The Tennessee House and Senate on Wednesday passed the state’s $59.8 billion budget for the 2025-26 fiscal year, fulfilling the General Assembly’s only constitutional duty.
Officials said, "This year’s spending plan, which recognizes a two percent growth rate, "reaffirms the General Assembly’s commitment to conservative budgeting, while prioritizing the needs of Tennesseans across the state. The balanced budget advances the state’s efforts to improve public safety, invest in infrastructure, advance education, support rural healthcare, and increase disaster relief funding for Hurricane Helene recovery.
"The legislative amendment makes fiscally responsible adjustments to the administration’s initial budget proposal by shifting $19.94 million in recurring allocations to non-recurring, allowing the state to better manage long-term spending obligations.
"Additionally, the General Assembly repurposed funds for legislative initiatives to support critical community needs, while maintaining Governor Lee’s major priorities."
The administration gave this assessment of the budget:
Grant Pool for Critical Community Services
In the 2025-26 budget, the General Assembly created a $42.5 million grant pool, with nonrecurring funds, for important emergency and community services. The grants include:
- $20 million for Volunteer Fire Departments
- $5 million for Rescue Squads
- $5 million for Emergency Medical Services
- $5 million for Senior Centers
- $5 million for Local Museums for capital improvements
- $2 million for Courthouse Restoration
- $500,000 for Second Harvest Food Bank
Disaster Relief for Hurricane Helene
The General Assembly continued to support victims of Hurricane Helene by providing $26 million nonrecurring for disaster relief for Helene victims in Northeast Tennessee and $20 million nonrecurring for local match funds for FEMA disaster relief.
Rural Hospital Support and Healthcare Investments
Lawmakers made significant investments in hospitals by using TennCare Shared Savings to provide an additional $78 million to help hospitals, particularly in rural areas, with uncompensated care and $4 million to complete capital projects at county health departments.
Additional healthcare investments include:
- $4 million recurring to increase pediatric dental rates
- $3 million nonrecurring to the Adult Healthcare Safety Net
- $500,000 nonrecurring to assist those living with epilepsy and their caregivers statewide
- $1.4 million recurring to provide scholarships for the joint public-private partnership in the Medical School Early Acceptance Program between MTSU and Meharry Medical College
- $1 million nonrecurring to Live Like Lou Foundation for ALS research
- $1 million nonrecurring for Volunteers in Medicine
Safety and Security Improvements
The Legislative amendment also provides additional allocations in safety and security:
- $5.4 million nonrecurring to improve campus safety and security at the University of Memphis
- $500,000 nonrecurring to establish and operate the UT Law Enforcement Innovation Center
- $400,000 nonrecurring to support the East Tennessee Regional Forensic Facility and Training Program
Major investments secured
In addition to the adjustments made to fund legislative priorities, the budget maintains important investments proposed by Governor Lee including:
- $1 billion into the road fund to address the state’s transportation infrastructure needs
- $62.7 million for K-12 infrastructure and facilities funding
- $244 million to strengthen education through the Tennessee Investment in Student Achievement (TISA) formula growth, including teacher pay raises
- $198.4 million for teacher bonuses in recognition of their hard work and dedication and for leading the nation in student achievement and growth
- $35.6 million investment into the Rainy Day Fund, bringing Tennessee’s reserves to nearly $2.2 billion, the largest in state history
- $25 million for FastTrack grants to recruit new business to Tennessee and support workforce development
Expanding choices for parents
In the January special session, the General Assembly passed historic legislation to provide Education Freedom Scholarships to empower parents with the freedom to pick the right school for their child and have a say in where their tax dollars are spent – regardless of income or zip code. This school choice initiative invests $145.9 million in Education Freedom Scholarships.
Statements from Legislative Leadership
Senate Finance, Ways and Means Chairman Bo Watson (R-Hixson):
“With revenues at more typical levels after years of historic growth, this budget reflects the careful discipline needed to protect Tennessee's financial future. 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. Tennessee is a shining example of fiscal conservatism, and this budget reflects that lasting commitment.”
House Finance, Ways and Means Chairman Gary Hicks (R-Rogersville):
“Our focus is on lasting financial strength and stability for the Volunteer State. This budget reaffirms our commitment to Tennesseans to keep our state on a conservative path to greater prosperity. We have tightened our belts, kept government spending low, and addressed a diverse range of needs, benefiting all Tennesseans.”
Lt. Governor Randy McNally (R-Oak Ridge):
“Tennessee's strong and historical commitment to fiscal responsibility continues to serve taxpayers well. Despite slow revenue growth and a national economy in reset, Tennessee is investing in education, cutting spending and making strong commitments to public safety. We are also redoubling our support for infrastructure by allocating additional money for our roads. While other states struggle to stay afloat financially, we are operating with little debt and our rainy day fund remains at historic levels. Once again, Tennessee is leading the nation in fiscally responsible, conservative budgeting.”
House Speaker Cameron Sexton (R-Crossville):
“This budget reflects Tennessee’s strong commitment to responsible leadership and forward-thinking investment. We’re addressing core priorities like education, public safety, and transportation while maintaining our conservative fiscal principles. It’s a budget that balances our needs today with a vision for tomorrow.”
Senate Majority Leader Jack Johnson (R-Franklin):
“This budget prioritizes critical investments for Tennesseans, keeps our state financially secure, and advances us toward a prosperous future. It continues our commitment to education and infrastructure, while also streamlining government operations and eliminating hundreds of vacant positions to protect taxpayer dollars. I commend Governor Lee and my colleagues in the General Assembly for their work to craft a budget that meets the needs of our citizens and upholds Tennessee’s legacy of fiscal responsibility.”
House Majority Leader William Lamberth (R-Portland):
“This is a spending plan that serves all citizens by prioritizing investments in education, strengthening public safety, maximizing our infrastructure and ensuring Tennessee remains one of the lowest-taxed states in the nation. I am proud of the collaborative work by members in both chambers to balance our budget needs of today with our obligation to future generations. Tennessee is on solid financial footing.”