Governor Bill Lee’s administration on Thursday outlined new spending plans for state government that reflect significant revenue reductions due to the huge economic impact of COVID-19.

Department of Finance and Administration Commissioner Butch Eley presented state lawmakers with the revised budget plans for the current fiscal year, as well as FY 2020-21, which begins July 1, 2020, and a framework for the following fiscal year, 2021-22.

“We will balance our budget each year while providing important services to our citizens,” Commissioner Eley said.

“We’re adjusting to the immediate impact of the pandemic on state revenues of up to $1.5 billion through the end of the next fiscal year, planning for the worst and hoping for the best.

“Tennessee has a history of being one of the best managed states in the nation, and we intend to work with the Legislature to continue that tradition, maintaining low taxes and preserving reserves while achieving efficiencies in operations and continuing to serve our citizens.”

In March, the administration and the General Assembly agreed on $397 million in recurring reductions at the onset of COVID-19, and the administration is proposing an additional $284 million in reductions for FY 20-21, bringing the total to $681 million in reductions. Hiring and expenditure freezes have also been in place since March. The state will close the current fiscal year on June 30 with unbudgeted non-tax revenues, agency savings and reserves.

In FY 20-21, the state will utilize reserves to lessen the impact of immediate spending reductions, allowing for thoughtful review of business practices for greater efficiencies and creative delivery of vital services as well as the development of strategic plans to reduce the employee workforce over the next two years, it was stated.

The state’s multi-year spending plan provides full funding for:

- The Basic Education Program (BEP) for K-12 public schools;

- Contributions to the state employee pension fund;

- State payments for employee health insurance; and,

- Debt service requirements.

Multi-year reductions will be achieved, in part, through:  

- Up to 12% reductions through greater efficiencies in all departments;

- Reduction in new capital projects and funding for capital maintenance;

- Authorizing bonds for existing capital projects previously funded with cash; and,

- An employee buy-out initiative to reduce the state workforce over the next two years.

The state has reserve funds totaling $4 billion, including the Rainy Day Fund, which will reach $1.2 billion after an additional deposit of $325 million at the end of the fiscal year on June 30.