SB 6001 – HB 6004
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
January 23, 2025
Fiscal Analyst: Alan Hampton | Email: alan.hampton@capitol.tn.gov | Phone: 615-741-2564
SB 6001 – HB 6004
SUMMARY OF BILL: Enacts the Education Freedom Act of 2025. Establishes an Education
Freedom Scholarship (EFS) Program administered by the Department of Education (DOE) for the
purpose of providing eligible students in this state with a scholarship to be used toward the cost of
attending a Category I, II, or III private school for the 2025-26 school year or subsequent years.
Requires each private school that enrolls EFS recipients to annually administer a nationally
standardized achievement test or the Tennessee Comprehensive Assessment Program (TCAP) test
to recipients in grades three through eleven (3-11), and to provide the results of the tests to the
Office of Research and Education Accountability (OREA) within the Comptroller of the Treasury
(COT), which must be annually reported to the education committees of the General Assembly.
Beginning with the Tennessee Investment in Student Achievement (TISA) allocation for the 2025-
26 school year, if a local education agency’s (LEA's) TISA allocation for the current school year is
less than the LEA's TISA allocation for the immediately preceding school year, and if the LEA
experienced disenrollment, requires the DOE to allocate additional funds to the LEA such that the
LEA's TISA allocation for the current school year combined with the amount of any such additional
funds is equal to the LEA's TISA allocation for the immediately preceding school year.
Beginning with the TISA allocation for the 2026-27 school year, if an LEA has ever received such
additional funds, and if an LEA's TISA allocation for the current school year is less than the sum
total of the LEA's TISA allocation for the immediately preceding school year and the amount of any
additional funds received by the LEA for the immediately preceding school year, and if the LEA
experienced disenrollment, then the DOE shall allocate additional funds to the LEA such that the
LEA's TISA allocation for the current school year is equal to the sum total of the LEA's TISA
allocation for the immediately preceding school year and the amount of any additional funds
received by the LEA for the immediately preceding school year.
Establishes that any additional funds provided to an LEA must be solely state funded. If an LEA is
eligible for the proposed additional funds and Basic Education Program (BEP) Transition Funding
or five percent Safety Net funding, then the DOE is required to only award the proposed additional
funds to the LEA.
Requires the DOE to award a one-time bonus in the amount of $2,000 to each teacher employed in
a kindergarten through grade twelve (K-12) school in this state for the 2024-25 school year.
Requires the State Treasurer (Treasurer) to distribute 80 percent of the privilege tax collections on
sports wagering, otherwise distributed to the Lottery for Education Account, into an account for use
by LEAs for the construction and maintenance of public school buildings.
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FISCAL IMPACT:
STATE GOVERNMENT
REVENUE General Fund
Lottery for
Education Account
LEA School
Building
Improvement
Fund
FY25-26 - ($77,235,700) $77,235,700
FY26-27 - ($77,235,700) $77,235,700
FY27-28 & Subsequent Years - ($77,235,700) $77,235,700
EXPENDITURES General Fund TISA
LEA School
Building
Improvement
Fund
FY25-26 $347,449,400 $3,328,700 $77,235,700
FY26-27 $191,261,800 NET ($44,933,600) $77,235,700
FY27-28 & Subsequent Years >$191,261,800 NET >($44,933,600) $77,235,700
Total Positions Required: 13
LOCAL GOVERNMENT
REVENUE Mandatory
FY25-26 $80,564,400
FY26-27 NET $32,302,100
FY27-28 & Subsequent Years NET Up to $32,302,100
OTHER FISCAL IMPACT
The General Appropriations Act of 2024 allocated recurring funding in the amount of $144,200,000
for the Education Freedom Scholarship Program, beginning in FY24-25.
A precise increase in permissive local expenditures for the construction and maintenance of public
school buildings beginning in FY25-26 cannot be quantified.
Assumptions:
Education Freedom Scholarships:
• An “eligible student” is defined as a resident of this state who is entitled to attend a public
school, except for a student enrolled in a home school, as defined in Tenn. Code Ann. § 49-
6-3050, or in a church-related school, as defined in Tenn. Code Ann. § 49-50-801, with
which the student’s parent is associated, registered, or is participating as a parent-teacher for
purposes of Tenn. Code Ann. § 49-6-3050(a)(2) or (a)(3).
