Crafting and passing Tennessee’s $60 billion budget is the one constitutional duty the legislature has to uphold each year.
The answer as to how easy that will be in 2026 differs based on which of the two political parties you ask. Republicans, who hold the state’s supermajority, acknowledge the budget could prove tighter than in years past. Democrats have a more dire assessment, insisting the state is headed toward a “fiscal cliff.”
Revenues for December — released in mid-January — showed a brighter point for Tennessee. Sales tax is the primary driver of Tennessee’s budget, along with fuel, franchise and excise and corporate taxes.
“Total revenues in December exceeded our budget estimates, primarily due to strong corporate tax receipts,” says the state’s finance and administration commissioner Jim Bryson. “Sales tax revenues for the month, which reflect November’s retail activities — including Black Friday and post-Thanksgiving sales — performed largely as anticipated, showing steady growth. Corporate tax collections, including franchise and excise taxes, were particularly robust. Although fuel tax revenues were slightly below expectations, all other tax categories performed modestly better than our projections.”
Even so, Republicans and Democrats agree that an infusion of new money from above-estimated tax revenues will not cover all of Tennessee’s needs. Currently, a backlog of infrastructure projects has risen to nearly $80 billion. Those needs range from sewer, water and stormwater to parks, roads and schools, according to a 2025 report from the Tennessee Advisory Commission on Intergovernmental Relations.
For Davidson County, those needs land around $15 billion. The report found that the county’s top necessities are school buildings, public buildings and transportation.
“We ran out of money for the things we really needed to do three years ago,” says Rep. John Ray Clemmons (D-Nashville), the House Democratic Caucus chair. “Think about it like this. Costs are only going to increase. Roads and infrastructure maintenance will only increase with each passing day. Instead of modernizing the way we fund projects, they have allowed our infrastructure to deteriorate.”
While infrastructure needs plague the state, Sen. Bo Watson (R-Chattanooga) — chairman of the Senate’s Finance, Ways and Means Committee — says Tennessee will never be able to fund all its needs in any given year. However, he notes that a new funding formula could be needed for the Tennessee Department of Transportation. Currently, the gas tax funds roads, and the state doesn’t issue bonds or borrow money for road projects. TDOT officials made that plea with the legislature in mid-January in one of its first transportation committee meetings.
“I think the transportation committee, along with finance, are looking at alternative strategies of how that kind of funding can be improved,” Watson says. “I think this will be a session where we will do a lot of discussion about that. I am not sure any decisions will be made regarding that.”
Despite infrastructure needs, Democrats worry that the things Republicans choose to spend new funding dollars on could prove unsustainable. Particularly, Democrats don’t want to see more funds go toward vouchers — known in Tennessee as Educational Freedom Scholarships. Gov. Bill Lee would like to see a program expansion, after more than 50,000 families applied for the dollars for the 2026-2027 school year.
“The first rule of holes is to stop digging,” says Sen. Jeff Yarbro (D-Nashville). “The last thing we can do is double the size of the voucher program to some of the wealthiest families in the state. It will bust the budget if it continues to grow like it did last year. We have to stop doing stupid things.”
With Gov. Lee currently in the final year of his second term, Republicans say any huge budgetary moves would likely wait until a new gubernatorial administration is seated. House Majority Leader William Lamberth (R-Portland) says if a new idea arises, however, he wouldn’t hesitate to push it through.
“It’s a healthy conversation to say the budget is tight,” says Lamberth. “I would phrase it this way. I am not saying yes or no to what we have seen filed by our colleagues. I don’t anticipate the governor has some massive program he wants to roll out, and I am going to wait until we look through what has been filed by my colleagues, then see whether or not there’s anything big there. I am not going to close off the possibility.”
The first look at a budget will arrive with the governor’s State of the State address in early February.
From immigration enforcement to voucher expansion, the Republican supermajority is pushing for Tennessee to be the nation’s conservative leader
