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Tennessee state budget and finances

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Tennessee state budget

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Budget calendar:  Annual
Fiscal year:  2014
Other state budgets
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Tennessee Gov. Bill Haslam signed the $31.5 billion FY2013 state budget into law on May 15, 2012.[1] The FY2013 state spending plan is $627 million less than that for FY2012.[1]

The state operates operates on an annual budget cycle.[2] The state's fiscal year begins July 1.

Tennessee has a total state debt of approximately $34,243,421,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the FY2013 state budget gap.[3] The debt is less than the prior year's approximate total of $35,239,489,000.[4]

Tennessee's total state debt per capita is $5,347.73.[5]

Federal Aid to State Budget

The chart below represents how much of the state’s budget comes from the federal government. The number is the corresponding ranking in relation to the rest of the nation (if #1, the state receives the highest percentage of federal funding in the nation):

State 2008 2009 2010 2011
Tennessee 33.09% (#11) 35.96% (#14) 44.56% (#7) 44.03% (#6)
  • Figures were calculated by dividing each state’s intergovernmental revenue into its general revenue.[6][7]

Fiscal Year 2014 State Budget

Gov. Bill Haslam said he does not expect deep cuts to the state's $31 billion FY2014 budget. In anticipation of increasing health care costs, the governor did, however, tell department heads to identify potential cuts so the state can increase spending in other areas and prepare for rising health care costs.[8]

FY2014 budget hearings ran Nov. 6, 2012 to Nov. 13, 2012.[8]

On Jan. 28, 2013, Gov. Bill Haslam discussed his proposed FY2014 state budget when delivering the State of the State address.[9]

The governor’s budget increases spending on education, including

  • $51 million for technology upgrades in schools statewide;[9]
  • $34 million for capital needs, including money for new security measures;[9]

and $35 million more for teacher salaries.[9]

Fiscal Year 2013 State Budget

Gov. Bill Haslam signed the $31.5 billion FY2013 state budget into law on May 15, 2012.[1] The FY2013 state spending plan is $627 million less than that for FY2012.[1]

The budget bills were SB 3768 and HB 3835. They can be found as enacted online.[10]

State state general fund include $210 million from the surplus remaining at the end of FY2012.[11]

At the conclusion of FY2013, the state's rainy day fund would be $356 million.[11]

Legislative Budget

Both chambers of the legislature approved a final version out of the conference committee on April 30, 2012.[12] A conference committee began resolving differences between the House and Senate budgets on April 27, 2012.[13]

On April 26, 2012, the House approved a $31.4 billion[14] FY2013 state budget by a vote of 66-30.[15] The House budget follows the governor's proposed budget closely, but leaves out several pet projects that appear in the Republican-authored Senate version.[15] House legislators authorized the state to issue up to $381.9 million in bonds.[15]

The next day, April 27, 2012, the Senate approved its $31.1 billion version of the FY2013. The Senate budget cuts millions of dollars in funding for programs and projects in what is seen as a retaliatory move against the House for cutting some Senate projects.[16]

Federal funding would account for $12.3 million, or about 39.6 percent of the state’s budget.[15]

Governor's Proposed Budget

Governor Bill Haslam unveiled his $30.2 billion proposed FY2013 budget on Jan. 30, 2012. Haslam said the $12.3 billion in federal funding would account for 39.6 percent of the state's budget. Three years ago, it was 43.1 percent of the budget. As a result of the reduced federal contribution, the governor recommended shrinking the total state budget by 2.7%.[17]

On April 2, 2012, the governor announced changes to his proposed budget, increasing spending by $28 million due to higher than anticipated revenue collection. The governor would also lower the state sales tax on groceries from 5.5 percent to 5.25 percent instead of the 5.3 percent he originally proposed and restore $5.5 million to the Department of Intellectual and Developmental Disabilities.[18]

Under the governor's budget, all state employees would receive a 2.5 percent raise in FY2013 and is contained in HB2384.[19][18]

The budget was originally built on the assumption that tax collections would grow 4 percent next year, reaching $9.4 billion.[17] The budget makes two tax cuts:[20]

