Now, tennessee governor bill haslam gives his annual state of the state address at the State Capitol in nashville. This is just over 30 minutes. [ applause ] thanks. Thank you. Thank you. All right. All right. Thanks so much. Speaker orwell, Lieutenant Governor mcnally, happy birthday, randy, speakers pro tem tracy and johnson, members of the 110th General Assembly, justices, constitutional officers, general slatery, commissioners, friends, guests, fellow tennesseans, and for the seventh year in a row the woman voted best first lady in the land, chrissie. [ applause ] my kids even made it this year. I am before you tonight to give my seventh state of the state address. Time really does fly. Id like to talk with you about the tennessee we can be. But first, lets start with where we are. Thanks to the hard work of so many tennesseans, i believe the state of our state has never been better. Our economy is outpacing the national economy. Not only to more tennesseans have a job today than ever in the history of our state, but tennessees Median Household Income has grown at the second fastest rate in the country. Not only are we adding [ applause ] not only are we adding jobs, were adding good paying jobs, on education there is no state in the u. S. That is demanding the spotlight like tennessee. It is worth repeating, with the incredible hard work of our teachers and students, tennesseans are the fastest improving in the country in math, reading, and as of this year, science. This past october [ applause ] this past october we received a science scores from the nations report card. And besides being the fastest improving, we narrowed the gaps between africanamerican, latino and white students. We also completely eliminated the gap between male and female students. [ applause ] please, you already did, but please join me in giving all of the teachers across this great state a hand for making such a difference for tennessee. [ applause ] in Higher Education, while the rest of the country struggles with increasing tuition, over last two years, tennessees colleges and universities have seen the lowest growth in tuition and fees since the 1970s. And and in just four months, well see the very First Associates degrees awarded to tennessee promised students across the state. [ applause ] for only the second time in our states history, we have a aaa Credit Rating from all three agencies. Even before the tax cut s that im recommending in this years budget, tennesseans pay the lowest amount of tax as a percentage of their income of any of the 50 states. The budget im recommending to you will take the states Rainy Day Fund to an all time high. In addition, we are still the state with the lowest debt per capita in the country. Last year last year was the first year in tennessee recorded history that we did not take on any new debt. This budget will recommend that this be the second year in tennessees recorded history that we wont take on any new debt. [ applause ] you know, with all of that we have still managed to create a surplus in tennessee. I want to be clear, surpluses are a good thing. A combination of conservative estimates, strong growth, and having the discipline to not spend the budget. Many of our fellow states who are in deficit positions would love to trade places with us. 25 of the 50 states saw revenue come in below projections last year. Since there has been so much discussion and speculation about the surplus, id like to spend a little time tonight talking about that. Beginning with just how much is it . It is important for all of us to draw a clear line of distinction between recurring revenue and nonrecurring revenue. For those watching at home, recurring revenue would be items like your weekly or monthly paycheck. Revenue you can typically count on coming in from year to year. Nonreoccurring revenue would be things like the money that aunt edna left you in the will or the insurance settlement you got for your car or the money you saved out of last years budget. These are items that you cannot typically count on from a year to year basis unless you think aunt edna might die multiple times. For reoccurring revenue, in most years we have growth of about 400 to 500 million that we can spend on new programs or increased costs. This year the amount of new recurring revenue is 957 million. Double the amount that we normally receive. [ applause ] however, it is important for all of us to remember that this is not 957 million without any claims to it. The tax cuts in the budget were proposing will take over 200 million of that. Funding the bep formula, something were all committed to, and raises for teachers, will take another 180 million. Nondiscretionary increases to ten care caused by Rising Health care costs in general and pharmacy costs in particular will take 130 million of the 957 million. Raises and increased Health Care Health insurance costs for state employees are another 107 million. In addition, obligations to our retirees for our pension plan and Health Care Costs will eat up 125 million. Funding the complete college formula and Higher Education will require 80 million. Im also recommending that the maintenance of our buildings be funded on a recurring basis going forward, which i believe is a more conservative and responsible approach that only put maintenance dollars in the budget when we happen to have some funds available. As you can see, many of the items i listed are nondiscretionary. We dont have much choice to it. As you can also see, there are some discretionary funds in that list. We dont have to give raises to our teachers or to our employees. We dont have to cut taxes. And we dont have to fund the maintenance of our buildings on a reoccurring basis. However, im convinced that all of these things are Strategic Investments in the future of our state. [ applause ] just those seven items