SB 1357 - HB 1399
FISCAL NOTE
Fiscal Review Committee
Tennessee General Assembly
March 12, 2025
Fiscal Analyst: Rebecca Chandler | Email: rebecca.chandler@capitol.tn.gov | Phone: 615-741-2564
SB 1357 - HB 1399
SUMMARY OF BILL: Requires the Commissioner of the Department of Labor and
Workforce Development (DLWD) to set the state’s minimum hourly wage rate at not less than $20
per hour. Requires an employer to pay an employee at least one-and-a-half times the hourly rate for
every hour worked in excess of 40 hours per week. Establishes a cause of action for employees, if
employers violate the state’s minimum hourly wage rate.
FISCAL IMPACT:
STATE GOVERNMENT
EXPENDITURES General Fund
FY25-26 $95,324,100
FY26-27 & Subsequent Years $95,299,000
Total Positions Required: 4
LOCAL GOVERNMENT
EXPENDITURES Mandatory
FY25-26 & Subsequent Years Up to $591,989,900
Article II, Section 24 of the Tennessee Constitution provides that: no law of general application shall impose increased expenditure
requirements on cities or counties unless the General Assembly shall provide that the state share in the cost.
Assumptions:
State Employment
• Currently, per the federal Fair Labor Standards Act, the federal minimum wage is set at $7.25
per hour.
• This legislation would set the minimum wage in Tennessee at $20 per hour, as it is greater
than the federal minimum wage.
• Based on information provided by the Department Human Resources, there are 3,909 state
employees who make $20 an hour, 2,642 full-time employees and 1,267 part-time
employees. To raise their wages to $20 an hour would incur a recurring increase in state
expenditures of $19,371,678 in FY25-FY26 and subsequent years.
• Additionally, state higher-education institutions will require additional expenditures for
increased payroll and increased contract employee costs. See table below for information
provided by higher institutions in the state:
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School Increase in Expenditures
Tennessee Board of Regents $10,703,848
University of Tennessee School System $51,006,769
Middle Tennessee State University $5,100,000
East Tennessee State University $2,600,000
Tennessee Tech University $2,744,720
Austin Peay State University $985,162
University of Memphis $2,500,000
Total $75,640,499
• The total recurring increase in state expenditures is estimated to be $95,012,177
($19,371,678 + $75,640,499) beginning in FY25-26.
• This legislation will require DLWD to investigate such complaints, as well as those received
with regards to wages earned for hours worked in excess of 40 hours.
• Based on information provided by the DLWD, due to the fact that the state does not have
an established minimum wage and essentially reflects the federal minimum wage, when a
wage complaint is currently provided to the Department, it makes referrals to the USDOL,
and it simply tracks the complaints, but does not currently investigate them.
• The proposed legislation will require the DLWD to investigate such complaints, as well as
those received with regards to wages earned for hours worked in excess of 40 hours.
• Based on information provided by the DLWD, the Department will need three additional
labor standards inspectors and one administrative assistant-3.
• The total recurring increase in state expenditures is as followed:
Title Salary Benefits
#
Positions Total
Labor Standard
Inspector $53,856 $16,963 3 $212,457
Administrative
Assistant 3 $48,204 $16,025 1 $64,229
Total: $276,686
• There will be a one-time increase in state expenditures of $35,244 for computers, phones,
software, travel, and training.
• There will be an increase in state expenditures in FY25-26 of $311,930 ($276,686 +
$35,244).
• There will be a recurring cost of $10,140 for travel, phone service, and training. Therefore,
there will be an increase in state expenditures of $286,826 in FY25-26 and subsequent years
($276,686 + 10,140).
• The total increase to state expenditures will be $95,324,107 ($95,012,177 + $311,930) in
FY25-26 and $95,299,003 ($95,012,177 + $286,826) in FY26-27 and subsequent years.
SB 1357 - HB 1399 3
Local Employment
• The impact to local government expenditures is dependent on several unknown factors,
such as the number of local government employees that will be impacted by the legislation,
the extent in which each employee’s wage must be raised to meet the requirements of the
legislation, the extent of any change in the number of hours that each employee works in a
year, and whether local governments will decide to reduce their total number of employees
as a result of higher wage expenses.
• As of December 2024, there were 299,300 local government employees.
• Based on data provided by DHR, approximately 8.9 percent of state employees earn less
than $20 per hour. Applying this percentage to local government employment, an
estimated 26,638 local government employees earn less than $20 per hour (299,300 x
8.9%).