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• The scholarship amount is equal to the base funding amount, or the dollar amount that
each student generates towards the student's funding allocation in a given year, provided
under TISA, and is solely state funded.
• The TISA base funding amount is $7,075 for the 2024-25 school year.
• The TISA funding formula was first implemented in FY23-24. Based on growth in the
TISA base over the first two years of implementation, it is estimated that the TISA base
funding amount and the average TISA payment will increase each year by an average of
3.13 percent.
• The TISA base funding amount is estimated to increase as follows:
o $7,296 ($7,075 x 1.0313) in FY25-26;
o $7,524 ($7,296 x 1.0313) in FY26-27; and
o Exceeds $7,524 in FY27-28 and subsequent years.
• For the 2025-26 school year, 20,000 scholarships will be awarded as follows:
o 10,000 scholarships for eligible students:
▪ Whose annual household income does not exceed 300 percent of the
amount required for the student to qualify for free or reduced-price lunch;
or
▪ Who meet the definition of eligible student to participate in the Tennessee
Education Savings Account (ESA) Program or the Individualized Education
Account (IEA) Program; and
o 10,000 additional scholarships for eligible students regardless of whether the
students meet the above eligibility requirements.
• No student may receive a scholarship for the same school year in which the student is
participating in the ESA Program or the IEA Program.
• For the 2024-25 school year, 584 students participate in the IEA Program while 3,590
students are enrolled in the ESA Program. It is assumed that students participating in these
programs will not seek participation in the EFS Program as benefits received through the
programs, including, but not limited to, higher per-pupil funding amounts in the ESA
Program, outweigh the benefits of the EFS Program.
• The 2023-24 average daily membership (ADM) in Tennessee public schools was
approximately 969,112. The ADM varies significantly from year to year, in part due to
recent pandemic distortions. Therefore, no adjustments in subsequent years are made for
the total student population.
• In 2024-25, there are approximately 169,210 students enrolled in non-public Tennessee
schools; 74,112 of those students are estimated to attend Category I, II, or III private
schools.
• The total number of students eligible to receive an EFS beginning in the 2025-26 school
year is approximately 1,039,050 [(969,112 public students + 74,112 non-public students) -
(584 IEA students + 3,590 ESA students)].
• The proposed legislation reserves 10,000 scholarships in FY25-26 for students who meet
certain income restrictions. The maximum household income is 300 percent of the amount
required for the student to qualify for reduced-price lunch.
• In FY24-25, the income limit for a family of four to qualify for reduced-price lunch is
$57,720. Therefore, a family of four whose income does not exceed $173,160 ($57,720 x
300%) is eligible to receive one of the 10,000 income-restricted scholarships in year one of
the EFS program.
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• Due to the established income threshold, it is assumed that applicants from both public and
private schools will seek the scholarship funding.
• Based on the statewide application of the proposed EFS Program, the income threshold,
and the number of eligible students, it is assumed that all 20,000 scholarships will be
awarded in the 2025-26 school year.
• Twelve states have adopted school choice programs similar to the proposed EFS Program;
however, multi-year data is only available for eight states. Based on data from these states,
the scholarships will be awarded to 65 percent of students from private schools and to 35
percent of students from public schools.
• It is estimated that 7,000 (20,000 x .35) scholarships will be awarded to public school
students and 13,000 will be awarded to private school students in FY25-26. It is assumed
that scholarships will continue to be awarded on a 65/35 basis in FY26-27 and subsequent
years.
• Beginning with the 2026-27 school year, and subject to the funds appropriated for
scholarships together with any available funds returned to the Treasurer, if the number of
applications received by the DOE during a program application period:
o Exceeds 75 percent of the total number of scholarships available for the respective
school year, then the DOE may increase the maximum number of scholarships
available for the next school year by no more than 5,000 scholarships; or
o Does not exceed 75 percent of the total number of scholarships available for the
respective school year, then the maximum number of scholarships available for the
next school year must remain the same as the maximum number of scholarships
available for the prior school year.
• Additionally, if the number of applications exceeds the number of scholarships available for
the respective school year, the DOE will be required to prioritize students who received a
scholarship in the prior year, then low income students, public school students or upcoming
kindergarten students in public schools, and finally all other eligible students.
• Based on school voucher program data from other states and the large pool of private
school students that would be eligible for the EFS, it is estimated that demand will be
sufficient to increase the maximum number of scholarships; therefore, 25,000 (20,000 +
5,000) scholarships will be awarded in the 2026-27 school year.