make up 900 million of the recommended spending for the 957 million of the new recurring revenue we have for this year. In addition, we are recommending several other places that we believe merit investment in the budget. Were recommending increasing the daily reimbursement rate we give to counties or housing state prisoners in county jails. Were adding funding for public defenders and investigators, more state troopers, and more district attorneys. [ applause ] it is also both smart and just to increase the amount of reimbursement we pay to some of the providers that take care of our most vulnerable citizens through the department of children services. Were also opening up more places in the Choices Program for those we serve in the intellectual and Developmental Disability communities. And unfortunately as drug use and opioid addiction plague our state, were expanding Substance Abuse and crisis intervention Treatment Services and supports. [ applause ] with the nonrecurring money or one time money, were focusing on items that can save state dollars down the road, including the improvement and maintenance of our buildings, both general government and higher ed, and were putting 110 million toward paying down a 1. 2 billion liability for Retirees Health care. And im also proposing to add 132 million to our Rainy Day Fund to bring it to an all time record high of 800 million, well on our way to the statutory guideline of 1 billion. [ applause ] since we have been talking about the surplus, i guess we should go ahead and talk about our Transportation Needs since it is hard to talk about one without the other. At its core, transportation and infrastructure are some of the most basic needs provided by safe government. By state government. And in a safe and Reliable Network is vital to the tennessee we can be. While there are some functions that people can perform for themselves without the government, no one can build a network of roads and bridges on their own. In tennessee, we last addressed who to fund our roads back in the late 80s. Since that time, when the rate was raised to 21 cents per gallon of gasoline, the value of that 21 cents has fallen to 11 cents. So if youre wondering, well, how can that happen, the answers are fairly easy. The gas tax is the one form of revenue that does not have inflation built into it. Because it is charged on a cents per gallon basis, instead of a percentage of the sale rate, inflation doesnt change the number. Secondly, improved mileage for vehicles has been great for the economy, great for the environment, and great for consumers pocketbooks. However, it is also meant that everyone drives on our roads for a lot less of the cost than they did back in 1989. With the improve act, were proposing to increase the gas tax seven cents and the diesel tax 12 cents per gallon. And all new revenue goes only to address our Transportation Needs. [ applause ] the legislation will mean 962 projects in all 95 counties both urban and rural. It will also mean 78 million annually in increased revenue for counties, and 39 million for cities. Scores of mayors across tennessee, cities and counties, rural and urban, have told me that, if we dont do something to address the fuel tax, they will have no alternative but to raise the property tax in their municipalities. I know some of you think we should transfer surplus money to the highway fund for transportation. We are, to the tune of 277 million, in last years and this years budget combined, but there are four real reasons why thats not a longterm solution. First, while we do have a surplus, we do not have a pile of money without a claim to it as i mentioned earlier. Second, i have never thought that it was a good plan to pay for a longterm need like 10. 5 billion in approved and needed road projects, with a shortterm surplus. Third, in the most fundamental, in my proposal, an estimated half or more of the increased revenue would come from nontennesseans and trucking companies. I dont know why we would take general fund dollars, which are mostly collected from tennesseans, for tennesseans, and use that to subsidize our roads which are paid for by a broad mix of in state and out of state users. Finally, paying money out of our surplus would continue to leave our cities and counties with an inadequate source of revenue for taking care of our neighborhoods and local roads. I know that some of you have said that youre never going to hit the green button for any kind of tax increase. I understand. I would rather not address this either. To be honest, i would rather be known as the governor who worked with you to cut 500 million in taxes, brought our debt to record low levels and introduced the tennessee promise. But imagine with me for a second what kind of tennessee we would be if two different governors and two different general assemblies did not have the foresight to address our needs back in the 80s, without them many of the roads that we now take for granted and hundreds of thousands of jobs would not be here. Earlier i mentioned that tennessee has the lowest taxes in the nation as a percentage of personal income. If the improve act goes into law, we would still have the lowest taxes in the nation. [ applause ] today, today we benefit from the decisions made in hard votes taken by those who came before us. And i am hoping we can make the same commitment to our children and grandchildren to deliver the infrastructure they need to pursue Economic Opportunity and high quality lives. I have also heard many of you say that any movement in the gas tax would have to be accompanied by relative revenue neutrality. If you believe that, i would argue that there will rarely be as good a chance for us to do that as we have before us right now. The improve act includes tax cuts targeted toward the f e taxes of our manufacturers. We take great pride in