HB 1238 - SB 1378
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
March 2, 2025
Fiscal Analyst: Alan Hampton | Email: alan.hampton@capitol.tn.gov | Phone: 615-741-2564
HB 1238 - SB 1378
SUMMARY OF BILL: Creates the Division of Early Child Care and Education (Division)
in the Department of Education (DOE). Transfers positions and associated funding from the Child
Care program within the Department of Human Services (DHS) to the DOE. Requires the
Commissioner of the DOE to appoint the Director of the Division. Requires the DOE to establish
a two-part transition plan to establish the Division and the unified early care and education system.
Establishes a transition advisory council staffed by persons within the Department to advise the
DOE in developing the two-part transition plan.
Requires the DOE to employ a contractor by July 1, 2025, to lead the DOE’s implementation of the
transition plan. Requires the DOE to submit the first phase of the written transition plan to the
Governor for approval by January 1, 2026, and the second phase of the plan to the Governor by
October 1, 2026.
Requires the DOE to implement the first phase of the transition plan by December 31, 2026, and
the second phase of the plan by July 1, 2027. Requires the Division to create and publish a strategic
plan for the unified early childhood care and education system by January 1, 2027. Requires the
Division to submit a report by October 30 of each year to the General Assembly on the progress
made in creating and maintaining the strategic plan.
FISCAL IMPACT:
STATE GOVERNMENT
REVENUE DHS DOE
FY26-27 ($21,410,400) $21,410,400
FY27-28 & Subsequent Years ($42,820,800) $42,820,800
EXPENDITURES DHS DOE
FY25-26 - $1,160,000
FY26-27 NET ($16,300,100) $24,289,700
FY27-28 & Subsequent Years NET ($33,988,500) $43,997,800
FEDERAL GOVERNMENT
EXPENDITURES DHS DOE
FY26-27 ($160,478,200) $160,478,200
FY27-28 & Subsequent Years ($320,956,300) $320,956,300
OTHER FISCAL IMPACT
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The Department of Human Services will require a continuation of interdepartmental revenue in an
amount of $1,884,100 in FY25-26 for leased office space. The Department will decrease
interdepartmental revenue by $500,000 in FY26-27 and $1,000,000 in FY27-28
Assumptions:
Department of Human Services
• The DHS will transfer positions and their associated funding to aid in the administration of
the newly created Division within the DOE.
• The DHS will transfer 263 programmatic positions and funding in the amount of
$21,345,613 from DHS’ Child Care program to the DOE. The positions are as follows:
Position Type # of Positions
Administrative Services Assistants 2 & 5 4
Appeals Coordinator 1
Child Care Specialist 2 65
Licensing Consultant 2 122
Program Coordinator 2
Program Directors 1-4 7
Program Manager 12
Program Specialist 16
Program Supervisor 3
Field Supervisor 1 & 2 31
Total 263
• The actual costs of payroll tied to Child Care program funding is estimated to be $5,986,363
in FY25-26.
• The DHS will transfer 38 administrative positions and funding in the amount of $3,944,630
to the DOE. The positions are as follows:
Position Type
# of
Positions Position Type
# of
Positions
Administrative Services Assistant 2 2 Program Coordinator 1
Appeals Generalist 1 Program Directors 1-4 4
Assistant Commissioner 2 1 Sr. Background Specialist 5
Associate Counsel 4 Executive Admin. Assistant 1
Auditor 2 2 HR Generalist 2 & 4 2
Clerk 3 4 Legal Assistant 3
Communications/Mktg. Manager 1 Sr. Associate Counsel 1
Background Specialist 1 Training Officers 1 & 2 5
Total 38
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• The transfer of positions and related funding will create a funding gap for the DHS.
Therefore, the DHS will require an additional appropriation of $2,041,733 ($5,986,363 -
$3,944,630).
• DHS will require one additional position to fill the gap in leadership created by transferring
the Assistant Commissioner 2 position to the DOE in order to lead the remaining divisions
under the Child Care and Community Services program, Community Services Block Grant,
Social Services Block Grant, Adult Protective Services, and Food Programs.
• The total recurring increase in state expenditures is as follows:
Title Salary Benefits
#
Positions Total
Assistant Commissioner 1 $158,544 $63,418 1 $221,962
• The DHS will also require recurring operational costs for the Assistant Commissioner 1
position, which is estimated to be $11,200 per year.