  • reducing the state sales tax on grocery food from 5.5 percent to 5.3 percent, costing the state $18 million;
  • raising the inheritance tax exemption level from $1 million to $1.25 million, costing the state $15 million

Highlights of the governor's proposed budget:

  • $263 million toward construction on college and university campuses;[21]
  • $70 million in additional state funds to give businesses expanding or relocating in Tennessee;[21]
  • cut more than 1,100 state jobs across the state, 617 filled positions statewide and 549 that are currently vacant;[17]
  • 2.5% raise for state employees, costing $123.8 million;[17]
  • $30 million to cover the cost of an ongoing comparison of public and private sector salaries;[17]
  • Full funding of the kindergarten-through-12th grade basic program, including about $55 million in new money to cover enrollment increases and other added expenses.[21]

The Governor said in Dec. 2011 that his administration needs to close a gap of $360 million, a little more than 1 percent of Tennessee’s $32 billion budget and 2.5 percent of the portion of the budget funded by state tax dollars. Although the state had generated more revenue than expected in the first months of FY2012, officials anticipate that the cost of TennCare, state pensions and public education would rise by $500 million, using up all of the increased tax revenues and then some. Officials also wanted to cover the cost of $160 million in programs that were funded using money from the state’s financial reserves. The governor requested that departments to prepare for cuts of as much as 5 percent so that his budget writers can choose from as they write the state’s next spending plan.[22]

Preparation for budgeting

State Finance Commissioner Mark Emkes asked state government agencies to submit by Sept. 30, 2011, base budget reduction plans for FY2013 that include 5 percent reduction in their state funding for next year. He also stated that agencies should not to propose any new programs unless they can save an equal amount with cuts elsewhere. Emkes said that spending cuts of $270 million would be necessary despite the prediction that state revenues would increase 3 percent in FY2013.[23]

Fiscal Year 2012 State Budget

Lawmakers unanimously approved the state's FY2012 $30.8 billion budget and signed it into law on June 16, 2011. The FY2012 budget is approximately $1.23 billion, or 3.9 percent, less than the FY2011 budget, which is primarily due to the loss of stimulus money from the federal government.[24]

The state ended FY2012 with $563 million more in revenue than initially anticipated.[11]

Both chambers of the Tennessee General Assembly unanimously approved a $30.8 billion FY2012 budget. The Senate voted on May 21, 2011. The House approved the budget 96-0 on May 20, 2011.[25] The approved budget bill an be found online[26]

The agreement allowed for the earliest end to a legislative session in the state since since May 1, 1998, and five weeks earlier than the 2010 session ended, saving taxpayers $450,000 in legislative expenses.[25]

Governor's Proposed Budget


With state tax collections are projected to run ahead of expectations, the governor's administration amended its budget proposal to eliminate some previously planned cuts to the state budget. Specifically, the amendment would restore $48 million to TennCare, $22 million to HOPE scholarships to college students attending summer classes and $5 million to let the University of Memphis begin operating Lambuth College, a private institution in Jackson facing financial difficulties, as a branch campus.[27] The budget also includes $71 million for disaster relief resulting from recent storms and flooding, $8.5 million to restore previously scheduled rate reductions to TennCare mental health providers, and a $6.9 million grant for three programs at Meharry Medical College.[28]

The administration also said that, if the federal government pays Tennessee the $82 million it owes the state, some more initial cuts may also be unnecessary. The federal government, however, has not specified a date for repayment. The Haslam budget amendment allocates funds to be received from the federal government on a "contingency" basis, to be spent only after being received.[27] The budget also assumes reimbursement of $15.7 million for nursing home funding.[28]

Original Proposal

On March 14, 2011, Gov. Haslam unveiled his $30.2 billion proposed budget, which closely followed that of his predecessor. Overall, the spending of state dollars would increase 3.5 percent under the Haslam plan thanks to a projected increase in state tax collections. But the state would receive and spend about 14.7 percent less from the federal government than in the current year.[29] The budget contains no general tax increase.

