Tennessee Legislative Report: Governor Highlights Roads, Tax Cuts, and Strengthening Families as Major Initiatives in State of the State Address


Governor Lee Delivers Fifth State of the State Address

Before a packed House chamber on Monday evening, Governor Bill Lee delivered his fifth State of the State address to a joint session of the Tennessee General Assembly. In a heartfelt moment of unity, Lee began by honoring First Lady Maria Lee, who is currently undergoing treatment for lymphoma and was unable to attend the evening’s event.

Embarking upon his second term as Tennessee’s 50th governor, Lee sought to highlight the many contrasts between Tennessee’s prosperity and the nation at large. His theme, “Leading the Nation,” was prominent throughout his one-hour speech and elicited a number of standing ovations. Citing the record number of families and companies opting to relocate to the Volunteer State, Lee credited his administration’s ongoing commitment to ensuring a high quality of life through investments in public education, workforce development, and safe schools.

Lee presented a $55.6 billion budget with a central theme of expanding economic prosperity for all Tennesseans. Following his past practice, Lee once again allocated a substantial portion to the state’s Rainy Day Fund – this time $250 million – which takes the fund to a record level and will amount to a new high of 9.1% of the state’s total budget. The remaining bulk of Lee’s proposed budget is directed at transportation, education, strengthening Tennessee’s families, and a robust conservation strategy. A 2023-24 fiscal year budget overview can be found here.

Transportation Takes Top Priority as Lee Advocates for Choice Lanes

As expected, the Governor’s address devoted considerable time to infrastructure, which has been a constant point of emphasis for the Governor in the last several months.  The Governor devoted more than a third of his proposed $9 billion budget in new allocations to what he calls the Transportation Modernization Act. The nearly $3.5 billion investment will aim to alleviate urban congestion through an overhaul of the roadway delivery system, dedicating $3 billion to building roads in all three Grand Divisions and another $300 million to the local highway program so communities can build and maintain the roads they need.

The Governor called for a new way of looking at roads and road funding, noting that outside-the-box solutions would be required if Tennessee is going to put any kind of dent into its considerable backlog of highway projects.  Along those lines, the Governor advocated for “choice lanes,” a public-private partnership that adds additional lanes to existing highways which motorists can use at their discretion, and will be billed for their use.  The Governor was quick to point out what he considers the distinction between choice lanes and toll roads – which have long been taboo in Tennessee – and punctuated the point by saying, “hear me when I say this: toll roads are not on the table.”  While choice lanes would be a drastic change for Tennessee’s self-funded, “pay as you go” system with no debt and no toll roads, Lee noted that choice lanes are used extensively in peer states such as Florida and Texas.

While some legislators will be weary of the plan given the departure from Tennessee’s past resistance to any form of “toll” on highways, the plan seems to have widespread support.  Indeed, the Tennessee Road Builders Association has already expressed support for Lee’s proposal. 

Job Growth and Tax Cuts

Amidst the overall uncertainty of the American economy, Lee’s budget proposal includes greater tax cuts to ease the effects of nationwide inflation, including an expanded three-month reprieve in grocery taxes for Tennessee families. Lee also introduced the “Tennessee Works Act,” a $150 million investment to lower the tax burden on small businesses and transition corporate taxes to a Single Sales Factor.

Reinforcing his commitment to job growth, Lee’s proposal builds upon the 170,000 jobs created throughout the past four years, by prioritizing Tennessee Colleges of Applied Technology (TCAT) with a substantial investment for new construction and updates to existing TCAT facilities. The TCAT Master Plan comes with a historical investment of $1 billion, the largest in state history. The TCAT Master Plan will permit skills-training for 10,000 new workers and build six new TCAT facilities in strategic locations across the state. 

Education and Family Highlights Include Teacher Raises, School Security and Enhanced Postpartum Coverage

In the wake of last year’s complete overhaul of Tennessee’s educational funding framework, there was speculation of what the Governor would propose this year in the education space. The Governor’s speech once again drew headlines with his proposal of an additional $350 million in education funding, including $125 million for teacher pay raises. If adopted, the new legislation would raise the base teacher salary from $35,000 to $50,000 by the time Lee leaves office. Lee’s budget also allocates funds toward enhanced literacy programs and expanded summer camp opportunities for children.

Lee also emphasized school safety by proposing the placement of a Homeland Security Agent in each of Tennessee’s 95 counties to allow for thorough reporting measures using the SafeTN App, where any Tennessean can report suspicious activity; an addition, Lee contends, will permit greater oversight and access for parents and students to report concerns or threats.

In keeping with his dedicated efforts toward strengthening Tennessee’s families, Lee shared the successes of the nation’s first-of-its kind TennCare Medicaid waiver program, which has resulted in more than $300 million in shared savings, at no burden to Tennessee taxpayers. These savings will allow for enhanced postpartum coverage and services for an additional 25,000 women, children, and parents. Additionally, with these savings, Lee is proposing covering the cost of diapers for the first two years of a baby’s life for mothers on TennCare.

Lee has proposed more than $190 million in additional resources to strengthen and support the Department of Child Services and a new $10 million grant program to support Tennessee foster and adoption nonprofit efforts. An additional $100 million proposed grant program will partner with nonprofits in supporting mothers, fathers, and families during a crisis pregnancy. Lee reinforced his dedication to strengthening Tennessee families and proposed a “commonsense paid parental-leave program” along with increased base-pay raises for state employees. 

Conservation: Lee Emphasizes Parks, Brownfields, and Nuclear

For his final term, Lee has committed to an agenda that addresses conservation efforts. He proposed $328.7 million in funding to upgrade as well as increase access to existing state parks, and also create new state parks.  The Governor also unveiled plans to implement cleanup and revitalization efforts for all of the state’s 175 brownfields.

Doubling down on previous efforts to emphasize nuclear energy and establish Tennessee as a national leader in that field, the Governor proposed an additional $50 million toward a Nuclear Fast Track fund to attract companies that will establish nuclear development. 

Reminder: Deadline Approaching for Employer Expenditure Report

All employers of lobbyists are required to file a 2022 year-end Employer Expenditure Report with the Tennessee Bureau of Ethics and Campaign Finance by next Tuesday, February 14, 2023. The report covers the period July 1 through December 31, 2022, and is filed electronically through the Commission’s website. For more information, click here. 

Looking Ahead

With both the State of the State and the bill filing deadline in the rear view mirror, the legislature will quickly move into high gear. Leadership is encouraging members to put bills on notice, and the level of committee activity will increase considerably.

As always, we encourage you to look closely at your weekly bill tracking report, which may have grown since last week as we have reviewed and possibly flagged more legislation. You may also notice the presence of bills that on their face seem to have no relevance.  In many cases these are considered “caption bills,” which have a much broader potential range of subjects than first meets the eye.  We have flagged certain caption bills not because of how they currently read, but instead to keep an eye out on possible amendments. Along those lines, please take a look at the attached report, and do not hesitate to let us know if you have any questions or concerns.

Thanks, and enjoy Super Bowl weekend.