SB 1392 (HB 1403) – Bond Issues for Higher Education, Infrastructure, and Related Purposes
Session: 114 (Tennessee)
Overview
- Purpose: Authorizes the State of Tennessee, acting by resolutions of its Funding Board, to issue and sell direct general obligation bonds (and related bond anticipation notes) to finance a broad set of capital projects and grants. Proceeds are earmarked for higher education capital outlay and maintenance, along with other specified public works and development activities.
- Designation: Bonds may be designated as “college savings bonds” under the Baccalaureate Education Savings for Tennessee Act, Chapter 190, Public Acts of 1989.
Key Provisions
1) Bond authorization and financing
- Bond authority: Up to $30,000,000 in direct general obligation bonds.
- Discount/costs: Funding Board may issue up to 2.5% of the bond amount to fund discount and issuance costs.
- Issuance terms: Bonds may be issued in one or several installments, with maturities up to 20 years. Interest rates set by the Funding Board, not to exceed the legal maximum.
- Tax status: Bonds and interest are exempt from state, county, and local taxation (except inheritance, transfer, and estate taxes).
2) Uses of proceeds
- Primary allocation: Proceeds must be allocated to the Tennessee Higher Education Commission for capital outlay and maintenance of higher education institutions.
- Additional authorities: The act authorizes expenditures related to acquisition of equipment and sites, erection and construction of sites/buildings (including acquisition of existing structures for expansion), improvements, betterments, extraordinary repairs, highways construction, bridge repair/rehabilitation, and grants to counties, metropolitan governments, municipalities, special districts, and various governmental agencies or instrumentalities.
- Grants to development entities: Grants to industrial development corporations for acquisition of equipment, site preparation, erection/construction, and related infrastructure development.
3) Administration and oversight
- Allocation and expenditure: Funds to be disbursed by the State Treasurer and other fiscal officers as provided by general law, and by appropriate administrative authorities benefitting from the financed projects.
- Approvals and contracting: Projects may hire architects, solicit bids, and award contracts to the lowest bidders in accordance with general law, including Tennessee’s procurement provisions. Contracts subject to approval by the State Building Commission.
- Anticipation notes: While awaiting definitive bonds, the Funding Board may issue bond anticipation notes (BANs) with terms set by resolution. BANs may be renewed or converted to long-term debt with amortization schedules. BANs/notes are also tax-exempt.
4) Conditions and limitations
- Appropriation prerequisite: No bonds may be issued until the General Assembly has appropriated funds to cover the first year’s principal and interest, and the Funding Board has determined funds are available.
- Civil rights compliance: Expenditures must comply with Title VI of the Civil Rights Act.
- Severability: Provisions are severable; invalid provisions do not affect the remainder.
- Effective date: Act takes effect upon becoming law.
4) Additional notes
- Section 4 specifies that bond proceeds are allocated to the Tennessee Higher Education Commission for capital outlay and maintenance, with discretionary authority for the Funding Board to allocate a portion of proceeds to fund issuance discounts.
Fiscal impact (from accompanying fiscal note)
- First-year debt service: Approximately $3.3 million.
- Total debt service (lifetime): About $48.9 million (principal $30.0 million + interest ~$18.9 million) with an assumed 6% coupon, 20-year term.
- Appraisal: Assumes bonds priced at market with issuance costs covered by the 2.5% discount.
Timeline and Status
- Introduced in 2025; co-sponsored by Bo Watson.
- Action history shows multiple readings and committee referrals, with current action being considered in the Senate Finance, Ways and Means Committee (as of April 2026).
Who is affected
- State government and fiscal officers (Funding Board, State Treasurer, and agencies receiving funds).
- Higher education institutions and the Tennessee Higher Education Commission (capital outlay and maintenance projects).
- Local governments, industrial development corporations, and other public entities eligible for grants or infrastructure funding.
Bottom line
SB 1392 authorizes a targeted, limited debt program to finance higher education capital needs and related infrastructure, with optional use for a wide range of public works and development activities, while providing mechanisms for issuance, oversight, and repayment within Tennessee’s existing legal framework.
