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HB 1516

Municipal Government - As introduced, creates a process for continuing funding for a municipal LEA when the municipal legislative body and the governing body for the LEA cannot agree on a budget; provides a process for continuing funding of municipal operations when a municipal legislative body has not adopted a budget by the first day of a fiscal year. - Amends TCA Title 6, Chapter 56, Part 1 and Title 6, Chapter 56, Part 2.

114th Regular Session (2025-2026) Introduced by Jerome Moon

The bill creates a continuing operating budget if a municipality misses a budget, limits encumbrances, and adds a COT-approved extension; for LEAs, it locks to minimum funding with

H. Placed on Regular Calendar for 4/20/2026
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Bill Summary · HB 1516

Summary of HB 1516 (Session 114) – Tennessee

Purpose and intent

HB 1516, as introduced, amends Tennessee law to create explicit processes for:
- continuing municipal operations when a municipal legislative body has not adopted a budget by the start of the fiscal year.
- establishing a budgeting framework for municipalities that also operate a local education agency (LEA) and face deadlock between the municipal legislative body and the LEA’s governing body on a budget.

The bill repeals the existing § 6-56-210 framework and replaces it with new procedures aimed at avoiding interim funding gaps while preserving controls on spending.

Key provisions

For municipalities without an adopted budget (Title 6, Chapter 56, Part 1)

  • If a municipal legislative body (MLB) has not adopted a budget by the first day of the fiscal year, the prior year’s operating budget and appropriation ordinance remain in effect by operation of law, until a final budget is adopted.
  • During this “continuing operating budget,” agencies and entities receiving funds may not encumber more than the allotment for the same month in the preceding fiscal year, unless the MLB passes an ordinance authorizing an excess with a corresponding funding source.
  • The continuing operating budget may be amended as allowed for a final operating budget, including provisions for debt obligations and court-ordered expenditures.
  • The continuing operating budget may run for:
    • the first two months of the fiscal year, and
    • up to a third month with approval from the Comptroller of the Treasury (COT) or designee, after showing extraordinary circumstances.
  • The third-month extension requires:
    • the municipality to submit justification to the COT by the fifteenth day of the second month of the fiscal year,
    • COT review and a decision within seven business days, and
    • MLB action to extend, if approved.

For LEA budgeting shortfalls (Title 6, Chapter 56, Part 1)

  • For municipalities with an established LEA, if the MLB and LEA governing body fail to agree on an LEA budget by August 31 in any year, the LEA’s budget is automatically set to the minimum budget required to comply with:

    • local match requirements, and
    • maintenance of effort provisions of the Tennessee Investment in Student Achievement (TISA) funding formula.

  • If such failure to agree occurs for three consecutive fiscal years, the LEA budget for the third year must include a mandatory increase equal to 3% of the required funding from local sources for schools.

  • However, the 3% increase is not required if the LEA failed to submit its budget proposal to the MLB by May 1 in any of the three years.

Affected entities

  • Municipalities with established LEAs.
  • Municipal legislative bodies.
  • LEA governing bodies.
  • Agencies and other entities receiving municipal appropriations.

Procedural and timeline aspects

  • Four primary timelines:
    • Budget deadline for LEAs: August 31 (annual trigger).
    • May 1 submission deadline for LEA budget proposals (to avoid the 3% increment).
    • First day of the fiscal year: start of continuing operating budget if no final budget.
    • Optional third-month extension with COT approval, including a seven-business-day decision window.
  • The bill requires specific corrective actions and reporting to the Comptroller for extensions.

Fiscal impact

  • The fiscal note indicates uncertain statewide impact due to variable local circumstances.
  • The Comptroller’s office can review and approve extensions, with no explicit new state expenditures anticipated beyond existing oversight capacity.

Effective date

  • The act takes effect upon becoming law.

Compiled from official sources — confirm details with the bill’s official record.

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