(The Center Square) – Phasing out of Tennessee’s free diaper program for low-income families to fund $137 million for the state’s hospital buyback program, and also using a new tax on wire transfers are part of an amendment agreed to by a Senate committee Wednesday.
The buybacks are “things that through the hospital assessment that are funded that would otherwise not be funded if the hospitals did not tax themselves at 6%,” Sen. Bo Watson, chairman of the Senate Finance, Ways and Means Committee, said when presenting an amendment to Gov. Bill Lee’s $58.3 billion budget.
Lawmakers used money from the TennCare Shared Savings program last year.
“We do not have that kind of money in Shared Savings anymore,” Watson said of the $137 million required. “So the Legislature had to look at the general fund in order to fund the buybacks.”
The plan includes freeing up $43.2 million by ending the TennCare Diaper Benefit on Jun 30, 2027, according to Watson. It is funded in this year’s budget, he said.
The program provided 100 free diapers per month to TennCare and CoverKids members ages 2 and under. Second-term Republican Gov. Bill Lee introduced the program with bipartisan support in 2023, and it began in August 2024.
“Tennessee was the first in the nation to recognize a real need that moms have in securing enough diapers for their newborns,” said Brandon Puttbrese, spokesman for the Senate Democratic Caucus in an interview with The Center Square. “Ending the program after just a couple of years is a major setback.”
Another part of the plan includes using $14 million from a wire transfer tax that has not yet been passed by the Senate. Senate Bill 2166 would place a $10 tax on overseas transfers, with an additional 2% fee for transfers over $500. It is up for debate in the Senate on Thursday.
It passed the House on April 9.
The remaining money comes from Lee’s proposals, including $14 million from technology funding that the governor appropriated for artificial intelligence. Another $10 milllion was taken from the $25 million Rural Development Fund proposed by Lee.
The largest amount, $55.8 million, would come from the $100 million Lee put in the budget for disaster recovery.
The funding shift from the shared savings fund to the general fund is not part of Lee’s budget proposal and was added as a Senate amendment.
The Center Square was unsuccessful prior to publication getting comment from Lee’s office.
“Democrats support the buy-back program but also support expanding Medicaid under the Affordable Care Act,” Puttbrese said.
Tennessee is one of 10 states that did not do so.
“If hospitals had more paying customers who have insurance, our hospitals would not rely on government funding schemes so much,” Puttbrese said. “Now Republicans are trying to fix a problem their blockade on Medicaid expansion created by ending a benefit for low-income mothers to supplement their diaper budget.”
“The budget is 9% less than the current year,” said Rep. Gary Hicks, chairman of the House Finance, Ways and Means Committee, at its Wednesday meeting.
“This is primarily due to a decline in federal funds, specifically COVID-related dollars, but also slowing growth and state tax revenue from what it was in recent years,” Hicks said. “The budget recognizes an estimated growth of about 2.35% in state revenue, which equates to about $450 million in recurring revenue and funding, which is programmed and spent.”
