Municipal Government - As enacted, 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 cont, the official text

Staie f/JefllleSsee

                             PUBLIC CHAPTER NO. 1071

                                                    SENATE BILL NO. 1592

                                                             By Hatcher

                                           Substituted for: House Bill No. 1516

                                                        By Moon, Wright

AN ACT to amend Tennessee Code Annotated, Title 6, Chapter 56, Part 1 and Title 6, Chapter 56,
          Part 2, relative to municipal budgets.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:

          SECTION 1. Tennessee Code Annotated, Title 6, Chapter 56, Part 1, is amended by adding
the following as a new section:

                    (a) This section applies to all municipalities that have established an LEA, as defined
          in§ 49-1-103, pursuant to§ 49-2-401.

                    (b) If the municipal legislative body and the governing body of the LEA fail to agree
          upon a budget for the LEA by August 31 of any year, then, by operation of law, the budget for
          the LEA is equal to the minimum budget required to comply with the local match and
          maintenance of effort provisions of the TISA, as defined in § 49-3-104. However, if for three
          (3) consecutive fiscal years the municipal legislative body and the governing body of the LEA
          fail to agree upon a budget and the LEA receives the minimum required funding for that fiscal
          year in accordance with this subsection (b), then the budget for the LEA for the third fiscal
          year must include a mandatory increase that is equivalent to three percent (3%) of the
          required funding from local sources for schools; provided, however, that this increase is not
          required if during any of the three (3) consecutive fiscal years the governing body of the LEA
          failed to submit its budget proposal to the municipal legislative body by May 1.

          SECTION 2. Tennessee Code Annotated, Title 6, Chapter 56, Part 1, is amended by adding
the following as a new section:

                    (a) If a municipal legislative body has not adopted a budget by the first day of any
          fiscal year, and until a final operating budget is adopted, the operating budget for the fiscal
          year just ended and the appropriation ordinance for the fiscal year just ended continues in
          effect by operation of law without further action of the municipal legislative body, except as
          required in subsection (b); provided, however, that all agencies of the municipality and other
          entities receiving appropriated funds shall not, during any month, encumber funds in excess
          of the allotment for a comparable month of the preceding fiscal year, unless specifically
          authorized to do so by ordinance of the municipal legislative body. The authorizing ordinance
          must identify a corresponding funding source equal to the amount of any excess allotment
          authorized. Any excess allotment authorized becomes part of the final operating budget.
          During the time that the continuing operating budget is in effect, the budget may be amended
          in accordance with the procedures for amending a final operating budget, and amendments
          may be made as necessary to provide for debt obligations and court-ordered expenditures.

                    (b) The continuing operating budget authorized by this section may continue in effect
          for the first two (2) months of the fiscal year and, upon approval from the comptroller of the
          treasury or the comptroller's designee after a showing of extraordinary circumstances, may
          continue for the third month of the fiscal year; provided, however, that a continuing operating
          budget must not extend beyond the last day of the third month of the fiscal year. The
          municipality shall submit its justification for extending the continuing operating budget
          through the third month of the fiscal year to the comptroller of the treasury or the
          comptroller's designee for approval by the fifteenth day of the second month of the fiscal
SB 1592
         year. The comptroller of the treasury or the comptroller's designee may request additional
         information deemed necessary to properly review the continuing operating budget extension
         request. The comptroller of the treasury or the comptroller's designee shall report the
         comptroller's approval or disapproval to the municipal legislative body within seven (7)
         business days from the date on which the request was received or the date on which any
         requested supplemental documentation was received, whichever is later, at which time the
         municipal legislative body may take action to extend the continuing operating budget for the
         third month of the fiscal year.
         SECTION 3. Tennessee Code Annotated, Section 6-56-210, is amended by deleting the

section.
         SECTION 4. This act takes effect upon becoming a law, the public welfare requiring it.

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         SENATE BILL NO. 1592

PASSED:  April 21, 2026

         --, Q . 4"' ~"~-''·· ..R..A,_ND1_ ___ _ _____ _

                                     SPEAKER OF THE SENATE

                         CAMERON"'SEXTON,SPEAKER

                         HOUSE OF REPRESENTATIVES

APPROVED this ?:)._r,..,cJ. day of r:Vln. A    2026

                                            K

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                     BILL LEE, GOVERNOR