TACIR review of fiscal‑capacity model spotlights virtual schools, greenbelt treatment and sales‑tax shifts

Tennessee Advisory Commission on Intergovernmental Relations research director Michael Mount presented the commission’s annual fiscal capacity analysis and highlighted features of the model that influence how state and local education funding is equalized.

Mount said two components of the Tennessee Investment in Student Achievement (TISA) funding formula—the base and weighted funding amounts—use TACIR’s fiscal capacity index. "Fiscal capacity answers the question how much each local government must contribute," Mount said, and he described the model’s inputs, including equalized property assessment, tax base per student, per capita income, and service responsibility.

Mount emphasized recent developments that affect county shares of statewide fiscal capacity. The Department of Revenue began providing destination‑sourced local sales tax data (including online sales), which increased the state total reported for fiscal 2023–24 to roughly $39 billion. Mount also described how virtual school enrollment alters fiscal capacity: "Holding all else equal, enrollment in a virtual school increases the fiscal capacity index of counties that operate virtual schools, decreasing state funding for other counties," he said, noting Union and Johnson counties had the largest virtual enrollments.

Commissioners raised concerns about perceived inequities and local fiscal strain. Sevier County Mayor said the county’s local funding share has risen and that local taxpayers risk assuming a larger share of school costs. Several members asked for clearer modeling of alternatives. Senator Yarbrough pressed whether TACIR should model adjustments to the formula for virtual students; Mount said the staff had not issued a recommendation but could model different approaches. The chairman asked Director Lippert to prepare an update and said he would form an ad hoc committee of legislators and local officials to examine the issue further.

Members also questioned how Greenbelt (agricultural present‑use assessments) treatment appears in the data. Mount explained Greenbelt and other reduced assessed values are reflected in the comptroller's tax aggregate report, which becomes an input in the model; Director Lippert added TACIR staff had researched how greenbelt assessments are reported and that lower assessed values translate into lower reported property tax revenue.

The commission did not take a formal vote on the fiscal capacity presentation. The chairman instructed staff to return with additional analysis, including modeling to show alternative treatments of virtual‑school students and clearer explanations of how destination‑sourced sales and greenbelt assessments affect county outcomes.