Tennessee law sets school and city budgets when leaders cannot agree

When a municipality and its local education agency do not agree on a budget by August 31, the school budget is set at the minimum needed to meet state funding requirements. This applies to municipalities that have established a local education agency under state law. If this happens for three consecutive fiscal years and the agency receives only the required minimum each year, the third-year budget must include an increase equal to 3% of the required local funding for schools. The increase is not required if the agency governing body failed to submit its budget proposal by May 1 in any of those three years. The agreement deadline is August 31 each year. The possible 3% increase applies in the third consecutive fiscal year that the municipality and agency fail to agree and the agency receives only the required minimum.

If a municipality has not adopted a budget by the first day of its fiscal year, its prior-year operating budget and spending ordinance continue temporarily. This applies to municipal operating budgets when the municipality has not adopted a budget by the first day of its fiscal year. Each month, municipal agencies and other recipients of municipal funds may not commit more than the prior year's allotment for a comparable month unless the municipal legislative body approves the extra amount by ordinance and identifies an equal funding source. The continuing budget may run for two months. It may run for a third month only after the comptroller or designee approves an extension request based on extraordinary circumstances; the municipal legislative body must then take action to extend it. The prior-year budget continues until a final budget is adopted, but it cannot extend beyond the last day of the third month of the fiscal year.