(The Center Square) – A Tennessee fund that provides property tax relief could run out of money by fiscal year 2027 and will need about $6 million to meet its obligation in fiscal year 2026, state lawmakers were told.
The property tax relief fund serves three demographics. The program for low-income and disabled residents is based on income.
Disabled veteran homeowners and their surviving spouses can receive a tax break on the first $175,000 of the full market value of their residence.
Disabled veterans make up the other one-third of recipients but receive two-thirds of the funds. Low-income elderly and disabled homeowners make up about two-thirds of the recipients but receive just one-third of the benefit program, Comptroller of the Treasury Jason Mumpower said.
The program has a $41.2 million allocation in the fiscal year 2026 budget, which begins July 1, but needs more than $47 million, Mumpower said at a meeting of the Senate Finance, Ways and Means Committee. The department will drain its reserves to make up for the shortfall.
“And if the program’s current eligibility requirements remain the same, and there are multiple bills out there to expand the eligibility, if they just stay the same, though, when I am back to talk to you this time next year, we will need an additional $10.3 million in order to fund the program,” Mumpower said.
The need is growing as the number of disabled veterans is increasing by an average of 14% a year.
The money for the program comes from the general fund. More than $60 million in additional funds could be needed over the next 10 years if the eligibility guidelines stay the same, according to the comptroller’s office.
Mumpower did not call the program a “crisis” for this year.
“I think when you’re using non-recurring money to pay for a recurring expense, that’s not good fiscal policy,” said Chairman Bo Watson, R-Hixson. “So while you may not see it as a crisis, we certainly see it as a serious problem that needs to be addressed.”
One of the options to keep the program afloat is to provide more money, lawmakers said. The other two options would affect program recipients.
The General Assembly could do nothing, which would mean the program would run out of money in fiscal year 2027. That could force the comptroller’s office to prorate the program, which would reduce the amount of benefits. Homeowners would have to pay their property taxes up front and be reimbursed, which would be an “absolute nightmare,” said Sen. Jack Johnson, R-Franklin.
A third option is to amend the program and reduce the amounts of benefits, Johnson said.
Two bills would expand the program.
Senate Bill 68 by Sen. Dawn White, R-Murfreesboro, would increase the eligibility amount for disabled veterans from the first $175,000 to $200,000 of the full market value of their residence. Rep. Debra Moody has filed the same bill in the House of Representatives.
A bill by Sen. Randy Briggs, R-Knoxville and Rep. Michael Hale, R-Smithville, would altogether remove the property assessment cap for disabled veterans.
The bills are currently moving through committees.