Tennessee is faced with an unprecedented economic challenge coming up over the next three fiscal years due to COVID-19. To restart and bounce back from this recession we will need to rely on consumer confidence, getting workers back on the job in a safe manner, COVID-19 testing, stimulus from the federal government and maintaining key state services like infrastructure and education.
I sit on the Fiscal Review committee which reviews contracts, tracks revenue and makes financial projections. I have detailed priority topics I feel can help to rebuild our economy and address issues to strengthen our economy after this pandemic passes.
If there is an issue I have not addressed below, please email me with your questions or concerns at darren@darrenjernigan.com and I will do my best to address them.
Rebuilding During an Pandemic
The COVID-19 pandemic has had a devastating effect on the national economy. The United States economy fell by 4.8% in the first quarter of the year effectively bringing the American economy to a standstill. The Gross Domestic Product will soon reach negative 30%. 40 million Americans have lost their jobs due to the coronavirus which left many without access to health insurance. 40% of those who have lost their jobs make $40,000 per year or less. Tennessee has not been immune to the economic downfall as the recession hit suddenly and is steep. Revenue and employment in our state, like the nation are down. A study conducted by Harvard and Brown University showed that Nashville consumer spending has fallen more than any other major metro city in the United States due to the COVID-19 pandemic.
When Governor Lee issued an executive order to shelter in place the Tennessee economy slowed to a near standstill. The impact was businesses closing, mass unemployment and leaving a sizable hole in the Tennessee budget. I sit on the Fiscal Review committee and currently Tennessee is projected to be $500 million short on the emergency budget passed in March. That number is for the calendar year, not the fiscal year (which ends June 30, 2021) when it is projected to reach over a $1 billion shortfall.
We must be cautious with the budget. Cuts will need to be made and we will need to dip into cash reserves, including the rainy-day fund. We cannot dip too much into the reserves, however. As much as this budget is going to hurt, the next fiscal year is not projected to be much better and we will need to use reserves there as well.
What do we need do? We need to focus on bringing back consumer confidence. Obviously, when we have access to a vaccine consumer confidence will rise dramatically. In the meantime, it is imperative we maintain a healthy balance of opening our economy coupled with promoting best practices in the public health arena containing the spread of the virus.
As Tennesseans, it is clear we are going to have to find a way to live with this virus. The quicker we become healthy; the quicker consumer confidence will return. It is vital that we continue to test for the disease and use anti-body testing once it becomes more reliable. This type of testing will go a long way in restoring consumer confidence.
I will support and vote to maintain and stabilize funding (no cuts) in the areas of education and infrastructure to assist in rebuilding the Tennessee economy. These two services are key sectors for growing an economy. Infrastructure to secure the movement of commerce and Education to assure an educated workforce is in place.
I fear some businesses simply will not make it back, but I certainly hope that is not the case. The American psyche has shifted and there will be Tennesseans who are hesitant to engage fully in public commerce for a while. This virus will run its course and we will need, as Tennesseans, find a way to live with it and move forward emerging stronger and better than we were before.
Unemployment in Tennessee
A major economic casualty of the COVID-19 crisis was the impact on our unemployment fund. The virus shut down businesses and created 14.7% unemployment in Tennessee. For a little bit of context, in the week of March 14th there were 2,702 unemployment claims filed which is average for our state. In the following weeks until May 9 th over 500,000 claims were filed by out of work Tennesseans.
Unemployment Insurance is a joint federal-state program that collects premiums from employers to pay benefits to unemployed individuals. The Unemployment Trust Fund houses all state premiums and pays out all benefits to unemployed individuals. The fund is based on a tax base formula called “premiums” applied to businesses. There is currently $1.25 billion in the trust fund. Currently, we are paying out $250 million a month, $60 million a week in unemployment benefits. When the trust fund falls below $1 billion an automatic premium increase will be applied to businesses to maintain the trust fund.
Tennessee has received $3.6 billion in COVID-19 relief funding from the federal government, but the money cannot be used for budget shortfalls. I do believe some of the funds can be used to help maintain the unemployment fund but it requires federal approval. As mentioned above, once the unemployment fund falls below $1 billion an automatic premium increase is applied to businesses. This is a premium that businesses can ill afford to handle right now, especially those closed for a short period and then only able to open at 50% capacity. I will propose the use of a portion of the federal relief money to keep the fund above $1 billion. This would be a one-time payment but it will give businesses an opportunity to recover without having to pay an increase in unemployment premiums.
Relief efforts must be about more than helping Tennessee businesses, her citizens need help as well. Tennessee has the 6 th lowest average weekly unemployment payments in the nation. While the national average is $378, Tennessee's average is $275 per week. The last time the amount was raised was in 2001 when it increased from $255 to its current rate. That is less than minimum wage for someone working full time. I am in favor of raising the weekly unemployment rate, as it will not only increase the monetary benefit for individuals but shore up a much-needed safety net generating economic activity in the state.