• The DHS is retaining 18.12 positions related to the Child Care program but is losing the
associated funding. The average operational costs per position is estimated to be $7,600 per
year; therefore, the DHS will require $137,712 (18.12 x $7,600) for those positions.
• The total operational costs are estimated to be $148,912 ($11,200 + $137,712) each year.
• The total recurring increase in expenditures for the funding gap, Assistant Commissioner 1
position, and operational costs is estimated to be $2,412,607 ($2,041,733 + $221,962 +
$148,912).
• The DHS will transfer $15,488,847 in technology funding for applications, systems
operations, platforms, and databases to the DOE.
• The DHS will require an additional $6,419,716 in state funding to continue regular systems
operations in FY26-27 and subsequent years.
• Child Care staff occupies leased space in 33 counties and shares this space with other
department program staff. Despite Child Care staff transferring to the DOE, the DHS does
not anticipate reducing its leased space throughout the state in the short term.
• The DHS has $1,884,100 budgeted for this purpose and will require a continuation of
interdepartmental revenue in an amount of $1,884,100 in FY25-26.
• The DHS will decrease interdepartmental revenue by $1,000,000 for a full year's worth of
costs beginning in FY27-28. In FY26-27, the DHS will reduce that amount by $500,000 due
to the projected start date of December 31, 2026.
• Transferring the Child Care program from the DHS to the DOE will require a
communications and media plan to inform customers, child care providers, and vendor
partners about the change.
• Based on previous DHS media and marketing campaigns, the one-time increase in state
expenditures in FY26-27 is estimated as follows:
HB 1238 - SB 1378 4
Description Cost
General Awareness Campaign $61,160
TV Campaign (3 months) $40,000
Broadcast Media Coverage $240,000
Digital Ads $60,000
Paid Social Media Posts $18,000
Vendor/Agency assistance $275,000
Total $694,160
• The DHS has $32,340,792 in state dollars budgeted for the Child Care and Development
Fund (CCDF), which is tied to CCDF Match and maintenance of effort for federal funding
requirements.
• Total state funding of $43,490,306 is needed to fully draw down CCDF awards of which
$18,975,782 is for maintenance of effort and $24,514,524 is for the CCDF Match award.
• The DHS is able to leverage $11,149,513 in DOE pre-kindergarten expenditures for
maintenance of effort and matching requirements, accounting for the difference between
the DHS budgeted state funds and CCDF Match and maintenance of effort requirements.
• Given that the Division must be created by December 31, 2026, it is estimated that FY26-
27 will experience one half year of impact.
• The total decrease in state revenue and expenditures to DHS (or the amount of state
funding transferred from the DHS to the DOE) is estimated to be $42,820,823
($21,345,613 + $5,986,363 + $15,488,847).
• Therefore, the decrease in state revenue and expenditures to DHS is estimated to be:
o $21,410,412 ($42,820,823 x 50%) in FY26-27; and
o $42,820,823 in FY27-28 and subsequent years.
• The increase in state expenditures to the DHS is estimated to be:
o $5,110,322 {[($2,412,607 + $6,419,716) x 50%] + $694,160} in FY26-27; and
o $8,832,323 ($2,412,607 + $6,419,716) in FY27-28 and subsequent years.
• The net decrease in state expenditures to the DHS is estimated to be:
o $16,300,090 ($21,410,412 - $5,110,322) in FY26-27; and
o $33,988,500 ($42,820,823 - $8,832,323) in FY27-28 and subsequent years.
• The total transfer of federal expenditures from the DHS to the DOE is estimated to be:
o $160,478,150 in FY26-27; and
o $320,956,300 in FY27-28 and subsequent years.
Department of Education
• The proposed legislation creates the Division in the DOE.
• The increase in state revenue (funding transferred from the DHS to the DOE) and state
expenditures to DOE is estimated to be $42,820,823.
• Therefore, the total increase in state revenue and expenditures to DOE is estimated to be:
o $21,410,412 ($42,820,823 x 50%) in FY26-27; and
o $42,820,823 in FY27-28 and subsequent years.
• The division has administrative responsibility for all child care and early education services
that are funded through state or federal monies, including, but not limited to:
o The Child Care and Development Block Grant Act and CCDF;
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o The voluntary pre-kindergarten program;
o The Individuals with Disabilities Education (IDEA) Act for children before
kindergarten;
o Head Start programs in this state; and
o Programs that are funded through the pre-school development grant of the Every
Student Succeeds Act.