• Using the full-time and part-time distribution observed among state employees, where 67.6
percent of minimum wage earners are full-time and 32.4 percent are part-time, it is
estimated that 18,007 local government employees are full-time (26,638 x 67.6%), while
8,631 (26,638 x 32.4%) are part-time.
• Assuming a minimum wage of $7.25 per hour, full-time employees working 2,080 hours
per year and part-time employees working 1,040 hours per year, we can estimate the
current annual wage expense for local government employees as follows:
o 18,007 full-time employees x 7.25 x 2,080 hours = $271,546,845
o 8,632 part-time employees x $7.25 x 1,040 hours = $65,074,836
• Therefore, the total estimated current expenditure to local government minimum wage
obligations are approximately $336,621,680 ($271,546,845 + $65,074,836).
• Under the proposed legislation, the total cost to local governments of a $20 minimum wage
will be:
o 18,007 full-time employees x $20 x 2,080 hours = $749,094,744
o 8,631 part-time employees x $20 x 1,040 hours = $179,516,788
• Therefore, there will be an annual increase of local government expenditures of up to
$591,989,852 [($749,094,744 + $179,516,788) - $336,578,060] in FY25-26 and subsequent
years.
Other Fiscal Impacts
• This assumes additional state and local sales tax collections for state and local governments
respectively as a result of impacted employees spending a higher wage within the economy;
however, any such impact is assumed to be offset by other reductions in state and local
business tax collections occurring as a result of reduced net income for impacted business
owners occurring as a result of paying higher wage expense.
• The proposed legislation may result in a small increase in cases in the court system, which
will result in additional state and local government expenditures for processing the cases
and additional state and local government revenue from fees, taxes and costs collected.
These expenditures and revenue are estimated to not be significant.
• Additionally, state and local government contracts with private entities may require
amendments to account for increased wages. The totality of this increase in state and local
government expenditures cannot be reasonably assumed.
SB 1357 - HB 1399 4
• The impact on gross income of state and local government workers as a result of requiring
pay that is one-and-a-half times normal pay, for all hours worked in excess of 40 hours in a
week, is unknown.
IMPACT TO COMMERCE:
BUSINESS IMPACT
FISCAL YEAR EXPENSES
FY25-26 & Subsequent Years Up to $18,692,583,400
Assumptions:
• Under the FSLA, the federal minimum wage is $7.25 per hour, but certain workers are
exempt or subject to special rules. Tipped employees can be paid $2.13 per hour if tips
bring total earnings to $7.25 per hour. Other exemptions exist for workers with disabilities,
live-in domestic workers, small farm workers, and seasonal/recreational employees.
• Approximately 872,021 Tennesseans make less than $17 per hour.
• Using the full-time and part-time distribution observed among state employees, where 67.6
percent of minimum wage earners are full-time and 32.4 percent are part-time, it is
estimated that 589,486 of these workers are full-time (872,021 x 67.6%) and 282,535 are
part-time (872,021 x 32.4%)
• Assuming full-time employees work 2,080 hours per year and part-time employees work
1,040 hours per year, we can estimate the current annual wage expense for employees as
follows:
o 589,486 full-time employees x $7.25 x 2,080 hours = $8,889,451,836
o 282,535 part-time employees x $7.25 x 1,040 hours = $2,130,312,422
• Under the proposed legislation, the total cost to businesses of a $20 minimum wage will be:
o 589,486 full-time employees x $20 x 2,080 hours = $24,522,625,754
o 282,535 part-time employees x $20 x 1,040 hours = $5,876,723,923
• Therefore, there will be an annual increase of expenditures to all Tennessee employers
under the proposed minimum wage will be up to $19,379,585,419 ($24,522,625,754 +
$5,876,723,923) – ($8,889,451,836 + $2,130,312,422) in FY25-26 and subsequent years.
• The total annual increase in private business expenditures related to an increased minimum
wage will be up to $18,692,583,390 ($19,379,585,419 - $19,371,678 state employees -
$75,640,499 higher ed employees - $591,989,852 local government employees).
• The impact on gross income of workers in the state as a result of requiring pay that is one-
and-a-half times normal pay, for all hours worked in excess of 40 hours in a week, is
unknown.
• For purposes of this analysis, it is assumed that this increase in expenditures for Tennessee
businesses will remain constant into perpetuity.
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CERTIFICATION:
The information contained herein is true and correct to the best of my knowledge.
Bojan Savic, Executive Director