The Tennessee General Assembly has begun reviewing the state’s budget, with lawmakers closely monitoring federal funding uncertainties under the Trump administration. As the Senate Ways and Means Committee met Monday, members examined Tennessee’s 2024 Annual Comprehensive Financial Report, which showed the state’s net financial position increased by $2.1 billion for fiscal year 2025. While still a gain, the increase was significantly lower than the previous year’s $6 billion, due in part to a reduction in federal funds flowing into the state.
Committee Chairman Bo Watson (R-Hixson) emphasized that lawmakers need to be cautious about relying on federal dollars as they move forward with budget discussions. “This committee needs to be very sensitive to the changes in federal dollars that may or may not be coming into the state,” Watson said. “With what all is going on in D.C. right now, whether those federal dollars are going to be there or not is at least open to conjecture at this point since we’ve seen a freeze on federal funding in a number of areas already.”
The Trump administration’s Department of Government Efficiency (DOGE), led by Elon Musk, has been conducting a thorough review of federal spending. As part of its mission to cut waste and inefficiency, DOGE has already identified areas for funding reductions, potentially impacting states that rely on federal dollars for matching funds in various programs. This uncertainty leaves Tennessee lawmakers in a position where they must plan cautiously, ensuring the state does not commit to programs that may lose anticipated federal support.
Governor Bill Lee has proposed a $59.5 billion budget, which includes $3.9 billion in new spending but does not include any tax breaks. However, both Republican and Democratic lawmakers have introduced proposals to eliminate Tennessee’s grocery tax, an issue that is expected to be debated in the coming months. The tax relief proposal comes amid rising inflation concerns, as Tennessee residents look for ways to lower costs on essential goods.
As lawmakers continue their budget discussions, the uncertainty surrounding federal funding will remain a key consideration. Tennessee’s ability to maintain financial stability while navigating potential shifts in federal support will be critical in determining the state’s fiscal future. Legislative leaders will need to balance new spending initiatives with conservative financial planning, ensuring that any commitments made are sustainable regardless of federal policy changes.
