioid Settlement Fund Legislation Succeeds
One of the final pieces of legislation the General Assembly considered was the creation of an opioid abatement fund and council to oversee funds once settlement agreements are reach with four opioid-related entities. The fund creates a structure for both receiving and determining how those funds will be spent. Tennessee Attorney General Herbert Slatery endorsed the bill and has been a major supporter, often appearing in committee to answer questions from the legislators. Amerisource, McKesson, Cardinal, and Johnson & Johnson are the only entities to have their settlement agreements go into the fund, but funds received from the Purdue Pharma bankruptcy will flow into it as well. The state and counties will split the funds 60/40, similar to plan created by Kansas. The subdivisions and state would each receive 15% of the settlement with no strings attached, but the remainder would have to be used for abatement issues.
An abatement council would also be created, made up of 15 members, 4 each appointed by the Governor, Senate, and House, 2 selected by the counties and 1 from the cities. The council’s main duty is to ensure the funds would go towards an opioid related abatement programs such as treatment, education, drug courts, and numerous data-evidence based programs. Medication Assisted Treatment (MAT) will be monitored carefully to ensure that patients are not swapping one drug addiction for another.
Permitless Carry Passes After Being Initially Halted Due to Pandemic
While a number of 2020 legislative initiatives that were halted due to the pandemic achieved passage in 2021, the so-called “Permitless Carry” bill may have been the most prominent. A major priority of Governor Lee in both years, the bill permits Tennesseans 21 and older, and members of the military 18 and older, to obtain and carry a handgun without a permit. Felons, those convicted of domestic violence offenses, people convicted of a DUI or stalking and people who have been committed by the court to a mental institution are not covered by the legislation. The bill also increases punishment for theft of a firearm to a felony and prohibits convicted felons of obtaining a firearm from early release. With passage, Tennessee now joins 18 other states with similar laws regarding permits.
While the measure enjoyed widespread Republican support, it was not a party line vote, as a handful of Republican members opposed the legislation. And while the bill received major support from the NRA, some gun rights activists criticized the bill for not going far enough, arguing that it should also apply to long guns and should cover Tennesseans 18 and older. Supporters also promised this would not be the end for the push for gun rights, claiming they plan to bring more legislation in the future to apply to all firearms.
Various law enforcement groups, such as The Tennessee’s Sheriffs’ Association and the Tennessee Bureau of Investigation opposed the legislation, claiming it would increase the rate of crime in the state.
The bill is expected to cost the state $20 million in lost revenues from permit fees, as well as an expected increase for incarceration costs. Nevertheless, lawmakers fully funded the cost of the bill in the FY21-22 budget.
Major Legislation Succeeds
2021 was a good year for high profile bills, as a number of bills that attracted considerable media attention proved successful in the end:
- Transgender Athletes: Status: Passed. Student athletes in middle and high school will be required to play on the sport team of the sex at birth.
- Nissan Stadium Tax Cut: Status: Passed. The Tennessee Titans will be able to keep sales tax revenue from Nissan Stadium for future developments and renovations.
- Knoxville Minor League Ball Park: Status: Passed. Legislators approved $13.5 million for a downtown Knoxville ballpark.
- Vaccine Passport Ban: Status: Passed. State and local governments will be barred from requiring COVID-19 vaccines.
- College Athlete Compensation; Name/Image/Likeness. Status: Passed. Beginning in 2022, athletes can begin accepting compensation for the use of the athlete’s name, image, or likeness.
- Medical Marijuana. Status: Passed, With a Caveat. After legislation that would allow medical marijuana for several conditions originally failed, legislators passed a measure that allows medical marijuana for several conditions once the Federal Government declassifies marijuana as a schedule 1 drug.
- Unemployment Benefits: Status: Passed. Those receiving unemployment benefits will only receive them for 12 weeks instead of 26 beginning in December 2023, those funds will go to the unemployment trust fund instead.
Looking Ahead: Fundraising, Reelection Prep, Redistricting and Possible Special Session Loom on Horizon
The conclusion of the legislative session signals the kickoff of the second season in Tennessee politics, fundraising season. The April, 2022 qualifying deadline is seared into the mind of all incumbents, who will look to bolster their political war chests this summer and fall to ward off any potential challengers for the 2022 primary elections. Lawmakers also hope to have a relatively uneventful “non-election” off season, unlike the 2019 offseason, which initially promised to be somewhat quiet but eventually saw a very unexpected and dramatic change in House Speakers by end of summer.
The bolstering of war chests will not be limited to the legislative branch. Look for Governor Bill Lee to both increase his fundraising efforts and take strategic steps to both prepare for his 2022 reelection campaign. Lee remains popular in Tennessee despite being dealt with the historically tough hand of steering the state through a pandemic, and it is difficult to imagine the Democrats being able to muster any candidate that could pose a realistic challenge to Lee. Indeed, the Governor’s proclamation last week that he was lifting all restrictions as COVID-19 was no longer a public health emergency in Tennessee was met with widespread praise, especially in Republican circles. Nevertheless, the Governor is not likely to take reelection for granted, and is expected to take an even more public role across the state as the calendar moves into the summer.
2021 is also a redistricting year in Tennessee, and that process will garner more and more interest as the official census numbers are known this fall. District lines are redrawn every ten years according to population and must not discriminate on the basis of race and ethnicity. In Tennessee, the congressional and state legislative district boundaries are set by the state legislature, and given the supermajority that the GOP currently enjoys, look for the district lines to remain as favorable to Republicans as possible. Redistricting must be completed before the beginning of the 2022 legislative cycle.
With Tennessee set to receive over $6 billion in COVID-19 relief funds from the federal government later this year, there has been hallway chatter about the possibility of a special session in late summer/early fall to provide the legislature with an opportunity to give input as to how those funds are to be spent. That could foreshadow a bit of friction between the executive and legislative branches, as often the two can differ as to precisely how funds need to be spent, and the Lee administration may believe it does not need legislative input in that regard. In any event, a possible special session regarding COVID-19 money – including the debate over whether it is necessary – could provide some additional political theatre in Tennessee this summer.
As you review your attached bill tracking report and take stock of the events of the 2021 session, please recall that since 2021 is the first year of the two year 112thGeneral Assembly, any bill that was not voted down in committee or on the floor is technically still able to pick up where it left off and move forward in the 2022 session. That said, look for lawmakers to replicate or even improve on the volume of bills filed in 2022 as compared to 2021. Following the adjournment of the 2022 session, the slate will be wiped clean and the process will begin anew for the 113th General Assembly when it convenes in January, 2023.
Finally, on a somber note, our thoughts are with two legislators that have faced health issues this session. Representative Mike Carter (R-Ootlewah), Chairman of the House Civil Justice Committee, is currently engaged in a difficult battle with advanced pancreatic cancer and has missed a majority of session due to treatment. Representative David Byrd (R- Waynesboro) has also been absent this session as he continues to suffer complications stemming from a COVID-19 diagnosis in December.
On behalf of the Tennessee government relations team at Adams and Reese, it has been a privilege representing your interests at the Tennessee state legislature. Have a safe and enjoyable summer.