(The Center Square) – The Tennessee House and Senate passed a $59.8 billion budget amid questions from some lawmakers about possible federal cuts.
The fiscal year 2026 spending package represents more modest growth, a 2% rate.
“With revenues at more typical levels after years of historic growth, this budget reflects the careful discipline needed to protect Tennessee’s financial future,” said Sen. Bo Watson, R-Hixson, chairman of the Senate Finance, Ways and Means Committee. “We’ve kept recurring spending in check and preserved low taxes, while supporting critical community services and investing in rural hospitals that serve some of our most vulnerable populations.”
The budget bill adds just shy of $146 million for the Education Freedom Scholarships, the state’s school choice program approved by the General Assembly in a January special session.
Also included is $26 million in nonrecurring funds to help those affected by Hurricane Helene and $20 million in nonrecurring money to match FEMA relief dollars.
The largest chunk of money is a $1 billion allocation for transportation projects.
Gov. Bill Lee told The Center Square during an interview last month that the state has a $30 billion backlog of road projects that built up over decades. Lawmakers passed the Transportation Modernization Act two years ago as a vehicle to partner with the private sector to enhance the roads and made a $3 billion investment.
The governor said the $1 billion is a step in the right direction.
“We have worked to maintain our roads and our bridges and our highways,” Lee said. “We have not spent the money that we need to to expand those. We put a strong effort in maintaining, which is why we have a good road system that people are fairly satisfied with. We have congestion however and that has to be addressed.”
Democrats said they were concerned about possible cuts from the federal government that could affect consumers. House and Senate Democrats sent a letter to Finance and Administration Secretary Jim Bryson earlier this week, asking for more information about the impact of possible federal cuts. The questions continued during the budget debate.
“Speaking broadly, we should have measures that are going to cut costs for families right now,” said Sen. Charland Oliver, D-Nashville. “Folks are trying to figure out where do they save in their household budgets and one of the things that we took out in this piece of legislation in the appropriations amendment was something that the governor requested which was a $60 million starter home fund.”
The $60 million starter home fund was slashed in committee.
Legislators also agreed to issue bonds for some capital projects, most of them at the state’s colleges and universities.
“It’s been a while since we have issued debt,” said Senate Majority Leader Jack Johnson, R-Franklin. “This will have no affect on our AAA credit ratings. At the beginning of the Lee administration, our debt service amounted to 2.4% of our tax collections. Today that number stands at 1.36%.”
The budget goes to Lee’s office for his consideration.
