Summary of Bill: SB 1592 (Session 114) – Tennessee
Title: 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, Chapters 56 Part 1 and Part 2.
Status and Sponsors
- Primary sponsor: Senator Hatcher
- Co-sponsor: Rep. Moon (HB 1516)
- Current status: Passed Senate; enrolled and sent for signatures; signed by Senate Speaker (as of action history)
Key Provisions
1) LEA Budget Dispute Process (municipalities with an LEA)
- Applies to municipalities that have established a local education agency (LEA) under the relevant statute.
- If the municipal legislative body (MLB) and the LEA governing body fail to agree on an LEA budget by August 31 of any year:
- By operation of law, the LEA budget is set to the minimum budget required to comply with the local match and maintenance-of-effort provisions of the Tennessee Investment in Student Achievement (TISA) formula.
- If the disagreement persists for three consecutive fiscal years and the LEA receives the minimum required funding in each of those years:
- The LEA budget for the third fiscal year must include a mandatory 3% increase in funding from local sources.
- This 3% increase is not required if, in any of the three years, the LEA governing body failed to submit its budget proposal to the MLB by May 1.
2) Continuing Operating Budget When MLB Has Not Adopted a Budget
- Applies to municipalities that have not adopted a budget by the first day of the fiscal year.
- Until a final operating budget is adopted, the budget from the just-ended fiscal year continues by operation of law.
- Restrictions on encumbrances:
- Agencies and entities receiving appropriated funds shall not encumber funds beyond the month-to-month allotment for the preceding fiscal year unless the MLB enacts an authorizing ordinance.
- The authorizing ordinance must identify a funding source equal to any excess allotment.
- Any excess allotment becomes part of the final operating budget.
- Amendments:
- The continuing operating budget may be amended under the same procedures used for amending a final operating budget to address debt obligations and court-ordered expenditures.
- Duration of the continuing operating budget:
- May continue for the first two months of the new fiscal year.
- May be extended to the third month with approval from the Comptroller of the Treasury (COT) or the Comptroller’s designee, based on a showing of extraordinary circumstances.
- The extending budget cannot go beyond the end of the third month.
- The municipality must submit justification for the extension by the 15th day of the second month.
- The Comptroller’s Office will either approve or disapprove and report within seven business days, after which the MLB may decide to extend for the third month.
3) Repeal and Effective Date
- Section 3 repeals a previous section (6-56-210), replacing it with the new continuing-budget framework.
- Effective date: Upon becoming law (no delayed effective date).
Fiscal Impact
- The fiscal note indicates uncertain, variable impacts on local governments due to unknown applicability (which municipalities/LEAs and which fiscal years would be affected).
- The Comptroller of the Treasury’s involvement is limited to eligibility/approval for the third-month extension; no explicit state expenditure increase is anticipated, and the impact on the Comptroller’s office is expected to be absorbable.
Who/What is Affected
- Municipalities with an established LEA (as defined by statute)
- Municipal legislative bodies (MLBs)
- LEA governing bodies
- Agencies and entities receiving municipal appropriations
- Comptroller of the Treasury (procedural oversight for budget extensions)
Timeline Considerations
- LEA budget disputes: August 31 deadline for LEA-MLB agreement.
- LEA third-year 3% increase trigger: only if three consecutive years of minimum funding and failure to meet May 1 budget proposal deadline in any year.
- Budget adoption timing: If MLB fails to adopt by first day of fiscal year, the new continuing budget provisions take effect immediately for continuity of operations.
- Third-month extension: must be justified by the second month; decision communicated within seven business days.
Plain-language takeaway
SB 1592/HB 1516 creates two parallel safeguards:
- A mechanism to keep LEAs funded at a minimum level when MLB and LEA leaders can’t agree on a budget, with a potential 3% local funding bump in repeated failure scenarios.
- A framework to keep municipal operations running when a city hasn’t adopted a new budget by the start of the fiscal year, by continuing last year’s budget with clear encumbrance controls and a possible limited three-month extension overseen by the state’s budget watchdog (the Comptroller), to allow time for final budget adoption.
