State and Local Government Committee advances tax, pension and social-policy measures; adopts three agency budgets

The Tennessee Senate State and Local Government Committee advanced several bills and approved three state agency budgets in a four-hour meeting that combined tax fixes, pension divestment language, local tax and rental rules and measures aimed at preventing discrimination by state-funded programs.

Why it matters: The committee moved measures that could change how local governments manage small delinquent tax accounts, how pension funds screen direct holdings, and how state-funded nonprofit and religious organizations must treat eligible participants in programs financed with public money. The committee also forwarded the proposed budgets for the Department of Human Resources, the Bureau of Ethics and Campaign Finance and the Department of Veterans Services to the Finance Committee.

The committee voted first on a bill brought by Senator Gordon Hyer that would let local governing bodies decline to bill certain very small property-tax delinquencies and abate related penalties and interest. The change aims to reduce collection costs for counties by avoiding pursuit of accounts the county considers uneconomical to collect. Will Denami, testifying for the assessors of property, opposed the measure on constitutional grounds and urged caution, saying Tennessee law requires uniform, equitable assessment and collection.

"Tennessee is required to be fair, equitable, uniform," Will Denami, speaking on behalf of the assessors of property, told the committee, and he said the existing constitutional framework makes a statewide exemption difficult to implement without a constitutional amendment.

Sponsor Gordon Hyer responded that the bill is permissive and would allow — not require — local governing bodies to decline to pursue very small balances. The committee approved the bill and will send it to the Finance Committee.

The committee also approved legislation that would require public pension plans to review and divest directly held equities of majority-owned Chinese companies. Senator Jon Stevens, who carried the measure, said the bill would require trustees to perform annual reviews and, consistent with fiduciary duties, divest direct holdings that the statute defines as restricted investments. Several members pressed the sponsor on implementation and whether local boards’ fiduciary duties create conflicts; the sponsor pointed to language in the draft that requires divestment be consistent with each entity’s prudent‑investor standard.

Senators debated whether the proposed divestment language should be broader — for example, referencing a federal list of adversary nations — but the sponsor said he focused the bill on China because of the specific concerns prompting the proposal. The bill was moved to the final calendar for further work.

On revenue-sharing and collection costs, the committee unanimously approved a bill to reduce the state’s administrative collection fee on certain locally collected taxes from 1.125% to 0.75%; the fiscal note attached to the bill estimates roughly $18,984,400 would return to local governments under the change.

Family-leave advocates and witnesses pressed the committee on another item: an amendment to the state’s parental paid‑leave law that would let adoptive parents start leave when a child is placed with the family, rather than waiting until a court finalizes the adoption. Drew Norman and Courtney Norman, who testified as an adoptive family and public-education employee, said local practice requiring finalization forces adoptive parents to use other leave options during a period when the child is a newborn.

"When I requested my parental paid leave from my local education agency, they told me I had to wait until finalization of our adoption," Drew Norman said. The committee approved the amendment and moved the bill to the calendar.

The panel also acted on several local-government and consumer-facing measures. It advanced an amendment allowing municipalities to establish residential rental registries and to assess civil penalties for noncompliance (an amendment adds a civil-penalty range the committee discussed); the sponsor asked for one week to work on language and the bill was rolled. The committee approved an amendment to allow municipalities to retain lodging tax collected during the first 30 days of an extended-stay hotel tenancy and set the bill’s effective date to July 1, 2025.

Agency budgets: The committee voted to forward the Department of Human Resources’ recommended FY26 budget increase — a small net increase driven by three investments (technology subscription, market-survey data and a position focused on ADA accommodations and supervisor training) and offset by operational reductions — to Finance with a favorable recommendation. Department leaders told the committee the state faces significant vacancies (including more than 600 correction-officer vacancies statewide discussed during the hearing) and that leadership and retention training are priorities.

The Bureau of Ethics and Campaign Finance presented a compact budget request and highlighted a 20‑year-old reporting system that the agency expects to replace; the committee approved their budget and asked the agency to continue vendor outreach for a modernized filing system. The Department of Veterans Services also secured committee approval to move its FY26 budget request forward; the department said it expects continued demand tied to PACT Act claims and asked for two full‑time veteran‑service officer positions.

Other committee actions included adopting an annual alcohol omnibus (multiple new by-the-drink licenses) and advancing a bill that would bar state-funded programs or activities from denying eligible participants access on the basis of religion; the sponsor said the measure was prompted by a recent denial to a Jewish couple seeking to participate in a state‑funded adoption program. Committee staff provided a legal clarification in committee that the nondiscrimination requirement applies to the specific program or activity funded by the state — not to every private activity of a recipient organization.

Votes at a glance - Senate Bill 10-61 (permit local governing bodies to decline collection/abate penalties on property‑tax delinquencies under $20): approved in committee; vote recorded in roll call (see action record). - Senate Bill 13-15 (reduce state administrative fee on certain locally collected taxes to 0.75%): approved in committee; moved to Finance (committee reported unanimous approval). - Senate Bill 5-42 (require public pension trustees to review/direct holdings in majority‑owned Chinese companies): moved to the final calendar for further work. - Senate Bill 3-14 (allow adoptive parents to begin paid parental leave at placement): passed committee unanimously and moved to calendar. - Department of Human Resources FY26 budget: approved and forwarded to Finance with recommendation to fund the modest net increase. - Bureau of Ethics and Campaign Finance FY26 budget: approved and forwarded to Finance. - Department of Veterans Services FY26 budget: approved and forwarded to Finance. - Senate Bill 3-84 (allow municipalities to keep lodging tax on first 30 days at extended‑stay hotels): passed committee. - Senate Bill 3-08 (alcohol omnibus licensing): passed committee and moved to Finance. - Senate Bill 3-05 (state-funded program nondiscrimination on religion): passed committee.

What’s next: Most measures approved by the committee now move to Finance or the full Senate calendar for further consideration. Several bills were rolled for additional drafting; a handful were rescheduled to the final calendar for possible floor floor action. Committee staff said technical amendments and fiscal memos for some late-filed changes are expected to be posted before the bills reach committee on the floor.

Reporting note: This article summarizes the committee record and names speakers and witnesses who appeared in the transcript. Quotations are exact where indicated and attributed to the listed, identified speakers.