• The EFS Program is projected to grow in subsequent years following the 2026-27 school
year.
• The total amount of scholarships awarded will result in an increase in state expenditures of:
o $145,920,000 (20,000 x $7,296) in FY25-26;
o $188,100,000 (25,000 x $7,524) in FY26-27; and
o Exceeding $188,100,000 in FY27-28 and subsequent years.
TISA and LEA Impacts:
• The proposed legislation establishes that, beginning with the TISA allocation for the 2025-
26 year, if an LEA's TISA allocation for the current school year is less than the LEA's TISA
allocation for the immediately preceding school year, and if the LEA experienced
disenrollment, the DOE is required to allocate additional funds to the LEA such that the
LEA's TISA allocation for the current school year combined with the amount of any
additional funds received by the LEA is equal to the LEA's TISA allocation for the
immediately preceding school year.
SB 6001 – HB 6004 5
• If an LEA is eligible for the proposed additional funding as well as BEP Transition funding
or five percent Safety Net funding, then the DOE shall only award the proposed additional
funding.
• The TISA funding formula relies on the prior year’s data to drive subsequent year
allocations. Therefore, data from the 2024-25 school year will generate the funding to be
allocated for the 2025-26 school year.
• In year one (2025-26 school year) of the EFS Program, the state will contribute 71.5 percent
toward the average TISA amount based on the ADM from the prior year. Therefore, LEAs
will receive TISA funding for students who may have accepted an EFS and are no longer
enrolled in public schools.
• In year two (2026-27 school year) of the EFS Program, fewer students will be enrolled in
public schools. As the TISA funding formula is directly tied to ADM, an LEA would
typically receive less state funding if enrollment declines.
• In FY25-26, LEAs that meet the criteria of both disenrollment of students and decreased
TISA funding in the absence of this legislation will receive additional allocations to raise the
TISA funding level to that of the previous fiscal year.
• Based on the analysis of current TISA funding and ADMs of all LEAs, and assuming future
growth in such funding and ADMs based on historical data, it is estimated that 12 LEAs
will meet the criteria in FY25-26 and would experience a decrease in TISA funding of
$3,328,662 in the absence of this legislation.
• Per the proposed legislation, any additional funds provided to an LEA must be solely state
funded.
• The increase in state expenditures and an equivalent increase in local revenue to increase
funding for those LEAs to the previous year’s level is estimated to be $3,328,662 in FY25-
26.
• The number of scholarships awarded to public school students is estimated to be as
follows:
o 7,000 (20,000 x .35) in FY25-26;
o 8,750 (25,000 x .35) in FY26-27; and
o Exceeding 8,750 in FY27-28 and subsequent years.
• For the 2024-2025 school year, the average TISA payment per pupil that is subject to the
state and local share of 70/30 is $8,959. Such payment is estimated to increase as follows:
o $9,239 ($8,959 x 1.0313) in FY25-26;
o $9,528 ($9,239 x 1.0313) in FY26-27; and
o Exceeding $9,528 in FY27-28 and subsequent years.
• The direct funding that is funded 100 percent by state is estimated to be $480 for the 2024-
2025 school year. Such payment is estimated to increase as follows:
o $495 ($480 x 1.0313) in FY25-26;
o $510 ($495 x 1.0313) in FY26-27; and
o Exceeding $510 in FY27-28 and subsequent years.
• There will be a decrease in state expenditures and a corresponding decrease in local revenue
of $50,257,200 [(7,000 x $9,528 x 70%) + (7,000 x $510)] in FY26-27 as a result of 7,000
scholarship recipients transferring from public to private schools in FY25-26.
• These decreases will be offset to a certain extent by allocations to ensure that an LEA’s
TISA allocation for FY26-27 is not less than that of FY25-26. Based on the analysis of
current TISA funding and ADMs of all LEAs, and assuming future growth in such funding
SB 6001 – HB 6004 6
and ADMs based on historical data, it is estimated that 15 LEAs will meet the criteria in
FY26-27 and would qualify for total additional allocations of $5,323,643. The increase in
state expenditures and an equivalent increase in local revenue to increase funding for those
LEAs to the previous year’s level is estimated to be $5,323,643 in FY26-27.
• The net decrease in state expenditures and the corresponding net decrease in local revenue
is estimated to be $44,933,557 ($50,257,200 - $5,323,643) in FY26-27.
