Tennessee lawmakers have approved a $59.8 billion state budget for the upcoming fiscal year, realigning nearly $180 million away from Gov. Bill Lee’s proposals to fund their own district priorities and local initiatives.
The budget takes effect July 1, with approximately $30 billion coming from state revenue and another $24.5 billion from federal sources—essential for departments such as TennCare, Human Services, Transportation, and Health. Despite warnings about flattening tax revenue and potential federal cuts, the legislature proceeded with major new investments and borrowing.
In a significant reshuffle, lawmakers eliminated funding for several of Gov. Lee’s high-profile projects, including $60 million for a starter home revolving loan fund and $35 million for regionalizing conservation of the Duck River. The Duck River initiative will still receive $90 million, but other nonprofit-related grants proposed by Lee were slashed.
Instead, the legislature funneled the reallocated money into 181 new projects statewide. Highlights include a $1 billion one-time investment in road projects (breaking with the tradition of paying for infrastructure solely through gas taxes) and a $42.5 million grant pool for volunteer fire departments, EMS, rescue squads, senior centers, courthouses, museums, and Second Harvest Food Bank, which was hit by federal cuts.
Additional spending includes $640 million for K-12 education, $264 million for higher education improvements, and $1.5 billion in new health and social services funding. That includes $78 million to buy back TennCare services and support for rural hospitals and county health departments. The budget also includes $597 million for disaster relief, $25 million of which is directed at Hurricane Helene recovery.
Another major inclusion is a $447 million expansion of the private school voucher program, a controversial measure criticized by Democrats as a “scam.” Democrats, including House Minority Caucus Chair John Ray Clemmons, D-Nashville, argued the state has doubled its budget over the last 15 years without improving everyday Tennesseans’ lives.
“This governor’s the single worst governor in the state of Tennessee’s history,” Clemmons said, blasting the administration for prioritizing tax breaks for out-of-state corporations and cutting essential programs. He warned that the state could face a “fiscal crisis” within five years due to unsustainable policies.
Clemmons also criticized the administration’s decision to deny federal HIV funding, cut summer food programs, and increase administrative salaries, including what he described as a $6 million payroll in the governor’s office. He claimed there were clear ties between Lee’s donors and state contracts.
Republican leaders pushed back, championing the state’s fiscal health, low debt per capita, and growing reserves. The budget adds $35.6 million to the state’s rainy day fund, which now totals nearly $2.2 billion—the highest in Tennessee history.
House Finance Chairman Gary Hicks emphasized that recurring revenue is being spent on non-recurring projects, helping the state maintain a healthy year-end balance. He also noted that tax revenue growth has slowed, with zero growth this year and just two percent expected next year.
Despite concerns, Republicans say the state is well-positioned for any downturn, pointing to the rainy day fund and interest earnings from federal COVID relief dollars—$700 million of which are included in this budget.
However, not all proposals made it through. Lawmakers declined funding for a controversial bill requiring schools to collect immigration status, rejected tax relief on fruits and vegetables, and voted down expanded summer food support. They also removed $20 million for the Nashville Zoo, $10 million for Youth Villages in Memphis, $5 million for an AI initiative, and $1 million in recurring funds for Men of Valor, a nonprofit previously connected to Lee.
Still, Senate Finance Chair Bo Watson, R-Hixson, underscored the community impact of the new grant funding: “These grant pools touch every one of our communities in some way.”
With budget approval complete, the Tennessee General Assembly moves one step closer to ending its session—leaving behind a mix of redirected funds, bold investments, and sharp partisan debate.