Haslam's budget seeks to begin rebuilding the state's rainy day fund, which dwindled from a $750 million high in 2008 to a projected $257 million at the end of this year. Haslam is calling for the fund to increase to $326 million by June 30, 2012.[30]

One area of increased spending under the Haslam plan would be in education. Haslam proposed a $63.4 million increase in K-12 education spending.[31] However, the budget does cut $20.2 million from higher education, which is likely to cause an increase in tuition.[32]

In the governor's proposed budget, nearly 1,200 state jobs would be eliminated, starting with currently unfilled positions and those jobs only recently created with federal stimulus money. For those employees keeping their positions, Haslam also proposed a 1.6 percent pay raise, the first since 2007. The proposal would cost the state about $77 million.[33]

The governor's proposed budget included $40 million in cuts to services to TennCare patients and reduction of $2.8 million in Children's Services funding.[34] The cuts come through such things as tightening the rules for when TennCare would pay for child delivery by C-section rather than normal birth and eliminating the Governor's Office of Children's Care Coordination.[35] The Tennessee Hospital Association proposed the tax as a means to draw down the federal Medicaid money at the almost $2-for-$1 match to avoid the cuts.[36]

The budget included an agreement drafted by former Gov.Bredesen to provide Electrolux $97 million in incentives to build a new plant in Memphis.[34]

Some budget highlights include:[37]

  • Elimination of 1,180 positions - 575 of which are currently filled
  • Uses $160 million of reserve money to preserve programs in the health, mental health and children's services departments for one more year
  • Impose a 4.52 percent fee on hospital gross receipts for the coming year, up from 3.52 percent in the current year
  • Reduce funding for TennCare by 2.1 percent to $8.7 billion
  • Grants $131.6 million to two companies building plants in Tennessee, including Electrolux
  • Provides no new funds for new higher education capital projects, but calls for $54 million in capital maintenance for existing structures
  • Allocates $30 million for continuing Corrections Corporation of America's contract for operating a prison at Whiteville
  • Reduce funding for higher education by $20 million, approximately 2 percent of the budget
  • $7 million for the Port of Cates Landing near Tiptonville, Tenn.


Protests at the state Capitol at times included thousands of those opposed to the collective-bargaining bill and to other measures in the legislature that would limit the power of unions. On March 15, 2011, seven protesters were arrested at the state Capitol.[38]

A compromise plan that reduces unions’ role in representing teachers passed the state legislature May 20, 2011, with a compromise by Republicans in the House and the Senate allowing the Tennessee Education Association continue to represent teachers in contract talks with local school boards but also involving other organizations at the bargaining table. It sets new limits on what could be written into final agreements, stating that while compensation, insurance and benefits could be spelled out, matters directly impacting the performance of students, including job assignments and bonuses, could not be part of the agreements. The bill was sent to Gov. Haslam.[39]

Prior to the compromise, companion bills had been pending in the Tennessee House and Senate that would end collective bargaining by teachers, making it so that Tennessee school districts no longer have to negotiate with teachers' unions.[40] The Senate Education Committee approved Senate Bill 0113 along party lines by a vote of 6-3 on Feb. 16, 2011.[40] The Senate held up a vote on the bill while House leaders worked on an amendment that would give local school boards the option of deciding whether to negotiate contracts with their teachers, and which may ease passage of the bill.[41] Republican Gov. Bill Haslam has remained neutral on the bill.[41] House Bill 130, as initially approved by the House Education Committee, would eliminate collective bargaining on wages and benefits, but would have allowed negotiations to continue on some other working conditions.[42]

On May 3, 2011, the House Finance Committee voted to send [HB130 back to the House Education Committee for another hearing. The bill had previously been approved, but not in the form as approved by the Senate. The Education Committee has officially closed for the year, but is expected to reopen for the additional hearing.[42]

Supporters of the bills note that none of Tennessee's neighboring states require collective bargaining with teachers, and that the teachers' negotiating rights are unique among public employees.[40] Arguing against the bill, a lobbyist for the Tennessee Education Association said that the legislation unfairly targets teachers.[40] Opponents also say the move takes away the assurance that teachers are compensated at decent levels,noting that Tennessee teachers own salaries below the national average.[43]

