The Tennessee General Assembly was very active this week as they work toward finishing up Legislative Session.
On Wednesday, under the guidance of our dedicated bill sponsor Chairman Gary Hicks and bill co-sponsor Leader William Lamberth, the Tennessee House of Representatives passed HB2045, our 401(k) bill.
This bill, if it were to pass the Senate and be signed by the Governor, would put in statute the requirement to match the 401(k) with $50. Currently, the law only requires the match to be a minimum of $40.
TSEA thanks bill sponsors Chairman Gary Hicks, and co-sponsor, William Lamberth for their efforts on behalf of state employees. The bill now awaits action in the Senate. Currently, the Senate has deferred all bills that are not budget or COVID-19 related to December 1, 2020. If that status changes, we will let you know. As it stands, we will look to move this bill in the Senate next year.
On Thursday, Finance and Administration Commissioner Butch Eley submitted Governor Lee’s revised budget to the Tennessee General Assembly. The revised budget lays out a three-year plan to return to a structurally balanced budget.
To balance the budget, reserves from the departments will be examined and used before the rainy-day fund. This plan also gives a cushion to the budget should there be additional unexpected shortfalls in the coming years.
In his proposal, Commissioner Eley emphasized the dire situation we face, but maintained optimism for the future. The following slide from Eley’s presentation demonstrates the state of our economy. It is important to note that the data listed below for April reflects March revenue. In a few days we will see the numbers for May, which will reflect April revenues which are expected to be much worse.
The biggest news from Thursday for state and higher education employees is that the revised budget recommends eliminating the proposed FY2020/FY2021 raises.
TSEA Executive Director Randy Stamps issued the following statement regarding plans to eliminate state employee raises:
“While we acknowledge the great uncertainty with our state and national economic outlook, this is a big disappointment,” TSEA Executive Director Randy Stamps said. “TSEA has reminded Lee Administrative officials and legislators that state employees have met every challenge during the COVID-19 pandemic. These are difficult times, and TSEA will continue to advocate for state employees during the budget process.”
The formula funding to all higher education institutions will also be cut, which will require all campuses to look for savings. We will continue to monitor this process as cuts are determined.
We have also received many questions about COLA for retirees. Retiree COLA is statutorily protected (TCA § 8-36-701) and tied to the U.S. Consumer Price Index. Unless the legislature decides to change the statute, the cost of living adjustment (COLA) for retirees effective July 1, 2020 will be 2.1 percent.
It is also essential to understand that any reserves used to balance the budget are only one-time expenditures as opposed to recurring in the budget. To again reach a structurally balanced budget, any one-time money used in future budget years must be replaced by additional recurring money when the economy recovers, or Tennessee will be in a much less financially secure position, which would make the situation even worse for state employees.
While we are disappointed in the proposal to cut pay raises, we appreciate the Administration’s commitment to fully funding the following:
* The state’s portion of state employees insurance premium
* The state’s TCRS obligation to state employees (pensions)
* No cuts to current salaries
The amended budget also includes a proposal of $50 million to fund an employee buyout.
The Department of Human Resources has been asked to develop
guidelines and assist departments in targeting positions for the buyout. The
last major buyout was during the great recession in 2008/2009. We can expect a
similar design for this buyout.
This proposed buyout is an employee buyout, not a retirement incentive. An employee buyout targets positions that will be cut if the employee takes the buyout. A retirement incentive is aimed at employees who are near or at retirement eligibility. As a rule, with employee buyouts, the department only takes into account the ability of the department to continue the work without that position and without consideration to the employee holding the position. We want to reiterate; this proposal is strictly for an employee buyout.
We anticipate that the Senate will pass the budget next week and
adjourn after considering only the bills determined by leadership to be
COVID-19 or mission sensitive.
The House of Representatives has continued to work through the
committee system and hear all bills that were left to be considered at the time
of recess in March. We believe the House could also finish up next week.
TSEA leadership has been in contact with Lee administration officials as well as monitoring the Tennessee General Assembly during the last week while these decisions were made. TSEA will continue to work with the Administration, legislators, and agencies on behalf of our membership during this very difficult time.
Thank you for all you do for Tennessee and for being a member of TSEA.