Tennessee

Tennessee

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FY2027 (enacted)
FY2027 (proposed)
FY2026 (enacted)
FY2025 (enacted)
FY2024 (enacted)
FY2023 (enacted)
FY2022 (enacted)

Enacted Budget – Fiscal Year 2027

On May 22, Tennessee Governor Bill Lee signed the state’s fiscal 2027 budget that appropriates $58.3 billion in all funds, a decrease of 7.6 percent from fiscal 2026 (as cited in the 2025-2026 Fact Book). The revenue forecast projects general fund revenues of $19.5 billion in fiscal 2027, an increase of 2.2 percent over the fiscal 2026 estimate. The budget invests $20 million in the state’s Rainy Day Fund, bringing reserves to more than $2.2 billion, the largest in state history.

The enacted budget makes investments in economic opportunity, infrastructure and housing, education, healthy families, safe neighborhoods, conservation, and nuclear energy. The budget allocates funds to expand the Tennessee Youth Employment Program and provide additional investment in the Tennessee Entertainment Commission to fund incentive grants. Under infrastructure and housing, the budget provides funds to the transportation department to expedite existing road projects and fund new projects across rural and urban areas of the state, while also incentivizing public-private partnerships that develop or rehabilitate workforce housing; further investments are also made to the Rural Development Fund to improve quality of life in rural communities. Education priorities in the budget include an investment to strengthen public education through further allocations in the funding formula, summer learning camps, and raising the starting teacher pay to $50,000; the budget also expands the school-based behavioral health liaison program and invests in K-12 safety grants. Additional funding is provided to increase Education Freedom Scholarships by 15,000 (bringing the total to 35,000) and delivering school choice to more families. To support strong and healthy families the budget utilizes Shared Savings to support health initiatives like the Pathway to Independence Program to incentivize employment for TennCare members. The budget also increases funding for TennCare to cover increasing costs associated with inflation, assist the Department of Children’s Services with reducing caseload ratios, and continue a pilot program to address unmet dental service needs. Safe neighborhoods are supported in the budget through funds to bolster the Governor’s Response and Recovery Fund, public safety grants to enhance crime prevention, and the addition of 50 State Troopers and related support staff. The budget also makes further investments in the Nuclear Energy Fund to attract advanced nuclear technology companies.

Enacted Budget Information
Fiscal Year 2027 Enacted Budget 

2025-2026 Fact Book

Governor’s Press Release

Proposed Budget - Fiscal Year 2027

On February 2, Governor Bill Lee proposed a fiscal 2027 total budget of $57.9 billion, a decrease of 9.6 percent compared to the estimated fiscal 2026 budget. This lower total budget is primarily a result of a significant decline in federal funds from the previous year. State appropriations total $29.6 billion, a decrease of 0.4 percent compared to fiscal 2026. General fund appropriations, which include Education Lottery-funded programs, are $25.8 billion in fiscal 2027. Recurring state general tax revenues are estimated at $19.6 billion in fiscal 2027, an increase of 2.4 percent over the fiscal 2026 revised estimate. The projected closing balance for fiscal 2027 is $1.5 million. The proposed budget includes a deposit of $20.0 million to the rainy day fund, bringing the total to $2.2 billion at the end of fiscal 2027. 

Proposed Budget Highlights 

The governor’s proposed budget includes strategic funding to ensure economic and educational opportunity, strengthen families, and preserve the state’s natural resources. The state’s legacy of responsible fiscal stewardship places Tennessee in a strong budgetary position and allows for investments to secure continued success. 

Education

• Recommends additional recurring funding for the second year of the Education Freedom Scholarship program for inflationary costs and to add an additional 20,000 scholarships. 
• Provides increased recurring funding for the public education funding formula, which supports salary increases, group health insurance premiums, and retirement contributions for local education employees.
• Directs non-recurring funding for the charter schools facilities fund along with recurring funding for the summer learning camps and summer transportation program, and local education agency reimbursement of paid parental leave claims.
• Recommends additional funding to increase the number of school-based behavioral health liaisons. 
• Funds the outcome funding formula and salaries for the University of Tennessee system, Locally Governed Institutions, and the Board of Regents. 

Public Safety

• Proposes three grants to the City of Memphis for downtown public safety, focused deterrence, and work-centered training. 
• Provides funding for the Corrections Education Investment Initiative, offering programming and educational opportunities for incarcerated individuals to increase reentry success. 
• Recommends an increase in the number of law enforcement positions statewide including 50 new trooper positions at the highway patrol, 34 positions at driver license centers, and 10 positions in the Bureau of Investigation for operational support and the establishment of a rapid DNA unit.
• Allocates an additional deposit into the governor’s response and recovery fund and recommends legislation designating the Tennessee Emergency Management Agency a cabinet-level department.

Infrastructure and Business Development

• Recommends a general fund subsidy (recurring and non-recurring funds) to the Department of Transportation for existing pavements and bridges, expediting existing projects, and adding projects.
• Directs a non-recurring general fund subsidy in the Tennessee Housing Development Agency to establish a starter home revolving fund, with an aim of increasing availability of starter homes across the state with a focus on rural areas.
• Proposes non-recurring funds to support quantum computing infrastructure in the state and recommends non-recurring funds to expand the Tennessee Youth Employment Program for young adults to gain valuable job skills.
• Allocates additional investment in the Rural Development Fund to improve quality of life in rural communities by supporting business development and infrastructure planning.

Health and Social Services

• Under the third year of shared savings in the TennCare Medicaid demonstration waiver, the budget redeploys shared savings cost increases to continue initiatives started in previous fiscal years as well as begin new initiatives including transitioning members to private insurance, implementing federally mandated community engagement requirements, and providing rural health transformation resiliency grants.
• Proposes appropriations in TennCare to keep pace with medical inflation, increased utilization, increased prescription drug prices, and providing support funding to the Department of Children Services.
• Allocates funding for increases in foster care and adoption reimbursement rates, residential custodial rates, eligibility rates in custody services, specialized treatment homes, and private provider case management.
• Directs non-recurring funds to continue a pilot program to address unmet dental needs and proposes recurring funds to defray reduced federal support for the administration of the Supplemental Nutrition Assistance Program. 

Other Priorities

• Recommends non-recurring funds and departmental revenues to create new state parks.
• Provides recurring and non-recurring funding and additional positions for a wildfire resiliency team at the Department of Agriculture.
• Directs additional investment in the Nuclear Energy Fund to attract advanced nuclear technology companies. 
• Provides funding to continue implementing Pay for Performance in executive branch agencies, creating a pool of funds for salary increases in fiscal 2027.

Proposed Budget Information
Fiscal Year 2027 Budget Proposal 

Budget Presentation 

Budget Overview 

Governor's Press Release