Rising tech costs, employee pay among concerns across state budget hearings

From left to right, Tennessee Chief Operating Officer Brandon Gibson, Gov. Bill Lee, Finance and Administration Commissioner Jim Bryson, and State Budget Director David Thurman listen as department heads make their budget presentations.

By KATE COIL

TT&C Assistant Editor

Rising technology costs and increased wages needed to recruit and retain employees were among top concerns expressed by multiple state departments as part of Gov. Bill Lee’s yearly budget hearings.

As data is migrated to the cloud, use of AI is expanded, security concerns increase, and technology companies like Microsoft renew their enterprise licensee agreements, state departments including Human Resources, TennCare, General Services and Revenue reported needing extra funds to maintain current software to continue to provide essential services or upgrade to cloud services.

Tennessee Chief Operating Officer Brandon Gibson noted she was concerned by the cost increases for the basic technology required by state departments. Stephanie Dedmon, the state’s Chief Information Officer, said this is an unfortunate fact of doing business as these enterprise licenses support basic functions like email and office suites.

“We are equally concerned about the rising cost and do try to push back with the vendors,” Dedmon said. “We are pretty much in line with other states, which doesn’t help us in terms of dollars but does show we are negotiating as best we can. Technology is so much more part of what we do to deliver our services than it was 10 or 15 years ago, and it’s frustrating how the vendors want more and more.”

Additionally, departments including Disability and Aging, Labor and Workforce Development, General Services, TDOT, and TBI noted they were requesting funds to increase employee wages or provide training and promotional opportunities in order to attract and retain workers.

FINANCE & ADMINISTRATION

Financial requests from the department included funds for moving data to the cloud, utilizing AI for more efficient operations to automate business enterprises and security functions, and technology maintenance.

The department also noted that Violent Crime Intervention Fund (VCIF) granted $150 million to 267 local law enforcement agencies to provide funding and support through 2027. So far, the program has helped fund 2,800 investigations, 50 positions, and 9,600 overtime hours, 142 vehicles, and 1,300 radios.

$5 million non-recurring for modernization to replace the Edison software in the next three to five years
$3 million non-recurring to create a business gateway that will take information currently spread across 12 different government websites into a single site
$5 million non-recurring for contractors to do remediation and $500,000 for tools to help meet new federal accessibility standards
$2 million non-recurring for storage refresh for FTI data.

GENERAL SERVICES

Ongoing capital projects from the department include:

The $425 million Multi-Agency Law Enforcement Training Academy (MALETA) in Nashville on track for a ribbon cutting in 2026
A new, 126-bed Tennessee Veterans Home in Arlington for West Tennessee at the former Aging and Disability Campus
Funding for six THP headquarters offices being constructed across the state
A new TBI lab and office in Knoxville with the current TBI facility being repurposed for the Department of Health
Construction of Blue Oval Wastewater plant

TNECD

Officials with TNECD noted the state has seen $38 billion in capital investments – half of which was in rural communities – in the past six years. In that same time span, TNECD has landed 633 projects, close to half of which are in rural areas. The $76 million invested in the state’s site development program has led to the creation of 460,000 jobs and $1.6 billion in capital investments. Nearly 60% of investment in the state occurred in rural Tennessee. The department has also seen success with the $700 million invested in broadband and the $4 million in placemaking grants awarded to nearly 60 projects.

Commissioner Stuart McWhorter noted that many companies investing in Tennessee are putting more investment dollars in equipment upgrades and facilities rather than creating new positions, often doing more production with less personnel. He said this is particularly true of advanced manufacturing.

Budget requests from the department include:

$45 million with $17.2 million recurring for Rural Development projects such as site development, Main Street programs, placemaking programs, and downtown improvements. A new program – the Grant Opportunity or GO Fund – will provide grant matches for distressed counties applying for federal funds.
$25 million non-recurring for Fast Track and Entertainment Commission
$2 million recurring for the Entertainment Commission
$63 million non-recurring research and innovation requests including:
- $10 million for SBIR/STTR matching funds
- Tennessee Technology Advancement and Tennessee Innovation Exchange pilot program to create partnerships with the state’s research universities to improve corporate research and development collaboration
- $25 million non-recurring for the REV program with ORNL
- $5 million for West Tennessee/Blue Oval City planning

TDOT

Tennessee spends less than half of the budget of peer states like Florida and Texas and is in the middle of the pack on gas tax, but revenues are slowing and not keeping pace with inflation, particularly the 20% inflation on construction costs. As the state continues to attract business and residents, investments must be made in infrastructure. At present, the gas tax is only growing by 4%.

