NASHVILLE, Tenn. (WKRN) — In rare form, Tennessee could take out a nearly $1 billion loan to pay for new state and higher education construction and renovation projects, which could free up cash for road projects.
Gov. Bill Lee’s proposed $59.5 billion budget is down from the 2024-25 fiscal year’s $60.5 billion budget, and it does not include tax cuts for Tennesseans.
However, the new, proposed budget does include funding for 100 additional Tennessee Highway Patrol troopers, $72.6 million in nuclear energy initiatives, around $125 million in farmland and Duck River conservation measures, and $1 billion for road projects and improvements.
The state doesn’t have quite enough cash to cover everything, which is why the governor has proposed a $930 million total debt bond to pay for capital projects, including building a new emergency operations center for TEMA, new facilities for the Department of Children Services, renovations to the Supreme Court, and various higher education building repairs and construction projects.
The bond would result in a $61.7 million increase in annual debt payments, according to the Commissioner of the Department of Finance and Administration, Jim Bryson.
Bryson told lawmakers in the Senate Finance Committee by taking out the bonds, which the state rarely does, Tennessee would still keep its Triple A (AAA) bond rating, the highest-rated credit score for states, while finishing capital projects faster and cheaper than waiting until the state had the cash to fully fund the projects, due to rapidly rising construction costs.
“Frankly, [construction] costs are rising much faster than interest rates. The state can incur debt at a relatively low rate, while costs can rise at 10% or more a year. Additionally, there is often a real cost of not having space for state services available along with the opportunity costs of inadequate facilities,” Bryson said. “We’re able to actually save some money in inflation on construction costs, so we win on both sides. It’s a strategy to be able to do some of the things the state needs to do and do it in a financially responsible manner.”
Lawmakers pointed out the state is proposing to use a loan to fund capital projects so it can save its cash for road projects, which have always been funded through a “pay as your go” model with cash.
“By using debt over here, we free up money for roads and bridges and things…” Sen. Bo Watson (R-Hixson) said.
The proposed budget also includes $1 billion for TDOT, which currently has an estimated $38 billion backlog in projects, according to the state.
Sen. Page Walley (R-Savannah) told Commissioner Bryson, while he understands the state needs to invest in new roads to accommodate the growth, he hopes TDOT will also use the funds to repair old roads.
“I get 10 times more calls about road conditions in my district than every other issue combined,” Sen. Walley said. “One of the frequent frustrating comments I get is we live on the Mississippi state line where I grew up. It used to be when you drove into Mississippi, you knew it because of their inferior roads. Now you drive into Mississippi and you know it because their roads are superior.”
Commissioner Bryson ensured Sen. Walley the majority of the estimated $38 billion backlog in TDOT projects are repairs for old roads, which is one of the “prime motivators behind this investment in our roads.”
Lawmakers will be able to make their own tweaks to the proposed budget during the committee process before voting to approve a final budget later this legislative session.
To view a copy of the full, proposed budget, click here.
