Summary: SB 614 (Session 114) – Tennessee Education Maint. of Local Funding Effort
Purpose
- To modify how local governments handle maintenance of local funding effort (MOE) for education when they fail to appropriate or allocate the full amount budgeted to a Local Education Agency (LEA).
- Specifically, requires unfunded portions to be allocated to the LEA in the following fiscal year and adjusts how MOE is calculated after a shortfall.
Key Provisions
- new subdivision added to Tenn. Code Ann. § 49-3-314(c)(5):
- For fiscal year 2025-2026 and each subsequent year:
- If a local government adopts a budget that includes the MOE for education but does not appropriate or allocate the full budgeted amount to the LEA, the local government must first appropriate and allocate the unfunded portion to the LEA.
- The unfunded portion cannot be used for increasing MOE for specified other county functions until the LEA shortfall is addressed. Those other functions include:
- County mayor’s office (§ 5-9-408)
- Sheriff’s office (§ 8-20-120)
- Highway department (§ 67-3-901(d))
- Election commission (§ 2-12-209)
- Any funds used to correct the shortfall are treated as nonrecurring expenditures under existing MOE rules.
- The MOE for the fiscal year after a shortfall must be determined based on the amount budgeted in the previous year, not the amount actually appropriated or allocated in the shortfall year.
- Effective date: Takes effect upon becoming law.
Background and Fiscal Note (as summarized in fiscal materials)
- Local government expenditures: The amended bill would require a one-year adjustment in the following fiscal year to fund the unfunded LEA portion, with estimated FY25-26 local expenditure impact of about $67.65 million to correct shortfalls (based on 17 LEAs with shortfalls in FY23-24 totaling $67,647,538).
- Ongoing impact uncertain: Future local revenue collections, MOE amounts, and timing of budget corrections are unknown, making long-term expenditure effects unclear.
- Assumptions: LEAs cannot use state funds to supplant local funds. The unfunded LEA portion must be allocated before increasing MOE for specified local offices.
Who is Affected
- Local governments (counties and municipalities) that adopt budgets including MOE for LEA funding but do not fully fund the LEA.
- Local Education Agencies (LEAs) that rely on MOE funding from local governments.
- Civil offices: county mayor, sheriff, highway department, and election commission (as MOE increases in these areas would be paused until LEA shortfalls are addressed).
Procedural/Timeline Aspects
- The new requirement applies starting with the 2025-2026 fiscal year and continues thereafter.
- If a shortfall occurs, the unfunded LEA portion must be funded in the next fiscal year before increases to MOE for certain departments.
- The MOE calculation for the year after a shortfall uses the budgeted amount from the previous year, not the actual allocation.
Status and Legislative History
- The amendment (Amendment No. 1) to SB 614 (later incorporated into HB 348) was adopted in the Senate with amendment SA0280 and transmitted to the House.
- The bill has progressed through committee stages and passed the Senate with amendments as of mid-April 2025.
Bottom Line
- SB 614 aims to enforce funding discipline by ensuring LEAs receive any unfunded portion of their budget in the following year, before any MOE increases to other local government functions, and by tying MOE calculations for subsequent years to prior-year budgeted amounts. The fiscal impact is significant but uncertain beyond the near term, reflecting local revenue variability and budgeting practices.
