by Sam Stockard, Tennessee Lookout
April 15, 2025

EDITOR’S NOTE: This article has been updated to reflect additions and deletions to Gov. Bill Lee’s budget plan.

Scurrying to pass a budget this week as the Tennessee legislature prepares to adjourn, lawmakers are putting their own stamp on the state’s budget despite being hampered by federal cuts that eat into the spending plan.

Republican chairs of the House and Senate finance committee remain uncertain about the impact of reductions in the $24.5 billion the state receives from the federal government.

Similarly, Democrats are asking Gov. Bill Lee’s administration to clue them in on federal cuts that could affect the proposed $59.6 billion spending plan, which is undergoing a bit of transformation as lawmakers put their own ideas into the budget. 

With federal funds making up nearly 42% of the state’s budget, Democrats sent a letter Monday to Finance and Administration Commissioner Jim Bryson notifying him that lawmakers need a “clear understanding of current and anticipating reductions” to make decisions.

Federal funds make up 93.4% of Human Services funding, 78.4% of the Department of Military, 61% of the TennCare Bureau, 51.5% of the Transportation Department and 57.8% of the Health Department.

“Understanding the depth and scope of these changes is imperative, not only for budgetary accuracy but also for anticipating impacts on essential services and public trust,” the letter signed by House and Senate Democrats says.

The Finance and Administration Department did not respond immediately to questions.

House finance committee Chairman Gary Hicks said this week he is hearing continually from departments about budget cuts emanating from Washington, D.C. He could not pinpoint any large items but said reductions have been made across several areas, such as the Department of Health, forcing the state to find funds to keep programs going. Lawmakers put $4 million Monday into county health departments to make up for grant reductions from the Centers for Disease Control.

As lawmakers started adding their own touches to the budget Monday, they removed $179 million from the governor’s proposals and added items such as $3 million to an audit of Memphis Shelby County Schools, which would come on top of $3 million already in the governor’s plan for an audit, increased the Attorney General’s Office budget by $4.5 million and inserted $35 million to extend a tax break to broadband internet companies.

The biggest item lawmakers removed from the governor’s budget plan was $60 million for a starter home revolving fund, the Tennessee Journal reported. That was followed by a $35 million reduction in funding for the Duck River water project, $20 million for a Nashville Zoo grant, $20 million for a north data center relocation, $10 million for Youth Villages Memphis Allies and $5 million each for artificial intelligence and Moore Tech.

Lawmakers inserted $78 million for TennCare services through the state’s annual hospital assessment, $37.5 million for a college of applied technology in Robertson County, $20 million for Hurricane Helene relief, $20 million for grants to volunteer fire departments, $20 million to replace the Erwin sewage treatment plant and $10 million to replace equipment at University of Tennessee medical and veterinary schools.

“We’re all watching to see what the federal government’s going to do, because quite frankly we don’t know what that’s gonna look like,” Hicks said. “I certainly support what they’re doing up there with trying to make cuts where it’s necessary. So we’ll have our nose pressed to the glass like everybody else to see how that will affect (the state).”

Likewise, Senate finance Chairman Bo Watson said cuts are coming in several areas, ranging from the Department of Human Services to the Education Department but predicted that lawmakers won’t know the scope of reductions before the legislature adjourns, especially considering Congress is working on its budget.

“We’ve got to move forward regardless of what’s happening at the federal level,” said Watson, a Hixson Republican. “Hopefully, we can get the budget out this week.”

Tennessee lawmakers have talked about “contingencies” in case of major reductions, but they have no “formal plan” to deal with them, Watson said.

Among the cuts coming from the Trump administration, Second Harvest Food Bank in East Tennessee canceled more than 377,000 pounds of food costing $722,000 because of a funding pause, according to Democrats. 

The Department of Health is ending sexually transmitted infection (STI) monitoring contractors, a move leading Metro Nashville to file suit.

TennCare, the state’s Medicaid program for 1.7 million low-income people, could see funding gaps because of the expiration of a federal match.

In addition, state residents are likely to see energy assistance reductions, some of which could affect 1,000 households in upper East Tennessee, according to Democrats’ letter.

Federal Funding letter from Leaders

Tennessee Lookout is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Tennessee Lookout maintains editorial independence. Contact Editor Holly McCall for questions: info@tennesseelookout.com.

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