• The impact to TISA funding and LEA allocations in subsequent years cannot be quantified
with reasonable certainty due to multiple unknown variables, such as future TISA funding
growth and future growth in ADM. However, the net decrease in state expenditures and the
corresponding net decrease in local revenue is estimated to exceed $44,933,557.
Administration of EFS Program and Total EFS Program Cost:
• On May 26, 2023, the DOE entered into a contract with the vendor Student First
Technologies to create and administer an online platform for the ESA and IEA programs.
The contract is effective until May 25, 2028.
• The contract includes an annual subscription and license fee of $695,000 for the platform,
which is required to accommodate a minimum of 20,000 users. In addition, according to
DOE, the current ESA Program team has 22 employees dedicated exclusively to the ESA
Program that accounts for $2,600,000 in personnel salaries and benefits.
• According to DOE, 11 positions (half of the existing ESA Program personnel) will be
required to administer the EFS Program. Therefore, it is estimated the new positions will
increase state expenditures by $1,300,000 ($2,600,000 x .50) in FY25-26 and subsequent
years.
• Based on further information from DOE, approximately $1,400,000 in operational funding
is required for: the set-up of a new application, processing increased volume in applicants
and vendors, support for participating students and vendors, and team operations. This
compares to approximately $1,900,000 in operational funding for the existing ESA
Program.
• The total recurring increase in state expenditures for administration of the EFS Program is
estimated to be $2,700,000 ($1,300,000 + $1,400,000), beginning in FY25-26.
• The total increase in state expenditures from the General Fund for the EFS Program is
estimated as follows:
o $148,620,000 ($145,920,000 + $2,700,000) in FY25-26;
o $190,800,000 ($188,100,000 + $2,700,000) in FY26-27; and
o Exceeding $190,800,000 in FY27-28 and subsequent years.
Test Administration:
• As a condition of receiving a scholarship, EFS recipients in grades 3-11 who enroll in a
private school will have to comply with certain state testing requirements.
• Each private school that enrolls EFS recipients in grades 3-11 must annually administer to
those students either:
o A nationally standardized achievement test that is aligned to the respective school’s
instructional plan and complies with rules established by the State Board of
Education (SBE); or
o The Tennessee Comprehensive Assessment Program (TCAP) test required for the
grade in which the recipient is enrolled.
SB 6001 – HB 6004 7
• The DOE’s contract with Pearson Inc. for the delivery of state assessments details the
modes of test administration by grade-level and subject area and determines what
assessment materials are required. The contract terminates June 2025, but it can be
reasonably assumed the department will either extend such contract or enter a new one
upon its expiration.
• Chapter 0520-07-02 of the Rules of the SBE requires Category I, II, and III private schools,
at least once each school year, to give a nationally standardized achievement test covering
the areas of English language arts and math to each student in third through eleventh
grades.
• Given that Category I, II, and III private schools are already required to administer such
testing, it is assumed that a private school participating in the EFS Program will administer
a nationally standardized achievement test rather than the TCAP. The costs will be borne
by each respective private school, resulting in no impact to state expenditures.
• If a private school elects to administer the TCAP test to EFS students, the test
administration can be accommodated within existing resources through the DOE’s current
contract with Pearson Inc., and any impact to DOE is estimated to be not significant.
• By June 30, 2026, and by each June 30 thereafter, each private school that enrolls EFS
recipients must provide the test results to the recipient's parents and to the OREA within
the COT. The data must be provided on a form developed by the OREA.
• The OREA is required to: (1) analyze the test results by recipient grade level, household
income level, sex, and race; and (2) submit an annual report to the education committees of
the General Assembly detailing the results of the tests.
• The OREA can create and submit the annual report utilizing existing staff and resources
without any significant increase in state expenditures.
Teacher Bonuses:
• The proposed legislation requires the DOE to award a one-time bonus in the amount of
$2,000 to each teacher employed in a K-12 public school in this state for the 2024-25
school year. It is assumed that bonuses will be paid in FY25-26.
• Bonuses paid to teachers pursuant to this legislation are not part of the TISA and are solely
state funded.
• Based on data from DOE’s TNCompass platform and historical shifts in the total number
of educators serving throughout the year, it is estimated that 86,000 teachers across various
categories (excluding administrators or instructional supervisors) would be eligible to
receive the bonus.
