Capitol Update: Week of April 13, 2026

State Budget Passes

The General Assembly passed the state budget Thursday of this week. That action is the only thing the legislature is constitutionally required to do each year, but it also is the linchpin that decides numerous policy issues. The budget determined the level of expansion of the state’s private school scholarship program, identified capital investments, set the per pupil TISA funding level, determined funding levels for grant programs and decided which legislative initiatives would be funded. With that agreement in place on the state’s spending priorities, a floodgate of legislation that had been held up pending budget approval started moving forward toward passage. An even larger group of bills quietly went off notice because the cost to the state or local governments was not included in the budget. We will be analyzing the document and providing you more information in the weeks to come about the state’s spending plan for 2026-2027 and how it impacts county governments. 

Education Freedom Scholarships Dramatically Expanded

The Senate voted on Thursday to expand Governor Lee’s Education Freedom Scholarship (EFS) program by 15,000 additional scholarships. This was the level adopted by the House on Monday when it narrowly passed the legislation (SB2247/HB2532) with 52 votes – just 2 above the minimum needed and one less than when the bill passed last year. The Senate bill passed with 18 votes – 1 above the threshold needed. 

When the program was first enacted last year in a special session, it authorized 20,000 private school scholarships. This year, Governor Lee pushed for legislators to double the number to 40,000. The House trimmed that request by 5,000, authorizing 35,000 total scholarships for the 26-27 school year. The amended version in the House also includes changes to the priority of which students qualify for a scholarship and changes to the so-called “funding floor” that was included in the bill last year to protect funding for public schools. 

According to the new priority language, the scholarships are first awarded to returning students who received a scholarship this year. Next are new applicants whose household income is at or below 100% of the federal free or reduced price lunch threshold. Third priority is for students whose family income is up to 300% of that level. Finally, students above 300% would be eligible for any remaining scholarships, with priority first given to students currently enrolled in public school or entering kindergartners and then to students above that level who are already in private school. 

With regard to the funding floor that protects public school systems against loss of funds due to disenrollment, significant changes were made. As the bill passed last year during the special session, the law protected districts against losing funds due to disenrollment for any cause. Many legislators from rural districts cited that as a reason why they dropped their previous opposition to voucher proposals. Under the bill passed this year, that rule remains the same for the upcoming school year, but changes kick in after that. For the 2027-28 and 2028-29 academic years, school systems will be required to report why students disenrolled and will only get “hold harmless” funding for students who provided the school system with a social security number (SSN). According to the U.S. Department of Education, school systems may request a SSN at the time of enrollment, but they must inform parents it is optional and cannot refuse to enroll a student for failure to provide a SSN.  For academic years 2029-30 and beyond, districts will only receive hold harmless funding for students who left the school because they were a recipient of an Education Freedom Scholarship. Since the vast majority of EFS recipients are believed to live in the state’s six largest and wealthiest counties, this means that rural districts with few or no private schools will most likely not be protected against funding loss due to disenrollment in the future. 

Finally, the bill requires the State Department of Education to begin tracking and reporting on EFS applications by county, enrollment status of applicants, grade level and family income in a manner that protects the student’s privacy.

County Employees on the County Commission

The House passed legislation (SB2591/HB2319) this week which prohibits county employees from serving on the county commission in the future. As amended, the bill takes effect January 1, 2027, so as not to interfere with the county commission elections currently underway. The bill allows employees serving on the commission on that date to continue to serve and be eligible to run for re-election in future years, but it prohibits county employees who are not serving on a county commission on that date from serving in the future. The bill was scheduled for a vote in the Senate this week, but was deferred until Monday.

Limitations on Lawsuits

A bill (SB2418/HB2069) that would require cities and counties to get the approval of the attorney general before bringing a lawsuit through a contingency fee agreement made it all the way to the House floor after somehow bypassing the Judiciary Committee, but it failed to get enough votes to pass or fail. The bill was being promoted by the Tennessee Chamber of Commerce as a way to protect businesses from lawsuits brought by class action law firms signing up local governments as plaintiffs. After failing to pass on the floor, the bill was referred back to the Judiciary Committee where it was scheduled to be heard on Tuesday of this week. The bill also makes significant changes to the law on public nuisance actions in general, making it harder to use this legal action to stop bad actors. While these types of suits have been used to hold pharmaceutical firms accountable for improperly marketing opioids in the past, several school districts are currently involved in litigation suing social media companies for harm done to the mental health of children and youths. On a smaller scale, nuisance actions have been used in cases where a landfill was not properly operating, an industry polluted land or water with discharged chemicals, convenience stores were selling dangerous “bath salt” drugs, and to stop other bad actors who were harming local communities through unethical and dangerous business practices. Counties and cities in Tennessee have generally not been highly litigious, but they need to keep this tool in the toolbox to defend citizens against bad actors. For these reasons, local government organizations opposed the legislation. The sponsor talked about the legislation briefly on Tuesday before taking it off notice in the Judiciary Committee. The bill is likely to be back in some form next year.  

911 Funding

SJR 48 that ratifies a rate increase for 911 fees has now passed both the House and Senate. The increase was recommended by the state Emergency Communications Board in 2024. The resolution to ratify the increase passed the Senate last year, but also had to pass the House for the new rate to take effect. The resolution passed a floor vote Monday night. The Senate concurred in amendment to the effective date of the bill to reflect the delay in implementation. New funding from this increased 911 fee will help distressed districts with the operational funding they need to address rising costs and retain employees.

Suspended Rules and Last Minute Amendments

As we predicted last week, legislators took advantage of the suspension of procedural rules around timing and notice to pull up bills that were not moving at all and suddenly rush them through a committee meeting. One example this week was HB 753 that was filed in 2025. The bill was never put on notice in the House Cities and Counties Subcommittee in 2025 or 2026 until this week. The committee was already closed, but House leadership made an announcement during a floor session that the committee would reopen to hear this single bill. The bill proposes a change to the way low income housing properties are assessed. A fiscal analysis on the bill projects that it will result in more than $100,000 in foregone local property tax revenue, although in previous years, that projection ran into the millions. Shortly after the announcement that the Cities and Counties Subcommittee would be meeting, the bill passed out over the objection of county associations and some members of the subcommittee. It then sailed through the House State and Local Committee, Government Operations Committee and the Finance Subcommittee that same afternoon. It was slowed for a few days and delayed until next week’s meeting of the House Finance Committee. The bill has not yet passed the Senate, but could be put on notice at any moment with the rules suspended. While we may not be able to stop this measure, examples like this demonstrate the reasons why it is critical for county governments to have representatives on the ground at the state legislature. Millions of dollars of tax breaks could be given to special interests at the whim of legislators with the stroke of a pen.   

Adjournment Expected Next Week

At the end of the floor session on Thursday, House Speaker Cameron Sexton cautioned members that they should be prepared for a long week of work next week. He estimated that there were around 150-170 bills that the House needed to take action on before adjourning. Most of these have now proceeded all the way through the committee process and are funded (if necessary) and ready for a floor vote. There are numerous disagreements with the Senate on versions of some bills, making it likely that the differences will have to be hammered out in conference committees. A few items are referred to the House Finance Committee for some last minute tweaking before they could come to the floor for a vote. The Senate appears to be ahead of the House. Its Finance Committee is scheduled to meet Monday and Tuesday to dispose of the bills held up behind the budget. Otherwise, it is only scheduled to have floor sessions through Thursday.