Tennessee lawmakers pass $42.6 billion budget with teacher, employee raises, new infrastructure spending

Tennessee Gov. Bill Lee answers questions after he spoke to a joint session of the legislature at the start of a special session on education, Tuesday, Jan. 19, 2021, in Nashville, Tenn. (AP Photo/Mark Humphrey)

NASHVILLE - Tennessee lawmakers approved a $42.6 billion state budget Thursday for the fiscal year that will start July 1, providing pay raises for public K-12 teachers as well as increases for state employees, local prosecutors and others amid massive revenue surpluses.

The General Assembly also included a proposal from Gov. Bill Lee, putting $250 million into a new mental health trust fund with interest earnings on the principal to be used to provide funding to boost programs addressing students' needs.

At the same time, lawmakers parted ways with Lee's original proposal in several areas, among other things inserting $250 million in one-time surplus cash into Tennessee's state pension system and injecting $100 million into the state's rainy-day reserve.

"That's a lot of money, but when we sat down and worked on this budget, we did it in the 'Tennessee Way,'" House Finance Committee Chair Patsy Hazlewoood, R-Signal Mountain, told the chamber.