Teacher Tenure

The Senate passed a Republican-supported bill that would make it more difficult for teachers to get and keep tenure on March 10, 2011. A companion bill is scheduled to be heard by the House Education Committee.[44] Under the Senate bill, teachers would not be eligible for tenure for at least five years - up from the current three-year probationary period - and they could lose that status later if students perform poorly on standardized tests.[45]

Use of Reserve Funds

The governor and legislative leaders have all said that the FY2012 budget should include spending around $186 million in "core services reserves" from the FY2011 budget. "Core services reserves" are earmarked funds set aside for specific programs, but the governor has the option of recommending they be used for purposes other than their earmarks in the FY2012 budget.[46]

The rainy day fund declined from $1.2 billion in 2007 to $500 million in 2012. The governor and legislative leaders favored building that fund back up.[46]


The State Funding Board, which includes the state comptroller, treasurer, secretary of state and the governor's top financial adviser, did not meet as scheduled and officials said Dec. 16, 2010, that they were uncertain when final revenue projections for Tennessee would be released. Lawmakers will use the figures to draft the 2012 budget and they have typically been released around the middle of in mid-December.[47]

In January 2011 the state delayed issuing its comprehensive annual financial report due to computer problems.[48] The report is used to draft the new budget and as Comptroller Justin Wilson said regarding the information and the new budget, "Whenever you have current information, you make better decisions than when you don't have current information."[48]

Budget transparency

Tennessee has a statewide, official spending database online.[49]

In addition, thanks to Tennessee House Bill 246 (2009), a spending transparency site mandated by the legislature was available by January 1, 2010. As Nebraska's treasurer Shane Osborn pointed out in his letter to Tennessee's legislators, "In the current economic climate, it is as important as ever that citizens have the ability to easily navigate the state budget, giving them access to information on how government is spending their hard-earned income."[50][51]

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases
State Database Searchability Grants Contracts Line Item Expenditures Dept/Agency Budgets Public Employee Salary
Open Government P
600px-Red x.png
600px-Yes check.png
600px-Red x.png
600px-Yes check.png

Although it is not a searchable database, the Tennessee Arts Commission has provided documentation of its funding history.[52][53]

See also: Evaluation of Tennessee state website

Limitations and suggestions

While the Open Government for the State of Tennessee transparency site does have searchable salary information, its list of vendor payments and expenditures is in .pdf form and not readily searchable.[54]

Multi-Measure Budget Transparency Profile

The Institute of Government and Public Affairs at the University of Illinois created a multi-measure transparency profile for Tennessee, which measures state transparency as of September 2011 using indicators from a range of organizations. These indicators measure both website transparency and other recognized facets of governmental transparency. In addition, IGPA presents four unique indicators of non-transparency based on the observation that transfers or reassignments between general and special funds can obscure the true fiscal condition of a state.[55][56]

In addition to the individual state profile, IGPA offers a 50-state comparison and profiles for other states.[57][58]

Budget background

Tennessee's budget process begins in August of each year when the Commissioner of Finance and Administration issues budget instructions to all departments and agencies of state government. Agency budget requests are submitted by October 1. During October and November, the Governor meets with the departments and agencies to hear their budget proposals for the following fiscal year.[59] Following the hearings the Governor issues a budget recommendation for the upcoming fiscal year to the Legislature. Both the House and the Senate are required to make any necessary changes or adjustments to the budget until the bill is passed in both houses. Lawmakers must pass a balanced budget before the fiscal year begins on July 1 of each year.[60]

  • Tennessee has no general income tax.[61]
  • Tennessee's current tax structure has the majority of its tax revenue coming from the sales tax, the largest portion of which funds K-12 education.[62]
  • Out of the state's tax revenue the state spends approximately 48 percent on education; 4 percent on resources and regulation; 12 percent on law, safety and correction; 3 percent on the general government; 32 percent on health and social services; 1 percent on business and economic development.[62]
  • State tax revenue is comprised of 57 percent sales tax, 2 percent motor vehicle tax, 7 percent gasoline tax, 3 percent income and inheritance tax, 5 percent gross receipts and privilege, 14 percent franchise and excise tax, 3 percent insurance and banking tax, 6 percent from other taxes, and 3 percent from tobacco, alcohol and beer tax.[62]

