Disability Priorities in the Governor’s State of the State & Budget

Tennessee Governor Bill Lee delivered his eighth and final State of the State Address last night before a joint session of the Tennessee General Assembly. He reflected on his seven years in office and described a vision of progress, particularly in education and rural health—areas that have been central to his administration in recent years. These efforts matter, and many Tennesseans have benefited from them. At the same time, for hundreds of thousands of Tennesseans with disabilities and their families, the promise of opportunity remains distant, conditional, or out of reach.

Governor Lee also released his proposed state budget for FY2026-2027. This proposal is critical, as the availability of services for Tennesseans with disabilities is determined each year through the state budget. Most state funding comes from taxes, fees and the federal government. Important to note: some items are funded by “Tenncare Shared Savings.” TennCare Shared Savings were created through the state’s Medicaid agreement with the federal government. Tennessee keeps part of the money it saves when it underspends on Medicaid services. Over three years, this added up to more than $1 billion. 

We conducted an initial review of the proposed budget to identify funding changes most relevant to our community.

Our analysis examines both the Governor’s policy remarks and his FY 2026–2027 budget proposal, with a focus on three key areas affecting Tennesseans with disabilities: education, access to care, and caregiver support.

Education:

Investment in improving teacher pay and education outcomes is good for our state. The Governor continues to emphasize private school vouchers through the Education Freedom Scholarship program. Voucher programs were created by the legislature in 2019 and expanded statewide last year. The Governor intends to further increase funding and available slots for students in 2026.

The Governor’s proposed budget includes:

• $42,350,000 in recurring funding to cover inflationary costs and add 5,000 scholarships 
• $112,950,000 in recurring funding, contingent on proposed legislation, to add an additional 15,000 scholarships

At the same time, FY 2026–2027 is the fourth year under the Tennessee Investment in Student Achievement (TISA) funding formula. In his budget, the Governor proposes a $170,000,000 recurring increase to TISA to support salary increases, group health insurance premiums, retirement contributions, and formula components including base funding, weights, direct funding, and outcomes. Additional education investments include:

• $40,000,000 in non-recurring funding for the charter schools facilities fund
• $5,000,000 in recurring funding for summer learning camps and summer transportation
• $2,610,400 in recurring funding to reimburse local education agencies for paid parental leave claims
• $22,000,000 increase for the Charter School Commission
• $572,700 for personnel at the Tennessee School for the Blind and the Tennessee Schools for the Deaf

While these investments are significant, expansion of the Education Freedom Scholarship program does not address gaps or improve special education for students with disabilities. The program directs public funds to organizations that are not held to the same accountability standards for serving students with disabilities and that retain legal authority to exclude them. There are many ways Tennessee could strengthen special education, most of which require sustained financial investment. Continued expansion of voucher programs makes it less likely that the state will prioritize or fund other needed improvements.

Access to Care:

Rural Health:

Governor Lee highlighted the Rural Health Transformation Program in his speech, which will receive more than $1 billion in federal funding over the next five years (2026–2030), authorized through Congress’s 2025 One Big Beautiful Bill Act. Tennessee plans to use these funds toward modernizing rural care delivery, expanding mobile and community-based services, improving maternal and child health outcomes, strengthening prevention efforts, upgrading health technology infrastructure, and growing the rural health workforce.

The proposed state budget includes additional investments to support these goals. Within the Department of Health, the Governor proposes:

• $125,000,000 in non-recurring funding for Rural Health Transformation Resiliency Grants to supplement the federally funded Rural Health Transformation Program through targeted capital projects and extension of effective care models (funded through TennCare Shared Savings)
• $1,000,000 in non-recurring funding to continue a Center of Excellence providing technical assistance, research, and advocacy for rural providers (Shared Savings)
• $1,400,000 in non-recurring Center of Excellence grants (Shared Savings)
• $4,400,000 in non-recurring funding for a Rural Health Care Training Program to address workforce shortages (Shared Savings)
• $1,000,000 in non-recurring funding for Rural Specialty Care (Shared Savings)

For Tennesseans with disabilities, these initiatives create real opportunities through non-emergency medical transportation, mobile care models, care navigation, and telehealth. However, disability-specific outcomes are not explicitly addressed. Without clear implementation standards and accountability, access can expand on paper while longstanding accessibility barriers remain unchanged in practice.

