Gov. Lee budget puts more money toward tax change

Tennessee Gov. Bill Lee's updated budget proposal includes more than $350 million higher than originally pitched for retroactive franchise tax refunds but does not fund any benefits for public schools included in the House version of a controversial statewide school choice program.

Finance and Administration Commissioner Jim Bryson presented Lee's budget amendment on Tuesday, saying that it reflects “the administration's position” on key legislation – including the governor's voucher bill.

That includes the higher amount toward restructuring the state's franchise tax, and offering retroactive refunds to businesses operating in Tennessee in the last three years. Lee had originally proposed about $1.5 billion toward the restructure and refund proposal, but fiscal analysts determined that if all of the 100,000 businesses that could qualify for the refund actually did so, it could cost significantly more, bringing the proposals cost to $1.9 billion. Lee's administration had sent a letter to the Senate Finance Committee last week promising to fund the difference, and the budget amendment does so.

The Lee administration has declined to release documentation about the need for the tax change but officials have pointed to a legal risk in how the state calculates the tax on businesses.

Meanwhile, House and Senate leadership remain at odds over significant measures in the school choice legislation. The House version includes significantly more funding from the state for teacher health insurance benefits, as well as more per-student funding toward school building infrastructure and maintenance – about $250 million more spending than the Senate version. It would also make sweeping changes to teacher and principal evaluations, and standardized testing requirements.

But the administration isn't backing the House's proposed $250 million in new public school benefits with the budget proposal.

“There are a lot of proposals out there with a lot of different dollar amounts on them,” Bryson said Tuesday. “We have done this amendment based on the administration's position on these . ... It will be for this committee and for the General Assembly to decide."

Lawmakers still could move forward with the new additional spending for public schools, but they'd have to appropriate those funds from elsewhere in the budget.

It's unclear what effect the funding omission will have in negotiations on a final version of the bill – but it will almost certainly make it harder for House leadership to make their case for including the public school benefits to Senators who are already dug in defending their own version of the legislation.

Overall, the budget amendment reduces total state spending by about $10 billion – or about 16% – from last year, including significant reductions due to ending federal COVID-19 aid.

Here are other notable items funded in the governor's budget amendment:

h $2.1 million to enact, if passed, Jillian's Law. Named for slain Belmont student Jillian Ludwig, the bill would require commitment of individuals adjudicated as mentally defective who are charged with serious crimes;

h $3.3 million for state-paid mental health screenings for defendants charged with a misdemeanor who are believed to be incompetent to stand trial;

h $5 million for the TN Entertainment Commission's Film Incentive Fund;

h $5 million for volunteer firefighter equipment grants;

h $10 million in grants for nonprofits, including a $1.5 million grant for Men of Valor, of which the governor was once a board member;

h $10 million to TN Economic and Community Development Department for Nuclear Development Fund;

h $5 million to TN Department of Military for National Guard deployment to the U.s.-mexican border;

h $40 million for infrastructure improvements on the I-24 industrial site;

h $130 million more to the state's Rainy Day Fund.

Vivian Jones covers state politics and government for The Tennessean. Reach her at vjones@tennessean.com .