Accounting principles

See also: Tennessee government accounting principles

Tennessee's Comptroller of the Treasury Audit Division is responsible for state and local audits and divided into the following divisions:[63]

  • County Audit - The division is responsible for annual audits of all 95 counties in the state. The division establishes standards for county audits conducted by public accounting firms. The division assists local governments with financial administration questions.
  • Municipal Audit - This division ensures that municipalities, designated school system funds, utility districts and government-funded, non-profit agencies are audited as required by state statute. The division investigates and issues reports on allegations of misconduct, fraud or waste in local government, often referring findings to other agencies for appropriate action.
  • State Audit - The Division of State Audit conducts financial and compliance and performance audits, conducts investigations, and performs special studies to provide the General Assembly, the Governor, and the citizens of Tennessee with objective information about the state's financial condition and the performance of the state's many agencies and programs.

Tennessee's audit reports are posted online. The Comptroller of the Treasury is a constitutional officer elected by a joint vote of both Houses of the General Assembly for a two-year term. Justin P. Wilson the current Comptroller.[64][65]

Credit Rating

Credit Rating Fitch Moody's S&P
Tennessee AA+ Aa1 AA+[66]


Tennessee received $5.33 billion in federal stimulus funding between February 2009 and June 2013.[67]

Public Employees

See also:Tennessee public employee salaries
See also:Tennessee public pensions

According to 2011 Census data, the state of Tennessee employed a total of 103,867 people.[68] Of those employees, 76,872 were full-time employees receiving a net pay of $285.8 million per month and 26,995 were part-time employees paid $26.4 million per month.[68]

