Tennessee's finances have state lawmakers facing a "good news, bad news" situation as they look to finalize Gov. Phil Bredesen's education funding reform plan, Lt. Gov. Ron Ramsey said.
"The good news is the state has more money than we expected to have. The bad news is the state has more money than we expected to have," said Ramsey, R-Blountville.
The State Funding Board told lawmakers Wednesday that the state will get between $252 million and $306.5 million in new recurring tax collections starting in the budget year beginning July 1. That's in addition to about $400 million in revenue growth already anticipated for next year and included in Bredesen's proposed budget.
Bredesen wants a 40 cent cigarette tax hike to help fund at least half of his $475 million overhaul of the state's Basic Education Program (BEP), but Ramsey said he has told the governor that he can't go along with it.
"We may meet somewhere in the middle. But if we're going to do that we want to have the money tied to education in the plan that we came up with that will help Northeast Tennessee and the BEP funding formula and have some strong measures of accountability in the bill," Ramsey said.
While lawmakers grapple with how to finance BEP reform, they are also considering competing Republican and Democratic proposals to lower the sales tax on food.
State Rep. Matthew Hill, R-Jonesborough, cited the state's anticipated revenue growth as the main reason to pass a substantial sales tax cut on food.
"There is absolutely no justification for a tax increase - all their arguments are losing steam," said Hill. "We have plenty of money to fund education and give the people a rollback on the food tax."
State Rep. Nathan Vaughn, D-Kingsport, favors a Democratic plan to pass a sales tax cut on staple food items such as eggs, milk, baby food and baby formula.
"I think we need to give them as big a break as we can," Vaughn said of the buyers of those food items. "They don't have the resources to stock up on food because they don't have enough money."
Vaughn also advocated Bredesen's BEP reform plan - which could pump millions more dollars into Northeast Tennessee school systems - with the 40 cent cigarette tax hike.
"I think we need to look at the 40 cents. ... I think the projections concerning tax revenues next year are not going to be as great as they are this year," he said.
Ramsey said he is hoping lawmakers can work something out on Bredesen's education funding plan and budget without both matters being decided by a conference committee of lawmakers.
"We're in negotiations with the House and the governor to work out something," Ramsey said. "I don't want to get back into a situation that we were in the last years of the previous administration (of Gov. Don Sundquist in 2002) that we're here until the end of June. ... That's not the way you do the state's business."