paying the lowest amount of tax, as a percentage of income in the country as individuals. Unfortunately thats not true for our business taxes. We are the third highest, the third highest in the country in business taxes as a percentage of income and as a percentage of our budget. This tax cut of 113 million annually makes tennessee more competitive as we recruit jobs to locate or expand here in state. So some of you may ask, why are we targeting manufacturers with this tax cut . Because they are the firms that in addition to their own jobs bring a long trail of supplier jobs with them. The average manufacturing job creates an additional three jobs out of their supplier ranks. Just this morning, i had a conversation with a major manufacturer who is looking to locate in one of our rural areas in tennessee. The good news is that we are one of two finalists for the location. The challenging news is that they think they will pay more business tax if they locate in tennessee and they are weighing their decision right now. I wish i could say thats the only conversation like that ive had. But thats at least the fifth time that has come up in a recruitment conversation in the last four months. I am confident this tax cut will mean more jobs for tennesseans in the future. [ applause ] i am also proposing that we cut the tax on groceries from 5 to 4. 5 , which in addition [ applause ] which in addition to the half percent we cut several years ago would mean a full percentage cut in the grocery tax since 2012. This new cut [ applause ] this new cut would save tennesseans 55 million annually on their grocery bills, for a total of more than 100 million since we came into office. [ applause ] finally, im proposing funding the cuts in the hall income tax. The hall is required to be eliminated by 2022. But it is one thing to eliminate a tax in a bill. It is an entirely different thing to actually take that revenue out of the budget. The improve act accelerates that, while we have funds in the budget, to address this. Those cuts will mean an additional 102 million in tax cuts during this General Assembly. In total, if this is approved, the General Assembly and this dwof governor will have cut 540 million in annual taxes out of the budget since 2011. [ applause ] let me repeat, 540 million in annual taxes since 2011, for the sake of reference, that is nine times more than the highest amount ever cut by General Assembly in a governor in the history of the state. [ applause ] and with the approval of the base reductions in this budget, we will have cut 550 million in ongoing expenses from the state budget over the last seven years. We reduced the cost of government, and are returning those dollars in tax cuts. [ applause ] you know, insuring the future health of our state is not just about roads and bridges. More than half of our counties have an economic status of either at risk or distressed. But our rural areas have assets that we can capitalize on. We are already making progress in this effort. Last year 40 of the new job commitments from our department of economic, community development, occurred in rural areas. In this budget, we are proposing including 21 million in recommendations from our Rural Task Force as tennessee moves ahead. We want to make certain that every part of our state is included. But one of the best things i think we can do for those areas is increase their access to broadband internet. Last week, i introduced the second piece of our next tennessee legislative agenda, the tennessee Broadband Accessibility act. You know, we talked about infrastructure with regards to transportation, but having the right infrastructure to handle tennessees potential growth also means talking about access to broadband. More than 800,000 tennesseans dont have that access. One in three businesses identified it as essential to selecting their location. Allowing tennessees private, nonprofit electric coops to provide Retail Broadband Service and investing 15 million in grants and tax credits annually will help spur deployment in rural unserved areas, opening them up to Economic Investment and job growth. Of course, accessibility without adoption doesnt accomplish very much, so were also focusing on digital literacy. So interested tennesseans can maximize the benefits of broadband. You know, we live in a world where if you have a strong internet connection, you can just about work from anywhere. If were serious about putting our Rural Counties on a level playing field, then opening up Broadband Access is one of the largest steps forward we can take. [ applause ] you know, as in prior budgets, youll notice this one makes another strong commitment to Public Education. Last year we had the largest funding increase for Public Education without a tax increase in the history of the state. This year were proposing one of the largest funding increases in tennessee history, while at the same time cutting 270 million in taxes. Were fully funding the basic education program, including 22 million in additional dollars to help schools serve high need students. And 15 million for career and Technical Education equipment. 100 million is included for teacher salaries, bringing the 3year total since fiscal year 16 to more than 300 million new dollars for teacher salaries. And [ applause ] which would mean 430 million new dollars since 2011. Tennessee has shown it will not balance the budget on the backs of teachers and students. [ applause ] under this legislature and this administration, tennessee has increased total k12 spending by more than 1. 3 billion. [ applause ] we are also making unprecedented investments to open up access to Higher Education. In addition to the tennessee promise and keeping tuition low, since fiscal year 12, tennessee has taken funding for its needbased Financial Aid from 56 million to 98 million. Our focus on educatio