NASHVILLE — A political collision over Tennessee's proposed $38.5 billion state budget appears to be looming, with Republican leaders of the Senate and House pursuing different paths on several key priorities.
After the House on Wednesday passed its version of the state's annual spending plan when budget negotiations broke down, the Senate Finance Subcommittee responded in kind on Thursday by approving one without a number of the lower chamber's amendments and reductions in other areas.
"The Senate's put together a budget that does what conservatives do," Lt. Gov. Randy McNally, the Senate Republican speaker, told reporters afterwards. "We've cut taxes, we've saved money for the state's Rainy Day Fund and we've prioritized the needs of the people of Tennessee."
McNally called it a "fiscally conservative budget. It's also a cautious and compassionate budget."
One major flashpoint is the Katie Beckett waiver program, which the House, led by new Republican Speaker Glen Casada, has made a top priority of funding.
It directs the state to seek a federal waiver of Medicaid rules to help out middle and upper-middle class families caring for severely medically disabled children who don't qualify for TennCare but face huge health care costs that have pushed some families into bankruptcy or divorce.
The House bill provides $27 million for that, banking on $44 million in anticipated revenue from sales taxes from online sales that the U.S. Supreme Court last year allowed in its Wayfarer ruling.
Senators support the waiver. But McNally and Senate Finance Committee Chairman Bo Watson, R-Hixson, said they don't want to use any revenues from the onlines sales ruling — it applies to out-of-state remote sellers with no physical presence in the state . They would rather use the money to fund tax cuts.
"The Senate has very cautiously funded the Katie Beckett manner in a way we believe will be using stable revenues for the future," McNally said, calling the online tax collections a "windfall."
So senators are proposing putting $16.5 million for the Beckett bill from regular budget growth and cuts for the 2019-2020 budget that goes into effect on July 1 and again for the 2020-2021 fiscal year.
Watson said the House and Senate have been talking for the last three to four years about how to fund the Katie Beckett waiver. The decision has been to fund Part A provisions of the waiver, which Watson said cover the "most complex, most expensive, most needs-based individuals in our communities in the state."
He said TennCare officials believe the chances of the state winning approval for the Part A waiver are "incredibly high." For Part B, however, "they're not quite as confident. They're confident, but not as confident."
Thus the move to go with a Part A waiver, which is almost certain to be approved, Watson said. Then lawmakers will ask TennCare for a study and report on what the cost might be on Part B and address it next year.
"Our committment to Katie Beckett is no less than any others, we're just taking a conservative, reasonable approach and we're not using tax increase revenues to do it, we're using existing revenues."
Part B offers a capped package of essential wraparound services and supports, as well as premium assistance on a sliding fee scale for children. Children enrolled in Part B would not be enrolled in full TennCare/Medicaid.
Senators are being "extremely frugal" in budgeting, said McNally, a former Senate Finance Committee chairman, and don't believe the online sales revenue is a "very reliable revenue stream" for the Beckett program.
"We don't want to use the money to pay for new programs," McNally said.
Instead, Watson said the Senate has long intended to use any windfall from the ability to require out-of-state internet retailers and catalog companies to collect sales taxes for tax cuts.
"It's always been the conversation of the Senate" that if the Supreme Court overturned its prior decisions on requiring the companies to collect the sales tax, "we would not take that money and use it as a tax increase for Tennesseans. We would have offsets."
The Senate budget calls for using $23 million of the anticipated revenue to reduce by 25 percent the state's professional privilege tax on doctors and nurses, attorneys and other professionally licensed Tennesseans, taking it from $400 to $300 a year.
Depending on how sales tax collections proceed, the remaining $21 million could go for future tax cuts.
McNally noted that while Republican Gov. Bill Lee is proposing raising starting pay for new state Department of Correction prison guards, the Senate version also provides $8 million to boost salaries for existing guards in a department with large turnover rates due to low pay.
The Senate budget also includes $25 million for state employee pension and health care liabilities, as well as providing another $1.5 million toward fighting the state's opioid epidemic.
Watson said the bill is intended to reflect "the hopes and dreams of Tennesseans, and we think we've done that today."
He said it cuts taxes by $25 million.
House Speaker Casada told GOP Caucus members this week that the House was holding firm to full funding for the Beckett waiver.
"We're going to pass our budget and when the Senate gets around to working and they catch up to us, they will pass a budget. And we'll sit down [with senators] with your leadership team and I have my full faith in them."
Contact Andy Sher at firstname.lastname@example.org or 615-255-0550. Follow him on Twitter @AndySher1.