I have put my name and contact information in the public domain offering to assist people who were struggling to obtain their unemployment benefits during this pandemic. I started each day for weeks with one to ten emails from people asking for help maneuvering the unemployment system. The stories were emotionally overwhelming and heartbreaking. I personally worked with and helped countless people get information about or receive their benefits. I was helping people from other districts as well. I say this to let you know if you are aware of someone still struggling to obtain information about or receive unemployment benefits, contact me and I will do what I can to assist.
Tennessee Economy
The Tennessee economy is largely driven by agriculture, manufacturing, and tourism. This translates to a large farming industry, automotive and food processing plants and of course, whiskey. Tourist hotspots like Nashville, Memphis, and Gatlinburg contribute greatly as well. Most of state funding (80%) is from sales tax and the excise franchise tax.
The good news: Tennessee is required by the State Constitution to pass a balanced budget each year. In doing so, Tennessee's fiscal health rates among the best in the nation with Moody's issuing Tennessee a top AAA rating concerning our general obligation debt. Tennessee's low cost of doing business and a pro-business regulatory climate, coupled with a no state income tax provision (also in the Constitution), makes it an ideal location for business to move here.
The not so good news: Tennessee is heavily subsidized by the federal government with roughly 40% of Tennessee's budget coming from Washington DC, ranking Tennessee 3 rd in the nation receiving federal funds. These funds for various reasons could go away at any time which would leave a gaping hole in the state budget. It is imperative we address this issue now creating a plan to identify backup resources and funding to maintain quality of life for Tennesseans.
Further, Tennessee relies heavily on a very high sales tax which is not only disproportionate to poor people but can fluctuate in times of a recession making it difficult to budget for programs such as Health Care, Education, Social Programs and Corrections. With no steady stream of funding, such as a state income tax, which is not allowed under the Tennessee Constitution, public policy initiatives for programs such as the ones listed above consistently rank in the lower tier of states.
I intend to file a resolution to require the Department of Finance and Administration to conduct a study and report back to the General Assembly concerning alternate funding resources. Moreover, the study should investigate additional reserves that can be created or utilized as well.
Living Wage
The federal minimum wage is $7.25 an hour and has not been raised since 2009. This amount is no longer a living wage in the United States and the minimum wage has not caught up with the cost of living since the late 1960's. Tennessee is one of only five states that has not adopted a state minimum wage, keeping with the federal standard of $7.25 an hour. Tennessee needs a living wage for our citizens working in hourly wage jobs .
A living wage is an investment. An investment in an employer's business, an investment in the employee, an investment in the community and an investment in the state's fiscal health. For the employer it increases productivity, morale and improves employee loyalty. For the employee it means income to pay for basic living expenses and reduces barriers to affordable housing and social inclusion. For the community, a living wage leads to increased consumer buying power, growing the local economy and promoting the values of the business. For the state it keeps individuals off government support and poverty programs.
Equal Pay
In 2020, a woman earns .81 cents to every dollar a man earns. Women are being paid less than men due to no attributable reason other than gender. In other words, the median salary for men is roughly 19 percent higher than the median salary for women. According to payscale.com, calculating presumptive raises given over a 40-year career, they find that women stand to lose $900,000 on average over a lifetime.
Moreover, the gender pay gap is wider for women of color, women in executive level roles, and women in certain occupations and industries. There are also barriers to advancement and representation of women in leadership in the workplace.
While it is true the difference between the earnings of women and men has shrunk, it has only been an incremental amount each year. I am proud to have co-sponsored legislation to reduce this gap but there is still much work to be done until this gap is closed and I will continue to promote and sponsor legislation that supports equal pay for women.
Affordable, Quality Child Care
How are working parents handling their childcare needs? With nearly 300,000 children under age six in Tennessee a vast majority of toddlers and preschoolers are enrolled in paid childcare. In fact, for every $1 the state spends on affordable, quality childcare we would get $16 back having a parent fully engaged in the workforce.
The government can address affordable, quality childcare in a few ways. Tennessee has the Smart Steps Program providing childcare financial assistance to low-income families and families who are working on post-secondary education. We also have a childcare certificate program for teen parents enrolled in high school. We need to maximize state and federal dollars that are available for low-income working families. The state can adjust subsidy reimbursement rates covering the cost of quality childcare. I plan to introduce a resolution to require the Department of Human Services to study the financial rates needed to ensure we are maximizing what is available to us and report back to the General Assembly.
In addition, childcare workers deserve to earn a living wage, as these are people dedicated to the care of our children while parents work to support their families. There is no greater trust a parent can be given to a person than the trust of their child's welfare. Tennessee needs high quality; affordable childcare and we need it now. I plan to introduce a bill to require a living wage for childcare workers.
Predatory Lending
There are more payday loan establishments on Lebanon Pike in our District than there are Waffle Houses, McDonalds and Starbucks COMBINED.
The payday loan industry is nothing short of legalized loan sharking. A short-term payday loan may charge more than 390% interest along with fees, locking consumers into long-term expensive debt. I have received and returned campaign donations from organizations representing payday loan companies. It is my view that this industry preys on the poor and those in emergent, unexpected need, drawing them into a cycle of debt nearly impossible to overcome.
I have sponsored legislation, and will continue to fight this industry, to curb the practice that all too often traps people in cycles of debt and drains local economies.