• The proposed legislation requires the DOE to establish a two-part transition plan to
establish the Division and the unified early care and education system, and creates a
transition advisory council staffed by persons within the Department to advise the
Department.
• The council consists of the following members:
o The state's chief operating officer or the chief operating officer's designee;
o Three nongovernment persons with expertise in early child care and education,
appointed by the Governor and the Speakers of the Senate and the House of
Representatives, respectively;
o The Commissioners of the DOE and the DHS;
o The state's IDEA Act coordinator; and
o The Director of the Tennessee Head Start collaboration office.
• It is assumed that members of the council serve without compensation and that meetings of
the council will be held virtually. Therefore, meetings can be completed within existing
resources.
• The DOE will require three additional positions to support the Division.
• The total recurring increase in state expenditures in FY25-26 is as follows:
Title Salary Benefits
#
Positions Total
Program Director 2 $115,212 $27,142 1 $142,354
Education Consultant 3 $75,720 $20,590 2 $192,620
Total: $334,974
• The one-time transition startup technology costs, which include expenses for business
registration, equipment purchases, initial inventory, location setup, and website
development is estimated to cost $987,280.
• The DOE will require $385,280 in recurring technology costs for placing DHS employees
that have transferred to DOE on the department network and systems.
• The total increase in state expenditures for technology costs is estimated to be $1,372,560
($987,280 + $385,280) in FY26-27 and $385,280 in FY27-28 and subsequent years.
• The proposed legislation requires the DOE to implement a unified early childcare and
education system that includes a uniform child care licensing and regulatory system by July
1, 2027.
• Part of this system includes a uniform accountability and quality rating improvement system
for publicly funded early child care and education programs. DOE currently uses the
CLASS measurement tool that meets the same requirements outlined in the bill.
• The cost to train the additional employees transferred from the DHS to the DOE for pre-
kindergarten is estimated as follows:
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o $39,000 for CLASS training in FY26-27;
o $4,500 for ongoing monitoring of CLASS materials in FY26-27 and subsequent
years; and
o $100,000 for travel costs including per diem, lodging, and mileage in FY26-27 and
subsequent years.
• The cost to train the additional employees transferred from the DHS to the DOE for the
infant and toddler cohort is estimated as follows:
o $90,000 for 10 trainers and two training sessions in FY26-27;
o $96,000 for 160 licensing consultants and two training sessions in FY26-27; and
o $200,000 for travel costs including per diem, lodging, and mileage FY26-27 and
subsequent years.
• The recurring cost for continuing professional development is estimated to be $152,250
(290 licensing consultants x $175 per test) in FY26-27 and subsequent years.
• The total training and testing costs are estimated to be:
o $681,750 ($39,000 + $4,500 + $100,000 + $90,000 + $96,000 + $200,000 +
$152,250) in FY26-27; and
o $456,750 ($4,500 + $100,000 + $200,000 + $152,250) in FY27-28 and subsequent
years.
• The proposed legislation requires the DOE to employ a contractor by July 1, 2025.
• Based on review of other government contracts that developed a plan for consolidating
agencies, departments, or entities, the cost for contract services is estimated as follows:
Cost Category
Estimated
Cost FY25-26
Estimated
Cost FY26-27
Personnel Costs $500,000 $300,000
Administrative Costs $50,000 $30,000
Travel &
Accommodation $75,000 $50,000
Technology &
Equipment $100,000 $50,000
Training & Development $25,000 $15,000
Contingency Fund $75,000 $45,000
Total $825,000 $490,000
• The increase in state expenditures to the DOE is estimated to be:
o $825,000 in FY25-26;
o $2,879,284 ($334,974 + $1,372,560 + $681,750 + $490,000) in FY26-27; and
o $1,177,004 ($334,974 + $385,280 + $456,750) in FY27-28 and subsequent years.
• The total increase in state expenditures to DOE is estimated to be:
o $1,159,974 ($334,974 + $825,000) in FY25-26;
o $24,289,696 ($21,410,412 + $2,879,284) in FY26-27; and
o $43,997,827 ($42,820,823 + $1,177,004) in FY27-28 and subsequent years.
• The total increase in federal expenditures to the DOE is estimated to be:
o $160,478,150 in FY26-27; and
o $320,956,300 in FY27-28 and subsequent years.
HB 1238 - SB 1378 7
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director