(The Center Square) – The explosive revenue growth Tennessee experienced over the past few years is slowing and lawmakers are considering a budget that is 1.3% lower than the previous year’s spending plan.
Even a $343 million amendment from Gov. Bill Lee did not push the fiscal year 2026 budget over last year’s $60.6 billion total. The governor’s proposal brings the budget to $59.76 billion.
At the state moves forward, economists are projecting a slower revenue growth of 2%, according to Jim Bryson, commissioner of the Department of Finance and Administration.
Tennessee has been fortunate in revenue growth in the past years, Lee told The Center Square during a Thursday visit to Chattanooga.
“We have flattened out in our revenue growth but we knew that was going to come because we’ve had such rapid revenue growth,” Lee said. “Our revenues are over 40% higher than they were before the pandemic, that’s significant revenue growth.”
The state could also face cuts to federal funding. Sen. Bo Watson, R-Hixson, chairman of the Senate Ways and Means Committee has mentioned the possible losses in two committee meetings.
“Well, with what all is going on in D.C. right now, whether those federal dollars are going to be there or not is at least open to conjecture at this point since we’ve seen a freeze on federal funding in a number of areas already,” Watson said in a February meeting.
Lee said Tennessee is ready.
“When there will be federal cuts, we don’t know exactly when they’ll be, what they’ll look like, but we are positioned financially because we’ve been good stewards, I believe, for decades, frankly,” Lee said. “We’ve been good stewards with our taxpayers’ dollars, have kept ourselves in a very low debt position, one of the lowest debt states in America.”
The FY26 budget adds a little less than $1 billion in bonding, Bryson told the Senate Ways and Means Committee this week. Debt service payments would increase from 1.36% to 1.76%, well below the state’s 6% target, he said.
“For context, if you look at when this administration came in, we were at 2.4% and we have paid off bonds and moved forward so we are now down to 1.36,” Bryson said. “So we’ve been very good with debt and feel like it’s time we can look at adding some additional debt because we have significant debt capacity and we can move forward without putting the state at significant risk.”
Lee’s $343 million amendment sets aside $10 million for artificial intelligence programs for the state, $20 million for school safety grants and $17 million for new indigent representation program for the criminal court system.
