Tennessee is leading the state to issue warnings about the governor’s spending strategy to balance the budget this year with the end of the investment returns from federal cooperative stimulus money.
Gov. Bill Lee’s supplementary budget plan for next year relies on, but never did, $200 million, which the state has been put aside to spend during the Covid-19 pandemic. These funds are already attached to an additional $500 million, which is part of the governor’s $59.6 billion budget proposal.
This budget manipulation allowed Lee to spend several millions of dollars over the years that are normally available. Investment returns are typically around $5 million. However, the federal stimulus funds are almost dead.
“We’re a sought-after,” said Sen. Botson, a Republican Sen. North Chattanooga, who chairs the Finance Committee.
The governor’s extra spending is shrinking year by year. Lee’s $345 million supplemental budget plan for fiscal year 2025-26 has been slashing sharply since a year ago, reaching $656 million.
Tennessee budget officials predict that the state’s budget will not grow this year, and state revenues are expected to go as expected, according to the finance and trustees. Authorities estimated growth of 2% next year.
The state budget was hit last year when Congress approved franchise and excise tax cuts and refunds for businesses that expect to receive approximately $1.4 billion in advance and $400 million a yearly additional fees.
“We’re cutting revenue streams and haven’t addressed the notable, high-value needs of road and education funds, so I think there’s a long-term problem for the state in the future,” Nashville Democrat Jeff Yarbro said Tuesday after hearing the governor’s budget update.
During Lee’s tenure, Tennessee’s budget has skyrocketed from the state’s growth economy, access to online sales tax revenues, and a combination of federal pandemic funds.
According to finance and trustee Jim Bryson, the governor hopes to take the extraordinary step next year, borrowing heavily to build roads before costs increase.
What does Lee suggest in his supplementary budget?
In addition to the Treasury investment return, the Supplementary Budget will move $23.6 million in funds to provide money for the Lee private school voucher program to various nonprofit organizations and favorable projects.
Nearly $14.5 million in the budget plan announced Tuesday is allocated to offset the district’s losses related to private school voucher programs, while $20 million is directed at charter school facilities.
An additional $5.5 million will be used to pay for the Department of Security and Homeland Security’s Immigration Enforcement Office. It was enacted in this year’s special session and was enacted to complement the federal crackdown on immigration without permanent legal status.
More than $20 million from Tenncare’s shared savings account with the federal government will be used to provide reimbursements to hospitals for the treatment of poor patients.
Another $28 million from shared savings is set to go to nursing homes that provide care to the poor. The state has accumulated nearly $1 billion in its Tenncare account, designed to serve low-income residents.
The governor’s plan continues to provide money to the prison missions Lee has participated in, and to many nonprofit organizations that the governor benefits.
For example, $1 million is aimed at the Christian Church of God in Memphis, but Bryson couldn’t explain why the church received the money.
Yarbro said it would require a “clear statement” about the benefits of lawmakers funding organizations across the state.
“There are more nonprofits supported by this governor because of what appears to be related,” Jablo said.
Watson called it “a lot of nickel and dime’s stuff,” and said the administration would explain it “in the backend.”
Other Expense Items
Additionally, Lee is supporting $10 million in the state’s artificial intelligence initiative and $3 million in audits of schools in Memphis Shelby County.
Some of the AI money will be directed towards the first investment in the state’s artificial intelligence to improve services, Watson said, but he added that some of the funds will be directed towards technology.
An additional $12 million will cover the Sumner County Economic and Community Development FastTrack project, including the Portland-to-Westmoreland waterline.
The City of Chattanooga will receive $15 million for the waterfront project. The Andrew Jackson Foundation has landed a $6.2 million grant, with $5 million going to the Tennessee Sports Hall of Fame.
Allies in the youth village of Memphis receive $10 million. The poor representative program in the state court system receives $17 million.
Lee’s plans have deposited $25 million in the Response and Recovery Fund, with $10 million directed towards the relocation of Unicoy County Hospital, which was severely damaged by Hurricane Helen last fall.
The governor’s plan will put $3 million in the summer food program for children, despite opposition to renewing federal funds to feed their children. Yabro called the idea “bad budgets and bad morals.”
