NASHVILLE, Tenn. — Tennessee Gov. Bill Lee on Monday proposed an injection of more than $1 billion into road projects in an effort to address the state’s $30 billion projects backlog, which will again need more than what gas taxes and other fees can provide.
The Republican governor’s budget proposal includes nearly $1 billion in one-time, general state tax money and a plan to shift $80 million annually from the sales tax on tires. It comes two years after Lee and Republican lawmakers approved a similar $3 billion shift of general tax money to roads funding, which is traditionally covered by gas taxes.
The money for roads is one of the big-ticket items in Lee’s $59.5 billion budget proposal for the year that begins in July. Tennessee’s budget has become tighter because tax revenues have slowed compared with the boom times that took shape during the COVID-19 pandemic.
“Safe, reliable roads are a primary responsibility of the state, yet there are limited funds to fulfill an unlimited need,” Lee said in prepared remarks during his annual State of the State speech Monday evening.
Some parts of the budget were already filled in after a quick special session last month. Lee convinced lawmakers to pass more than $900 million worth of initiatives from different pots of money. They include a huge expansion of vouchers to help students attend private school, coupled with public school teacher raises; relief for areas devastated by Hurricane Helene; and changes to help President Donald Trump’s administration with its immigration deportation crackdown plans.
Lee elevated roadwork as a priority in 2023, when his legislation included a $3 billion infusion for projects and a hike in electric vehicle and hybrid fees. It also opened the door for allowing express toll lanes on highways through public-private partnerships, which hasn’t been implemented yet as officials initially consider it for a stretch of Interstate 24 from Nashville to the southeastern suburbs.
Tennessee isn’t alone. Many states have likewise taken a variety of steps to supplement their gas taxes, which aren’t keeping up with their needed roadwork as more people drive electric vehicles and hybrids.
Meanwhile, Lee proposed directing $11 million to the Boys and Girls Club to help boost their childcare programs throughout the state, as well as expand eligibility to a state program that supplements childcare worker salaries.
“Today, infant care in Tennessee carries virtually the same price tag as in-state tuition at a four-year public college,” Lee said. “That is an insurmountable cost for the vast majority of moms and dads who want to be in the workforce.”
Lee boasted that his proposals would result in “tens of thousands of new daycare spots across rural and urban Tennessee” but did not provide additional details on how or when that goal would be achieved. Nor did he specify who exactly it would serve. For example, many of the Boys and Girls Club locations in Tennessee only offer daycare services to children 5 years old and up.
Also in Monday’s speech, Lee proposed a $60 million fund that would create 0% construction loans to build single-family homes. And while the governor’s budget does not contain any new tax breaks for Tennesseans, Lee said he plans on funding a tax credit enacted last year that would give incentives to developers building affordable housing.
“These are important steps, and together, we should continue looking for more solutions that are fiscally responsible to finally address the issue of housing –- through innovation, not through regulation,” Lee said.
Lee is proposing tens of millions of dollars more to invest in nuclear energy, as well. In his plan, the state would contribute $50 million to help the Tennessee Valley Authority develop a small modular reactor. The federal utility has applied for an $800 million U.S. Department of Energy grant for the initiative.
