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Zack McMillin
By Zack McMillin November 4, 2012

Schools must get half the proceeds from county sales tax increase, says Stand For Children

Education funding issues often provoke emotional arguments, and a measure to increase the local option sales tax in Shelby County by a half cent has led to accusations that an education-advocacy group is trying to manipulate voter sensibilities with misleading claims about the benefits for school-children.

We've covered some education funding issues before, like the claim that the education burden on Tennessee and Shelby County taxpayers is among the lowest in the nation (Mostly True) and the assertion that local governments have not increased spending on schools over six budget cycles (True).

In this case, Stand For Children is leading the campaign to persuade voters in Memphis and unincorporated Shelby County to raise the local option sales tax levied by the county from the current 2.25 percent to 2.75 percent (the state sales tax rate is 7.0). The overarching message on expensive, glossy mailers -- the future of the adorable children smiling in photos will be brighter if voters approve the half-cent sales tax increase.

Stand is allied with a bi-partisan coalition of supporters, including Memphis Mayor A C Wharton and most of the Memphis City Council, Shelby County Commission chairman Mike Ritz, Memphis Congressman Steve Cohen and the majority of the unified Shelby County Board of Education. They argue the increase is necessary to help fund the $57 million shortfall that Shelby County's schools merger Transition Planning Commission says will occur if all their schools consolidation recommendations are approved by the unified county school board.

Opponents, including Shelby County Mayor Mark Luttrell and Memphis City Councilman Jim Strickland, contend that until a clearer picture is available for the exact budget needs of the consolidating school systems in Memphis and Shelby County, it is premature to levy an additional tax.

Stand is making a slew of claims, some of which elude the Truth-O-Meter process because they involve opinions, hypotheticals and interpretations about the will of elected officials. "Small change can make a big difference for all of our kids" reads one line, and another claims the revenue "will make our schools better." Both are clearly opinions.

Stand also says the money will allow for expansion of pre-kindergarten and training for teachers, while also possibly helping expand hours at libraries and community centers. Strickland especially objects to what he calls the pre-K "promise," and indeed it remains to be seen whether the school board will follow through on the recommendations of the Transition Planning Commission and its own committees and staff to expand pre-K. There are budget and logistical issues that could delay or derail the plan to offer pre-K to all children who need it.

Stand in some cases has adjusted, for instance, by qualifying its language on pre-K. But on one issue it has only raised the volume -- that whatever else is argued about increasing the county sales tax, $31 million is guaranteed to flow to the county's schools because state law requires half of the proceeds of a local option sales tax to be spent on schools.

That's the claim we are examining here.

When we contacted Stand, its Memphis-based state director, Kenya Bradshaw, almost immediately emailed back a copy of Tennessee Code Annotated 67-6-712, "Distribution of revenue" under the "The 1963 Local Option Revenue Act."Bradshaw was a member of the county Transition Planning Commission that made pre-K for all who need it one of its highest priorities, and she carries around an actual copy of the statute.

It deals with the local option sales tax  and very plainly states that "one-half (1/2) of the proceeds shall be expended and distributed in the same manner as the county property tax for school purposes is expended and distributed."

It also says that the the proceeds can be pledged "to the punctual payment of principal of and interest on bonds, notes or other evidence of indebtedness" but doing so requires the approval of the local school board.

Estimates of the revenue expected to be raised from that county sales tax increase have run between $60 million and $62 million -- it depends in part on projections of future economic activity. So $30-31 million per year would, in fact, be guaranteed for schools. The half that does not go to schools is returned to the municipalities where they were collected, and of that non-schools portion $23  million is expected to flow to Memphis.

One core issue is that approval of the countywide increase would trump the votes in August referendums by suburban municipalities to apply a half-cent local option sales tax as a way to raise revenue to fund municipal school districts they hope to operate.

Opposition to the increase in some suburban municipalities is therefore fierce, because it would mean lower overall revenue than was expected for some municipal school districts. Some opponents argue that the vote is basically an anti-suburban municipal schools money grab by Memphis interests. Residents in those suburbs do not get a vote because they already have authorized sales tax increases for their towns.

Another argument by proponents is that a vote against the half-cent sales tax increase is essentially a vote for a property-tax increase to fund the expected budget gap created because of schools consolidation.

Our ruling

There is clearly much for voters to consider on the referendum to increase by a half-cent the county's sales tax rate, and the contentiousness related to the Shelby County's reorganization of  public schools has created some confusion for voters.

On one of the most crucial issues, Stand For Children claims half the proceeds from the local option sales tax must go to schools. The statute is definitive and the claim is True.

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Our Sources

Zack McMillin, "From a standpoint of the county government, neither school system has received an increase in funding over the past six years" for PolitiFact Tennessee, Aug. 20, 2012.

Zack McMillin, "Memphis schools superintendent says county, state tax funds for education rank among lowest in U.S.," Jan. 13, 2012.

Tennessee Code Annotated section on local option sales tax.

Stand for Children post on Facebook, Oct. 24, 2012.

Stand For Children brochure for voters.

Michael Kelley story in The Commercial Appeal examining revenue impacts of county sales tax increase, Oct. 15, 2012.

Linda A. Moore, "Supporters prepare to sell countywide sales tax increase to community" in The Commercial Appeal, Oct. 10, 2012.

Linda A. Moore, "Memphis mayor, councilman announce support for countywide sales tax increase" in The Commercial Appeal, Oct. 1, 2012.

Linda A. Moore, "Shelby County mayor vetoes tax referendum, but commissioner predicts override" in The Commercial Appeal, Aug. 23, 2012.

Michael Kelley, "Tax hike draws support of Memphis school panel" in The Commercial Appeal, Oct. 30, 2012.

Michael Kelley, "Unified school board leans toward endorsing sales tax increase in Shelby County" in The Commercial Appeal, Oct. 23, 2012.

Linda A. Moore, "Anti-tax increase campaign hits Facebook" in The Commercial Appeal, Oct. 19, 2012.

Final recommendations from Shelby County schools merger Transition Planning Commission.
Page 4 has TPC recommendation for pre-Kindergarten.

Shelby County schools merger Transition Planning Commission website.

Memphis City Councilman Jim Strickland response to PolitiFact Tennessee.

Stand For Children’s six-page response to PolitiFact Tennessee from Memphis director Mark Sturgis.

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Schools must get half the proceeds from county sales tax increase, says Stand For Children

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