budget surplus – Memphis Flyer

State Capitol building

Tennessee lawmakers may have an extra $3 billion to budget this year, according to a new policy report from the Sycamore Institute.

State coffers declined less and rebounded faster than in other states, according to the nonpartisan think tank based in Nashville. Consumer spending fell dramatically in March 2020 (27 percent lower than in January 2020). But spending here returned to near pre-pandemic levels soon after Tennessee received billions of dollars in federal CARES Act funding.

Sycamore Institute

With this, tax revenue in Tennessee has “far exceeded expectations,” the report says. Last summer, policymakers projected dips (1.4 percent in 2020 and 2.8 percent for 2021) in Tennessee’s general fund. But the fund was up 3.7 percent at the end of the 2020 fiscal year. Five months into the new fiscal year, the fund has already beaten year-to-date estimates by $716 million. If the trend continues, the state’s general fund could end up 5 percent over the 2020 fiscal year.

Sycamore Institute

Here’s where the additional $3 billion will come from:

• $476 million (non-recurring) from the 2020 surplus.

• $1.1 billion (non-recurring) from projected 2021 collections above official budgeted estimates.

• $1.5 billion from the increased 2021 base plus projected 2022 growth.

Sycamore Institute

“Some of this money has already been appropriated, but most remains available for the governor and [Tennessee General Assembly] to allocate,” reads the report. “During the recent special legislative session on education, for example, lawmakers appropriated $110 million of non-recurring funds for the current fiscal year. That money will increase the state’s share of the school funding formula for teacher salaries and for other activities to mitigate pandemic-related learning loss.

“A portion of recurring funds will also be needed to offset decisions made in June to ensure the budget was balanced in the face of uncertain revenues. The June 2020 budget was balanced but used some non-recurring actions to offset a projected $1 billion recurring revenue shortfall.

“Policymakers will likely first apply re-estimated recurring revenues to bring recurring revenues and spending into balance.”

One side says “pork barrel legislation”; the other says “community enhancement grant.” Calling the whole thing off, however, is no option.

Democratic state senator Jim Kyle commenced a whistle-stop tour of a dozen libraries and community centers in the 28th District last week to inform his constituents about the $20 million budget surplus the state will disperse through community enhancement grants.

The program puts the onus on organizations to apply for the funds, rather than on politicians to choose among favorites. “We’ve never done it like this before,” explains Kyle. “This is the middle ground for [politicians] who don’t want to choose.”

In May, Republican representative Brian Kelsey of Memphis waved an envelope full of bacon at the legislature in Nashville in protest of the bill and charged that the program looks like pork and smells like pork, regardless of the new guidelines.

“This is a fundamental difference between Democrats and Republicans,” says Kyle. “They think there’s something wrong with it. We think this is what we’re supposed to do.”

Other Republicans, though, view the program as a compromise. Mark Norris, Republican senator from Germantown, says, “We opposed other measures that weren’t, shall we say, arm’s length fund disbursements. This lets the [neutral] secretary of state review applications and decide.”

The money is left over from franchise and excise taxes, which are imposed quarterly on for-profit businesses statewide.

“The issue came down to this, or making specific budget appropriations,” Kyle says. “We thought that the better course of action was to create a pool of funds.”

Applications are available on the Web site of the Tennessee Secretary of State. The grant program is open to community organizations, nonprofits, and those who can find a sponsoring organization. As of August 3rd, a variety of Shelby County organizations had applied.

LaSimba Gray, pastor of the New Sardis Baptist Church, applied for $1 million for the currently nonexistent African-American Museum. The application’s stated purpose explains simply that the “funds will be used.”

Other local organizations make slightly more modest requests with more specific justifications. Families of Incarcerated Individuals, a nonprofit founded in 1989 to “deter incarceration through family support,” requested $4,000, with the stated purpose to “expand the program to serve more youth affected by incarceration.”

Applicants have a 4 p.m. August 15th deadline. The money must be spent by next June 30th, or it will revert back to the state.

Here in the land of barbecue and weekend cookouts, “pork” and “community enhancement” now intersect in more ways than one.