Capitol Update: January 31, 2025
After a flurry of activity, Governor Lee’s Education Freedom Act of 2025, which provides scholarships to private schools, passed the House and Senate Thursday afternoon this week. The bill provides funding for 20,000 scholarships, half of which have some income limitation. The limit is based on 300% of the income level to qualify for free or reduced lunches (estimated to be around $175,000 for a family of four). The scholarship would be in the same amount as the base per pupil funding level in TISA (currently $7,075 but expected to be increased in next year’s budget). Recurring funding for these scholarships is already included in the state’s budget. The General Assembly left those funds in the budget last year, despite the legislation failing to pass in 2024.
The final version of the bill also includes a $2,000 one-time bonus for teachers. It requires school systems to pass a resolution to request those funds. While there were news reports that the bill requires school systems to endorse the entire piece of legislation to get those funds, the language only requires them to approve the section of the act related to these bonuses.
The legislation makes some funding from the tax on sports betting available for capital funding for public k-12 schools, with limits to make sure the Hope Scholarship account is still fully funded. As originally introduced, the bill would have diverted 80% of the revenue from that tax for this purpose, which was estimated to be around $75 million. With an added requirement that these funds first be made available to shore up any anticipated shortfall in lottery scholarship revenues, it is unclear exactly how much revenue from that source will be sent to public schools. The estimate from Fiscal Review projected it to be around $62 million. School systems that are economically distressed or at-risk, high-performing school systems where 50% of the schools are graded A, and school systems that qualify for high growth funding are all eligible to receive $25 per pupil for capital funding. The remainder of these funds would be held in a fund by the State Treasurer and made available for school systems that suffered damage from a natural disaster or have a demonstrated need for capital funding.
The bill also includes what has been termed a “funding floor” to protect public school system TISA funding. The bill provides that public school systems that lose enough students that they would receive less total TISA funding year-over-year will instead receive the same total dollar amount as they did the previous year. Estimates from the legislature’s fiscal review committee indicate that this will protect approximately 15 school systems. Many other systems will likely lose some students, but their reduction would be offset by per-pupil funding increases. The loss of enrollment that triggers this provision does not have to be attributed to students leaving to go to private schools. The decrease in enrollment could be due to any cause – population decreases, migration to other school systems, home schooling, etc. Many legislators who had previously voted against school choice initiatives cited these provisions as a reason why they were changing their position.
Disaster Relief Funding for East Tennessee Communities
A number of proposals related to disaster relief also passed in the special session. SB 6003/HB6003 creates two funds – a Hurricane Helene Interest Payment Fund and the Governor’s Response and Recovery Fund. The interest fund is intended to be used to pay interest costs of local governments who have to borrow money for recovery efforts while waiting for federal disaster reimbursement from FEMA. Those funds can cover three years of interest costs on loans up to a max of 5% interest. The response and recovery fund would be administered by TEMA and used to assist with agricultural recovery efforts, unemployment assistance and business recovery expenses related to an emergency. This fund is not limited to Hurricane Helene response and is intended to remain in place to assist with future disaster recovery efforts. In addition, SB 6004/HB6002 makes changes related to unemployment assistance for individuals affected by a declared disaster and authorizes TEMA to assist local governments with recovery efforts on public property upon request. An additional bill (SB6007/HB6007) creates a fund to reimburse property owners who have had a loss or damage to property in the counties affected by hurricane Helene. Essentially, the state will be making grants to property owners in the amount of 130% of the taxes they paid for tax year 2024. This grant will help protect the tax base of affected counties while also providing some additional relief to taxpayers. The bill passed both chambers unanimously.
Immigration Enforcement
The special session also included Governor Lee’s immigration enforcement proposal (SB6002/HB6001) that would create a centralized immigration enforcement division within the Department of Safety. The bill authorizes the Commissioner of Safety to enter into an agreement with the U.S. Attorney General regarding immigration enforcement. The bill also makes the current state prohibition on enacting sanctuary policies for illegal immigrants into a Class E felony and directs the attorney general to take action to remove any official who violates the law from office. This provision created discussion in committees and the floor debate in the Senate where some legislators questioned the constitutionality of the provision. The legislation also includes provisions to set up grants to incentivize local governments to enter into agreements with the federal government for immigration enforcement. These grants can be used to fund training, operational expenses, and other resource needs related to immigration enforcement; purchases of equipment; and to fund other immigration enforcement programs and activities as approved by the new state Chief Immigration Enforcement Officer. The bill also makes changes related to the issuance of state I.D.s.
The Week Ahead
After the whirlwind of activity this week, there will be something of a lull next week. The Senate recessed until February 10th – the same day Governor Lee is expected to give his state of the state address and unveil his budget. The House returns next week and has scheduled numerous committee meetings. However, most committees are only meeting for organizational purposes and do not have bills on their agendas. The filing deadline for new legislation also falls next week. Representatives and Senators have until February 6th to file their bills. Since many Senators may not be in town, this left lobbyists and advocates scrambling to secure sponsors for legislation before they left town this week. All these developments indicate that when county officials arrive in Nashville for County Government Day on February 17th and 18th, things will just be heating up. County associations are diligently reviewing legislation to be able to inform members about key bills. They will also be outlining how the Governor’s proposed FY 2025-2026 budget will impact county operations.
