Securing a Fiscally Sound Future for Tennessee

January 21, 2014 7:00AM

Beacon proposes new calculations for the state spending limit  NASHVILLE – The Beacon Center of Tennessee today released a proposal to the Tennessee General Assembly on recalculating the Copeland Cap, a state spending limit devised by former Rep. David Copeland and approved by voters to the state constitution in 1978. Currently, spending may increase at the same rate as the rise in the personal income, effectively meaning that Tennesseans must hand over more to the government as their personal financial circumstances improve. The Beacon Center’s more fiscally responsible approach calls on state lawmakers to instead base the calculation upon population growth plus the rate of inflation. “Thanks to the leadership of Rep. Copeland, Tennessee’s spending cap has ensured limited growth in Tennessee’s budget, but in hindsight, it could be an even more effective tool to curb state spending—allowing hard-working Tennesseans to keep more of their own money,” explains Justin Owen, CEO of the Beacon Center and author of the brief. Since adopted in 1978, the Copeland Cap has been exceeded with regularity—only 18 times in 35 years has the legislature failed to exceed the cap. Beacon’s proposed change to the calculation of the Copeland Cap spending limit is based on the assertion that as prosperity rises, Tennesseans will have less need for government services. Demand for government services decreases as citizens become increasingly able to provide for their own welfare. The Beacon Center maintains that lawmakers should not take advantage of increased taxpayer capacity to fund layers of unnecessary bureaucracy. A more appropriate and reasonable calculation would be to use population growth plus inflation, which more directly impact the state budget. Amending the spending formula would also mean a savings to Tennessee taxpayers. Population plus inflation rates have jointly risen by approximately five percent per year since the enactment of the Copeland Cap, while personal income growth has risen by over six percent on average per year. “This difference sounds modest, but in practice, it is significant,” Owen asserts. “Had the Copeland Cap been calculated using population plus inflation since its enactment in 1978, taxpayers would have saved more than $38 billion in the ensuing three-and-a-half decades. That amounts to more than $6,300 for every man, woman, and child in Tennessee. Not every taxpayer…every single person.” The full brief, entitled Securing a Fiscally Sound Future for Tennessee, can be found here. The Beacon Center of Tennessee is an independent, nonprofit, and nonpartisan organization dedicated to providing concerned citizens and public leaders with expert empirical research and timely free market solutions to public policy issues in Tennessee. The Center’s mission is to change lives through public policy by advancing the principles of free markets, individual liberty, and limited government.