Gearing Up for the 2025 Budget with an Overview of 2024 Budget Priorities

Next week, Governor Lee will kick off a series of budget hearings with departments and agencies of state government regarding their appropriations needs in the 2025/2026 fiscal year. These are important hearings and mark the beginning of the budget process which will conclude with passage of the budget at the end of session in 2025. I will provide updates on these budget hearings as they unfold.

Ahead of the budget hearings, the following is a review of the 2024/2025 budget we passed in the General Assembly last session to fund state government.

The 2024/2025 budget took on no new debt and reflected lawmakers’ continuous efforts to cut taxes, maintain fiscal responsibility, protect public safety, prioritize education and invest in rural health.

We faced new budgeting challenges as state revenue collections have slowed. Fortunately, years of consistent conservative budgeting from lawmakers enabled the state to be well-prepared to face declining revenues. Tennessee continues to be among the most fiscally stable states in the nation with no state income tax and low tax burden overall.

After years of record-high revenue growth, the state’s revenues have normalized. We tightened our belts and kept recurring expenses low to alleviate future financial burdens. Despite declining revenues, the budget maintained low taxes while also providing services to those in need, particularly disabled and vulnerable populations. Through this budget Tennessee continues to lead the nation in fiscal conservatism, and I am proud of our work.

The budget also included a $100 million addition to the state’s Rainy Day Fund, which serves as the state’s savings account to withstand economic downturns, bringing the fund to a historic level of $2.15 billion.

Notably, the budget included the largest tax cut in state history with $393 million to repeal a portion of the franchise tax, which will help over 100,000 businesses across the state, including small businesses. It also sets aside $1.55 billion to account for potential tax refunds to qualifying franchise taxpayers within a three-year period.

Continuing focus on education

Once again, education is a top priority in the budget, with an emphasis on empowering parents and improving public education. For K-12 public education, the budget invested an additional $261 million to go into the TISA education funding formula. It also included $125 million to keep the state’s commitment to raise the starting salary for every Tennessee teacher to $50,000 by 2026. This budget included $144 million recurring for 20,000 education freedom scholarships. The budget also allocated $15 million for the Charter Schools Facility Fund.

Prioritizing public safety

A key aspect of the 2024 budget was to provide resources to keep Tennessee communities safe. Investments in public safety included:

$17 million to add 60 new highway patrol troopers, supervisors and support staff

$6.4 million for military border deployment of Tennessee National Guard

$4.4 million for a legislative initiative to implement blended sentencing to address juvenile crime

$1.5 million to fund a legislative initiative to reduce recidivism of repeat misdemeanor offenders

$383,500 for a legislative initiative to collect data on number of illegal immigrants in Tennessee from law enforcement agencies

$15 million for grant pools for volunteer firefighters, rescue squads, and EMS

$4.45 million for Youth Villages Violence Prevention Program in Shelby County

13 new positions for the TBI

Increase support to Tennessee hospitals and healthcare facilities

The slate of budget and legislative priorities included significant investments in rural and behavioral health care with $80 million to strengthen rural health and $25 million for behavioral health. These funds will help to expand bed capacity, improve healthcare training and career pathways and expand access to behavioral health inpatient care. These priorities are funded through shared savings from Tennessee’s successful TennCare waiver, which allowed the state to increase the efficiency and effectiveness of the TennCare program.

From TennCare reserves, the legislature allocated $97.7 million to support Tennessee’s hospitals and $12.3 million to support Tennessee nursing homes.

Rural Communities

There is $36 million in non-recurring grants to help distressed counties and rural communities with economic development, such as community asset improvements, marketing and downtown revitalization grants.

Preserving Outdoor Heritage

This budget allocated one-time spending for significant investments to preserve Tennessee’s natural beauty and outdoor heritage for generations to come. These proposed investments included:

$59 million for Tennessee State Parks capital projects

$51 million to the Heritage Preservation Fund to preserve land across this state

$20 million to expand blueways trail access through new recreational access points to Tennessee waterways

$10 million to improve water quality at rivers, lakes and streams across the state, making them safe for future generations to enjoy and the

$10 million to expedite the Bill Dance Signature Lakes initiative

$5 million to protect and enhance scenic beauty along our major highways

$3 million for Access 2030 to make Tennessee State Parks accessible to Tennesseans with disabilities

$1.5 million authorized for pay raises for District Attorneys and Public Defenders