External links

Additional reading


  1. 1.0 1.1 1.2 1.3 Tennessee Report "Haslam Signs State’s $31.5B Budget" May 15, 2012
  2. National Conference of State Legislatures "State Experiences with Annual and Biennial Budgeting" April 2011
  3. Budget Solutions "State Budget Solutions' third annual State Debt Report shows total state debt over $4 trillion" Aug. 28, 2012
  4. State Budget Solutions “Report reveals aggregate state debt exceeds $4 trillion” Oct. 24, 2011
  5. State Budget Solutions "State debt more than $37,000 per private worker, $13,000 per capita" Oct. 2, 2012
  6. US Census Federal Aid to State and Local Governments
  7. Tax Foundation' "Monday Map: Federal Aid to State Budgets. Accessed October 15, 2013
  8. 8.0 8.1 The Tennessean "Tennessee budget hearings start Tuesday" Nov. 5, 2012
  9. 9.0 9.1 9.2 9.3 [ The Tennessean “State of the State: Haslam urges more spending for higher ed, technology” Jan. 29, 2013]
  10. HB 3768
  11. 11.0 11.1 11.2 The Knoxville News "Political notebooK: State finance chief warns against spending tax surplus" Aug. 12, 2012
  12. The Memphis Commercial Appeal "Tennessee budget compromise moves on to Haslam for approval" April 30, 2012
  13. The Times Free Press "Tennessee budget in conference committee" April 27, 2012
  14. The Times News "Tenn. House OKs $31.4B spending plan, rejects cut in grocery sales tax" April 27, 2012
  15. 15.0 15.1 15.2 15.3 The Tennesseean "TN House passes state budget" April 27, 2012
  16. The Chattanooga Times Free Press "Tennessee Senate passes 2013 budget" April 27, 2012
  17. 17.0 17.1 17.2 17.3 17.4 The Tennessean "Haslam budget includes pay raise but some layoffs" Jan. 30, 2012
  18. 18.0 18.1 The Knoxville News "Haslam: Compromise reached on civil service reform" April 3, 2012
  19. HB2384
  20. Memphis Commercial Appeal "Haslam budget plan includes major Memphis projects" Jan. 30, 2012
  21. 21.0 21.1 21.2 The Knoxville News "Gov. Bill Haslam's $31 billion budget abolishes government jobs, raises pay" Jan. 30, 2012
  22. The Tennessean "Tennessee prepares for more budget cuts" Dec. 2, 2011
  23. The Knoxville News Sentinel "Tennessee's state agencies told to prepare for 5 percent cuts" Sept. 2, 2011
  24. The Times Free Press "Haslam signs budget, lawsuit caps legislation" June 17, 2011
  25. 25.0 25.1 "Legislature Unanimously Approves State Budget," Tennessee Report, May 21, 201
  26. SB2090
  27. 27.0 27.1 The Knoxville News "Some state budget cuts avoided" May 4, 2011
  28. 28.0 28.1 Businessweek "Gov: Budget to fund more key services in Tenn." May 16, 2011
  29. The Knoxville News "Haslam presents $30.2B budget" March 15, 2011
  30. Haslam Presents $30.2 Billion Budget, March 15, 2011
  31. Memphis Commercial Appeal, Gov. Haslam Unveils Tennessee Budget, March 15, 2011
  32. Memphis Commercial Appeal, Gov. Haslam Unveils Tennessee Budget, March 15, 2011
  33. MSNBC, Gov. Proposed Pay Raises, Layoffs in First Budget, March 15, 2011
  34. 34.0 34.1 The Tennessean "Haslam puts budget to test" March 16, 2011
  35. Haslam Presents $30.2 Billion Budget, March 15, 2011
  36. Memphis Commercial Appeal, Gov. Haslam Unveils Tennessee Budget, March 15, 2011
  37. Haslam Presents $30.2 Billion Budget, March 15, 2011
  38. The Tennessean "Police remove, arrest 7 people at TN Capitol after union protests" March 16, 2011
  39. The Tennessean "Bill limiting teachers union's role heads to Haslam" May 21, 2011
  40. 40.0 40.1 40.2 40.3 The Deseret News "Bill targets teacher collective bargaining rights" Feb. 16, 2011
  41. 41.0 41.1 The Tennessean "At TN Capitol, 3,000 rally for teachers' voices to be heard" March 6, 2011
  42. 42.0 42.1 The Knoxville News "Some state budget cuts avoided" May 4, 2011
  43. The Mountain Press "Union busting? Legislature studies bill that would reverse teachers’ right to collective bargaining" Feb. 21, 2011
  44. Businessweek March 10, 2011
  45. Forbes "TN gov seeks to reassure teachers over law changes" March 11, 2011
  46. 46.0 46.1 The Knoxville News Sentinel "State to tap reserve fund" Feb. 14, 2011
  47. [ Businessweek "Uncertaintly about final revenue estimates in TN" Dec. 16, 2010
  48. 48.0 48.1 "Computer System Delays State Budget" Jan. 6, 2011
  49. "Open Government for the State of Tennessee."
  50. Tennessee House Bill 246 (2009)
  51. Treasurer Shane Osborn, "Letter from Treasurer Shane Osborn to Tennessee's Legislators," March 17, 2009
  52. Tennessee Arts Commission
  53. .pdf Tennessee Arts Commission Grant Awards
  54. ["Open Government for the State of Tennessee"
  55. Institute of Government and Public Affairs
  56. University of Illinois Transparency Profile for Tennessee
  57. [ University of Illinois 50 State Transparency Comparison
  58. University of Illinois State Transparency Profiles
  59. State of Tennessee,"Budget Process," retrieved March 16,2009
  60. Tennessee Department of Finance and Administration,"Budgetary Process," retrieved March 16,2009
  61., "Which states have no personal income tax?," retrieved November 12, 2009
  62. 62.0 62.1 62.2 State of Tennessee,"The budget, fiscal years 2008-2009," retrieved March 16,2009
  63. Tennessee Comptroller of the Treasury Web site, retrieved November 12, 2009
  64. Tennessee Audit Reports
  65. Tennessee Comptroller of the Treasury Web site, retrieved November 12, 2009
  66. Pew Stateline Infographic on State Credit Ratings. Accessed September 18, 2013
  67. Recovery, "Stimulus Spending by State"
  68. 68.0 68.1 2011 Tennessee Public Employment U.S. Census Data