Tennessee’s budget basics
According to the National Association of State Budget Officers (NASBO), Tennessee’s total expenditures in fiscal year (FY) 2022 were $48.1 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2022 were $2.9 trillion, ranging from $5.6 billion in Wyoming to $510.0 billion in California.
Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.
Per the US Census Bureau, Tennessee’s combined state and local direct general expenditures were $56.2 billion in FY 2021 (the most recent year census data were available), or $8,062 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $11,087.
(Note: We cite data from both NASBO and Census to provide a broader picture of each state’s fiscal situation. However, these sources detail spending from different levels of government in different years, and the COVID-19 pandemic and the federal government’s response to it significantly affected these totals in different ways in different years. Please only use one source if you are looking for historical comparisons.)
Tennessee’s largest spending areas per capita were public welfare ($1,968) and elementary and secondary education ($1,551). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.
Tennessee’s combined state and local general revenues were $62.0 billion in FY 2021, or $8,891 per capita. National per capita general revenues were $12,277. Tennessee does not levy an individual income tax on salaries and wages but does tax bond interest and stock dividends. After federal transfers, Tennessee’s largest sources of per capita revenue were general sales taxes ($1,884) and charges ($1,317), such as state university tuition and highway tolls.
Governor Bill Lee, a Republican, was elected in 2022 with 74 percent of the vote. The next gubernatorial election is in 2026.
Republicans control both the House of Representatives (75 Republicans to 23 Democrats) and Senate (27 Republicans to 6 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Tennessee. All Tennessee House seats are on the ballot in 2024 because representatives serve two-year terms. Senators serve four-year terms; roughly half the senatorial seats are on the ballot in 2024, and the other half will be up for election in 2026.
Tennessee’s budget institutions, rules, and constraints
Tennessee uses an annual budget. The legislature is not required to pass a balanced budget, nor is the governor required to sign one, and deficits may be carried over into the following year. However, the state has budget rules that require lawmakers to balance revenues and expenditures. Tennessee also limits annual spending growth with a budget rule based on personal income growth. The limitation can be overridden with a simple legislative majority vote, though. Tennessee also limits total authorized debt and debt service incurred by the state.
(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)
Tennessee’s current budget
Under the American Rescue Plan, Tennessee will receive $3.7 billion in direct state fiscal aid and $1.8 billion in local government aid from the federal government. As of January 2022, Tennessee had spent part of its ARP funds on capital construction, broadband expansion, public health programs, economic development, and refilling its unemployment insurance trust fund.
According to NASBO, Tennessee’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:
- FY 2022: $18.3 billion/$48.1 billion
- FY 2021: $14.7 billion/$40.0 billion
- FY 2020: $15.2 billion/$36.0 billion
- FY 2019: $14.7 billion/$33.8 billion
For more on Tennessee’s budget, see
Tennessee’s economic trends
Tennessee’s per capita income (per the Bureau of Economic Analysis) was $58,279 in 2022, ranking 31st among the states. It was below the national average of $65,423, but above the Southeast regional average of $56,118. The state’s median household income (five-year estimate) was $58,516 in 2021, ranking 41st among the states and below the national average of $69,021. Tennessee’s poverty rate was 14.3 percent in 2021 (five-year estimate), above the national rate of 12.6 percent.
Although Tennessee’s averages tell a story about the entire state, Tennessee is composed of diverse localities. For example, the city of Morristown’s median household income was $36,495, and its poverty rate was 25.5 percent; the city of Brentwood’s median household income was $165,948, and its poverty rate was 2.6 percent.
Tennessee’s unemployment rate historically tracks the national average, though the state rate is more volatile than the US rate.
Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Tennessee, the average unemployment rate in 2022 was 3 percent for white residents, 6 percent for Black residents, and 3.9 percent for Hispanic or Latino residents.