Home-and Community-Based Care:

The budget also includes expansions to home- and community-based services:

• $30,131,200 to add 300 crisis slots to Employment and Community First (ECF) CHOICES;
• $54,997,700 in non-recurring funding to enroll 2,500 individuals from the ECF CHOICES waiting list (Shared Savings)
• $31,250,000 in non-recurring funding to open 2,000 new CHOICES 3 slots (Shared Savings)

While these investments are meaningful, their stability is limited when they are non-recurring and funded through Shared Savings. Progress for people with disabilities and their families will require ongoing investments that address both service availability and the workforce needed to deliver those services.

Certificate of Need:

In his address, the Governor called for reform of Tennessee’s Certificate of Need laws, which require healthcare providers to obtain state approval before building, expanding, or adding certain services. While this policy area is complex, it is important to proceed carefully to ensure that any changes preserve safeguards that support high-quality, accessible home- and community-based care.

Behavioral and Mental Health Services:

Though unmentioned in his address, the Governor’s proposed FY 2026–2027 budget includes several targeted investments in mental health services. These investments reflect continued attention to behavioral health needs across the state, including services that are particularly relevant for children, adolescents, and individuals with intellectual and developmental disabilities.

Within TennCare, the budget proposes non-recurring funding increases for:

• $7,000,000 for Community Mental Health Center quality payments
• $3,750,000 to expand psychiatric inpatient services for children and adolescents with intellectual and developmental disabilities
• $1,000,000 for in-home child and adolescent behavioral health supports
• $1,000,000 for Community Mental Health Center workforce development
• $2,000,000 for substance use disorder treatment

Additional investments are proposed within the Department of Mental Health and Substance Abuse Services, including:

• $3,000,000 to expand School-Based Behavioral Health Liaison services
• $5,000,000 for Creating Homes Initiative 3.0
• $2,107,800 in non-recurring funding for the Addiction Recovery Program (Year Three of Four)
• $3,822,700 in non-recurring funding for Project Rural Recovery expansion and sustainability
• $4,000,000 in non-recurring K–12 Mental Health Trust Fund Grants

These investments have the potential to strengthen behavioral health systems and improve access to care for Tennesseans across the lifespan. However, many of these funding increases are non-recurring and rely on Shared Savings, underscoring the importance of ongoing evaluation and sustained investment to ensure long-term stability and meaningful outcomes for people with disabilities and their families.

Department of Disability And Aging & Department of Human Services:

In other areas directly affecting access to care for people with disabilities, the proposed budget does not include new investments. No additional funds are included in the Department of Disability and Aging Services for intellectual or developmental disability services or aging services. Similarly, the Department of Human Services proposal includes no additional funding for the Supplemental Nutrition Assistance Program (SNAP) or Vocational Rehabilitation.

Caregiver Support:

Governor Lee noted that Tennessee has added 300,000 new jobs and invested in workforce development during his tenure. Employment opportunities are critical, and so are living wages. Many Tennesseans with disabilities are unable to hire direct support professionals because Medicaid reimbursement rates for these positions do not support livable wages. At the same time, many family caregivers are unable to accept jobs they are qualified for because they lack reliable support for their loved ones with disabilities while they work.

The proposed budget includes workforce-related investments within TennCare:

• $10,000,000 in non-recurring funding for long-term services and supports (LTSS) workforce recruitment and retention incentives for providers serving individuals enrolled in CHOICES, Employment and Community First (ECF) CHOICES, 1915(c) waivers, and OPTIONS (funded through TennCare Shared Savings)

In Conclusion:

One in four Tennesseans lives with a disability, and nearly every area of state government touches disability-related services and supports. Disability policy is shaped by the Governor’s proposals yet disability was largely absent from his State of the State Address.

The budget is not final yet. The legislature will soon debate funding priorities and work to pass a balanced budget.

We invite you to join us for Disability Day on the Hill 2026. Come talk to your legislators about what matters to you. When people with disabilities and their families are included in policymaking, the result is stronger, more effective policy for everyone.

 

You can find the Governor’s proposed budget (564 pages) at this link: https://www.tn.gov/finance/fa/fa-budget-information/fa-budget-archive/fiscal-year-2026-2027-budget-publications.html

A full transcript and recording of the Governor’s address are available here:
https://www.tn.gov/governor/sots/2026-state-of-the-state-address.html