Much funding is needed to keep existing roadways in a state of good repair with the majority of those fundings going to bridges and pavements. The state presently is putting more money into repair projects and is still able to do less projects than previously. The longer it takes to complete a project, the more expensive that project becomes. Other highlights include:

The single-largest TDOT project remains the replacement of the I-55 Bridge in Memphis
The first Choice Lanes will come online on Interstate 24 in mid-2026.
A $50 million non-recurring request to help in Hurricane Helene recovery that will provide low-interest loans to help local governments tap into match funds for state and federal dollars
An $8 million budget request for spot safety as federal funds are only provided reactively to safety needs and Tennessee has recoded 1,300 fatalities on roadways in past three years. The funds will address a safety project backlog.

TBI

TBI Director David Rausch said that 50 scientists have been added to TBI labs and that turn around for sexual assault kits has gone from 45.4 weeks up to 13 weeks with an ultimate goal of all crime lab returns being done within eight to 12 weeks. He also noted that TBI technology investments and its new aviation unit have proven vital, especially during the Hurricane Helene efforts, to identify flood victims and perform search and rescue functions. Budget requests included:

Increased personnel, including 29 positions for victims’ services and seven new intel analysts. Rausch noted an increase in cybercrime is leading to a need for additional personnel, particularly new staff positions to deal with Internet Crimes Against Children as no new personnel have been added to that area since 2011.
Four positions to create a second state aviation team
Funds for digital storage and technology to help with fentanyl and meth detection, which will both protect agents in the field and help with lab backlogs.
The development of real-time crime centers in major municipalities which will serve as hubs to help clear violent crimes and provide intel analysis.
A pilot program in Knoxville that will test wastewater for drug use similar to that used to test wastewater for the presence of COVID-19. The pilot program will be deployed on high school and college campuses and can also help narrow down homes where drug manufacture and dealing may be taking place.

DOH

With two-thirds of Tennessee counties without a hospital that provides maternity care, the department is developing telehealth programs for medical and mental health care. There are presently 31 counties involved in these programs.

The Department of Health is also working to establish a Center of Excellence to help develop resources and best practices to address the loss of medical providers, both hospitals and private providers, in rural communities. The information hub will also develop research grants and programs to provide solutions to the often-unique problems different communities face.

DISABILITY AND AGING

With nearly 20% of Tennesseans soon to be retirement age and East Tennessee being the top retirement destination for retirees in the Southeast, funding requests from the Department of Disability and Aging have included senior-focused programs such as:

Expanding seed money for rural transportation options for seniors, particularly in more rural municipalities and counties;
Providing center grants;
Grants for downpayments and housing renovations for seniors and those with disabilities;
Programs that provide community support of seniors, particularly programs that help navigate dementia; and
More funding for inclusive playgrounds. A grant program in 2024 received 84 applications, but only seven of those could be funded.

OTHER DEPARTMENTS

The Department of Revenue noted that of the 120,000 taxpayers eligible for the $1.6 billion in franchise and excise tax refunds, 41,400 had claimed their refund, totaling $865 million.
TDEC announced six new state parks are expected to come online in the near future and the $28 million Tennessee Water Education and Training Center at UTIA’s Lone Oaks Farm is expected to be complete in 2026. The “wet center” will provide opportunities for hands-on training programs in hydraulics, hydrology, erosion, and flood management.
TEMA is requesting funds to deploy Mesonet across all 95 counties. The program provides a network of real-time, automated weather stations for improved weather monitoring, severe weather warnings, and emergency response.
TDIC said construction is underway at the new residential burn building for training with completion expected in six months.
Labor and Workforce officials noted that Tennessee is in a unique position where there are more employers seeing talent than people seeking employment. The reason for this gap may also be because the workforce participation rate does not take into account full-time students, retirees, participants in the gig economy, or stay-at-home parents. Additionally, external factors such as housing, transportation, and childcare.