The House and Senate are set to take up votes on the state’s budget during their sessions on Thursday, but two major spending components are still up for debate.
Gov. Bill Lee's proposed budget is $52.8 billion, which is about 16 percent lower than last year's $62.9 billion due to drop-off in federal and state appropriations. The state is appropriating $25.6 billion, down from last year’s $32.4 billion. Federal appropriation in the fiscal year 2025 budget sits at $19.8 billion, a decrease from $23.2 billion.
While the governor’s budget added $150 million to the state’s rainy-day fund for a total all-time high of $2.15 billion, the legislators reduced that by $50 million for other funding priorities. During a Senate Finance Committee meeting, Sen. Bo Watson (R-Hixson) said the legislative amendment reduced the rainy-day fund by $50 million and allocated that funding to a grant for a new Tennessee Performing Arts Center facility. In total, TPAC will receive $250 million in fiscal year 2025-26.
“That will be a very important thing for continued support for arts in the entire state — as a hub for performances so that [we support] the very human and uniquely human aspect of creation,” Sen. John Stevens (R-Huntingdon) said during the committee meeting.
The legislative amendment reallocated several of the governor’s priorities.
“We’ve seen a decrease in revenues to the state of Tennessee and expenditures that correspond to that, and so the legislature wanted to continue to do some fiscally responsible activity and restrain our spending as well,” Stevens said.
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One of those reallocations was $3.3 million from a three-year pilot program for maternal health services to crisis pregnancy centers. Sens. Jeff Yarbro (D-Nashville) and London Lamar (D-Memphis) both asked why that money would be moved from one group to the other. Watson said legislators thought crisis pregnancy centers handled many of the functions as the maternal health services. As such, the monies were reallocated as a one-time fund rather than a recurring pilot program that would ultimately cost $9 million over three years.
“We decided that given some of the budget constraints we might be facing in the next couple of years, we were not interested in doing any budget proposals which were one of ‘X’ numbers of years unless it was already a commitment we had made,” Watson said.
That move has been criticized by Healthy and Free Tennessee, a nonpartisan network of organizations and individuals that promotes sexual health and reproductive rights.
“We are in a maternal mortality crisis in Tennessee,” says Nina Gurak, policy director of Healthy and Free Tennessee, in a statement. “In particular, Black Tennesseans are experiencing terrible maternal and infant health outcomes due to medical racism and a severe lack of investment in our communities. These anti-abortion pregnancy centers do nothing to support the health and safety of pregnant Tennesseans, some even going so far as to shame and blame pregnant and postpartum Tennesseans. It’s unconscionable to further divest from maternal health when we need it the most.”
In addition to that move, the Democrats on the finance committee voiced their concerns about the $144 million in funding for the governor’s proposed school voucher legislation — the Education Freedom Scholarship Fund, whose two versions have yet to be reconciled in the legislature. Watson stressed in the meeting on Tuesday that the bill is still very much alive, but sources have told local news outlets this week that the bill is dead for the year.
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Lamar proposed an amendment during the Senate’s finance committee meeting that would redirect the $144 million to Tennessee Investment in Student Achievement for public school funding. That amendment failed. The budget does already include $261 million for the TISA formula.
Also hanging in the balance: Senate Majority Leader Jack Johnson (R-Franklin) mentioned that the governor’s amendment includes a decrease in $393 million in recurring revenue from Lee’s push to repeal the property provision of the franchise tax.
“This budget includes the largest tax cut in our state’s history,” Johnson said. “That’s going to help over 100,000 businesses — small, medium and large, across the state.”
Johnson also mentioned that the budget sets aside $1.55 billion to account for three years of potential tax refunds to avoid potential litigation. The House and the Senate have also passed various versions of the franchise tax legislation. On Wednesday, the Senate refused once again to take up the House’s version, and there will be a special conference committee held to discuss the legislation.
The House bill would allow for taxpayers to amend their returns and get a refund up to one year later, as opposed to the Senate’s approval for three years. The House bill also includes some transparency that the Senate bill does not — making that refund information available to the public. Even general language around the legislation has differed between the House and the Senate.
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“The bill you have before you and the reason that I would oppose your amendment is simply a policy debate as to whether or not we should cut the franchise tax going forward, making us more competitive than other states to be able to attract businesses and retain businesses,” House Majority Leader William Lamberth (R-Portland) said in response to an amendment brought forward by Rep. John Ray Clemmons (D-Nashville) that would have solved the potential legal issue (mentioned by the governor and Johnson) with no significant fiscal note.
“What's interesting here is you've got the House Republicans disagreeing with the Senate Republicans, but they're both being completely fiscally irresponsible,” Clemmons tells the Scene's sister publication the Nashville Post.
Clemmons highlighted that spending on both vouchers and the franchise tax in the fiscal year 2025 budget would be to the detriment of the state going forward.
“Fiscal conservatism is straight out the Capitol window, because one is claiming they want to be fiscally conservative on a voucher bill," Clemmons says. "That is going to cost the state billions of dollars annually, regardless of what form it passes this year. Then you've got a franchise tax and a corporate handout, in one bill, that one is saying, ‘Oh, well, we're gonna be more fiscally conservative on this than the other on this version.’ But they're both completely willing to blow a $2 billion-plus hole in the budget, not only this year, but in the future. This is a recurring hole in the budget. And so they're both oddly standing on principles where they're both on the wrong side of the fence on both issues.”
This article first appeared in our sister publication, the Nashville Post.
