Gov. Bill Haslam's gas tax proposal saw major action on Monday, when the Senate Transportation Committee approved the measure which was significantly altered in recent days after discussions between leadership and the governor.
The transportation committee approved an amended version of the governor's bill which keeps in place a gas tax increase, albeit a smaller one than Haslam has proposed. The amended version further reduces the state's tax on groceries, eliminates a proposed fee on rental cars and cuts a controversial aspect related to indexing.
The committee voted 7-1 in favor of sending the amended bill to its next legislative committee.
The latest action from the Senate committee comes one week after a special subcommittee amended the governor's bill to only include a long list of projects that would be addressed if the overall plan is approved.
Some House lawmakers, including Rep. Bill Sanderson, R-Kenton, called the Senate's action last week a "mock" move.
Many in the Senate have been more welcoming of the governor's main proposal, known as the IMPROVE Act, which originally sought to increase the tax on gasoline by 7 cents per gallon while cutting taxes in various other ways.
The House has been exploring alternative transportation funding options.
The House version of Haslam's caption bill — broadly written legislation that allows for changes — was amended to incorporate aspects of a plan from Rep. David Hawk, R-Greeneville, in that it relies on using a portion of existing revenue generated through sales tax to pay for the state's transportation needs instead of a gas tax increase.
The different approaches in the House and Senate have led to a standstill of sorts, with both chambers appearing to be waiting for the other to take a vote on whether to increase the gas tax.
Senate Majority Leader Mark Norris, R-Collierville, said after conversations with Haslam in recent days, they had reached an agreement on the various changes to his bill.
During and after the committee's action, Norris said it was important for the Senate to take action on the gas tax proposal given the fact the governor's proposed budget relies on the passage of IMPROVE Act. If lawmakers failed to move on the proposal, the budget would have to be redone, a potentially lengthy process.
Among the changes included in Norris' amendment were a portion that would provide tax relief to the elderly and disabled veterans, reduce the sales tax on groceries to 4 percent, and a tax hike on gas and diesel fuel of 6 cents and 10 cents per gallon, respectively.
The gas and diesel tax increases would be phased in over three years. For the upcoming 2017-2018 fiscal year, the gas tax would be increased by 4 cents. In each subsequent fiscal year it would increase by 1 cent.
The diesel tax would be increased by 4 cents in the upcoming fiscal year and would be hiked in the following fiscal years before maxing out at 27 cents in fiscal year 2019-2020.
Unlike the phased-in approach on the gas and diesel taxes, the decrease in the state's sales tax would be immediate. The cuts to the tax on groceries would result in a $120 million reduction in revenue for the state.
The money that would be raised through the tax increases would provide approximately $250 million for the state, $35 million for cities and $70 million for counties once the plan is fully phased in, said Stephen Smith, a policy adviser for the governor.
The governor's original proposal would have provided $39 million to cities $78 million to counties.
Other significant changes included in Norris' amendment is a portion that would would increase the amount of tax relief a service-connected disabled veteran could receive. Right now, eligible veterans can receive tax relief based only on the value of the first $100,000 of their home. The latest proposal would increase the amount to $135,100.
Elderly Tennesseans eligible for tax relief would also see tax breaks in the new amendment. The value limit for low-income elderly would go from $23,500 to $27,000.
Sen. Mark Green, R-Clarksville, who is a veteran and running for governor, took issues with the inclusion of the tax relief for veterans as part of the newly amended plan.
"Adding the veteran property tax restoration to the gas tax increase is a blatantly obvious ploy to manipulate the men and women who served on our great country to advance an agenda and justify a tax increase in the face of a $2 billion surplus," he said. "Honestly, its unconscionable."
Norris' amendment would also include the local option that has drawn support from mayors and local municipalities, as well as the tax cuts for businesses, an increase in vehicle registration fees, and accelerating the elimination of the state's Hall Income Tax.
After explaining the plethora of changes to the governor's bill, Norris fielded questions from Sen. Jim Tracy, R-Shelbyville, who previously served as chairman of the transportation committee.
Tracy asked Norris if a vote against the bill was a vote against veterans, the elderly, businesses and all citizens who buy groceries in Tennessee, to which the majority leader simply said, "Yes."
But not every member of the transportation committee was on board with the amended proposal. Sen. Janice Bowling, R-Tullahoma, expressed skepticism saying it appeared as if they were reducing taxes to go out of their way to also increase taxes.
A brief effort to delay action on the amendment failed.
Lt. Gov. Randy McNally, R-Oak Ridge, praised the committee's approach, calling it strong and fiscally responsible.
"The bill as amended is now beyond revenue-neutral. It is a clear and undisputed tax cut for Tennesseans. It has my unequivocal support," he said.
Speaking to reporters after the vote, Norris said he engaged with Haslam about the proposal last week, including at the late Senator Douglas Henry's funeral service, in part because of the lack of progress in the House.
"We thought we were being respectful of the other chamber and that was not productive," Norris said.
Smith, the governor's adviser, reiterated that Haslam has wanted a comprehensive and fiscally responsible transportation funding plan. "We believe that this approach will get us there," Smith said.
House Republican Caucus Chairman Ryan Williams, R-Cookeville, said he had yet to see the language in the 101-page amendment, adding that there are members of the House who remain opposed to a gas tax increase.
House Majority Leader Glen Casada, R-Franklin, said it was good that the Senate was taking action on the legislation.
"We are moving forward, and as it should be the Senate has ideas and the House has ideas and we'll reconcile those either between now and floor vote or conference committee," Casada said.
Casada said there are other amendments in the House that are actively being discussed. One amendment bandied about by lawmakers would divert money from car sales to pay for the state's transportation needs.
After deferring action on the measure last week, the House Transportation Committee is expected to take up the gas tax proposal on Tuesday.
Jake Lowary contributed to this report.
Reach Joel Ebert at email@example.com or 615-772-1681 and on Twitter @joelebert29.