Tennessee’s next governor will enter office with a $1.2 billion surplus, after the state finalized the books on its most recent fiscal year.
State Finance and Administration Commissioner Jim Bryson said in a news release that the surplus was partly driven by inflation and higher-than-expected corporate tax collections.
“It’s important to remain cautious,” Bryson said. “These corporate estimated payments may require some adjustments.”
Tennessee had a budget of nearly $60 billion in 2025-26, about half of which is covered by state tax revenue. The state is currently in the 2026-27 budget year and the surplus revenue from last year’s budget will factor into the 2027-28 budget.
The budget process for that starts in November and is finalized at the end of the legislative session in the spring of 2027.
In November, Tennessee will elect a new governor to replace term-limited Gov. Bill Lee. U.S. Sen. Marsha Blackburn is the Republican nominee, Memphis city councilwoman Jerri Green is the Democratic nominee, and two prominent independent candidates, David Hatley and Lauren Pinkston, are running. The state’s surplus is not an indication of the state’s economy, according to Mandy Spears, the executive Vice President at The Sycamore Institute, a nonpartisan think tank that tracks Tennessee’s budget.
“A surplus is almost always driven by estimations, which most years is done conservatively to create this scenario,” Spears said.
During Lee’s eight years in office, he’s largely overseen a growing state budget with yearly surpluses sometimes in the billions.
Lee has used past surpluses to create a new education funding formula, expand private school vouchers, cut business taxes and provide additional funding for road construction.
Originally published on tennesseelookout.com, part of the BLOX Digital Content Exchange.
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