• Providing teacher bonuses will increase state expenditures by $172,000,000 (86,000 x
$2,000) in FY25-26.
• Because the bonuses are completely state funded, to avoid any local impact it is assumed
that the appropriation for bonuses must include the employer share of benefits.
• The employer share of benefits is estimated to be 15.33 percent (6.2% Social Security +
1.45% Medicare + 7.68% Tennessee Consolidated Retirement System).
• Providing the employer share of benefits will increase state expenditures by $26,367,600
($172,000,000 x 15.33%) in FY25-26.
• The total increase in state expenditures for teacher bonuses is estimated to be $198,367,600
($172,000,000 + $26,367,600) in FY25-26.
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Privilege Tax:
• Tennessee Code Annotated § 4-49-104(e) requires 80 percent of the privilege tax collected
on sports wagering to be deposited into the Lottery for Education Account, 15 percent to
the General Fund for local governments, and 5 percent to the Department of Mental
Health and Substance Abuse Services.
• Under the proposed legislation, the Treasurer will be required to distribute 80 percent of
the privilege tax collected into an LEA School Building Improvement Fund, for the
construction and maintenance of public school buildings, instead of the Lottery for
Education Account.
• The Department of the Treasury (DOT) will require additional personnel and support
services for the implementation and administration of this fund allocation as follows:
o $160,800 ($120,000 salary + $40,800 benefits) for one position;
o $201,000 ($150,000 salary + $51,000 benefits) for one position; and
o $100,000 for support services including legal, audit, and communications.
• The increase in state expenditures is estimated to be $461,800 ($160,800 + $201,000 +
$100,000) in FY25-26 and subsequent years.
• Based on information provided by the Tennessee Higher Education Commission, the
Tennessee Lottery for Education Account revenue and expenditures from FY21-22
through FY23-24 are as follows:
Revenue
Lottery Sports Wagering Total
FY21-22 $467,500,000 $36,700,000 $504,200,000
FY22-23 $497,400,000 $65,700,000 $563,100,000
FY23-24 $492,300,000 $70,100,000 $562,400,000
Expenditures
Scholarships Administration Total
FY21-22 $346,600,000 $7,400,000 $354,000,000
FY22-23* $427,100,000 $9,200,000 $436,300,000
FY23-24 $446,500,000 $9,300,000 $455,800,000
*HB 2152/SB 2405 of the 112
th
General Assembly increased the HOPE Scholarship award
amounts and expanded the Dual Enrollment Grant.
• According to the Sports Wagering Advisory Council estimates presented to the State
Funding Board on November 4, 2024, total privilege tax collections allocated to the Lottery
for Education Account are estimated to be $77,235,690 in FY25-26. While future growth is
possible, for the purposes of this fiscal analysis, such allocation is assumed to remain
constant in subsequent years.
• The decrease in state revenue to the Lottery for Education Account and corresponding
increase in state revenue to the LEA School Building Improvement Fund is $77,235,690 in
FY25-26 and subsequent years.
• It is assumed there will be an equal increase in state expenditures from the LEA School
Building Improvement Fund and corresponding increase in local revenue in FY25-26 and
subsequent years.
SB 6001 – HB 6004 9
• Any increase in permissive local expenditures beginning in FY25-26 cannot be quantified
with reasonable certainty.
Total Impacts:
• The total increase in state expenditures to the General Fund is estimated as follows:
o $347,449,400 ($148,620,000 + $198,367,600 + $461,800) in FY25-26;
o $191,261,800 ($190,800,000 + $461,800) in FY26-27; and
o Exceeding $191,261,800 in FY27-28 and subsequent years.
• The increase in state TISA expenditures is estimated to be $3,328,662 in FY25-26. The net
decrease in state TISA expenditures is estimated to be $44,933,557 in FY26-27 and exceed
$44,933,557 in FY27-28 and subsequent years.
• The decrease in state revenue to the Lottery for Education Account and corresponding
increase in state revenue to and state expenditures from the LEA School Building
Improvement Fund is estimated to be $77,235,690 in FY25-26 and subsequent years.
• The total increase in local revenue is estimated to be $80,564,352 ($3,328,662 +
$77,235,690) in FY25-26. The net increase in local revenue is estimated to be $32,302,133
($77,235,690 - $44,933,557) in FY26-27, and be up to $32,302,133 in FY27-28 and
subsequent years.
CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director