The Mandated Local Partnership
Tennessee's education funding system is built on a state-local partnership. Under TISA, the state provides 70% of the combined base and weighted allocations, with local governments expected to contribute the remaining 30%.
TISA Base + Weighted Funding Split
However, this 70/30 split is a baseline — the actual local share can vary based on a district's fiscal capacity, and many districts choose to contribute more than their required minimum.
Local Revenue Sources
Local school funding in Tennessee comes primarily from two sources:
🏠 Property Taxes
The largest source of local education funding. Property tax rates and property values vary significantly across Tennessee's 95 counties, creating natural disparities in local funding capacity.
🛒 Local Sales Taxes
A portion of local option sales taxes contributes to education funding. Economic activity and retail presence affect how much revenue each district generates from this source.
What is Fiscal Capacity?
Fiscal capacity is the cornerstone concept of Tennessee's local funding system. It measures a school district's ability to raise local revenue based on its tax bases — primarily property values and local sales tax generation.
💡 How Fiscal Capacity Works
Higher Fiscal Capacity: Districts with strong property values and sales tax bases are expected to contribute a larger local share.
Lower Fiscal Capacity: Districts with weaker tax bases receive more state support to compensate, ensuring a more equitable distribution of resources across the state.
This equalization mechanism aims to prevent a situation where students in property-poor areas receive dramatically fewer resources than those in wealthier communities.
Maintenance of Effort
Tennessee law includes a maintenance of effort provision that prevents local governments from reducing their education funding contributions year-over-year. This ensures:
- Local support remains stable even as state funding increases
- TISA funds supplement, rather than replace, local investment
- Districts can't shift their funding responsibility entirely to the state
Key Concepts in Local Funding
📊 Local Overmatch
Many districts choose to contribute more than their required local share — this is called "overmatching." These additional funds allow districts to offer enhanced programs, higher teacher salaries, or additional services.
⚖️ Equalization
The state adjusts its contribution based on fiscal capacity to help balance funding between wealthy and poor districts, though disparities can still exist when districts overmatch.
💰 Direct Allocations
Unlike base and weighted funding, TISA's direct allocations for priorities like literacy and CTE are funded 100% by the state — no local match required.
📈 Revenue Fluctuations
Local revenues can fluctuate based on property assessments, economic conditions, and sales tax performance, creating budget challenges even when state funding remains stable.
Real-World Budget Challenges
Even with increased state funding through TISA, districts can face budget challenges when local revenues don't meet expectations:
⚠️ When Local Revenue Falls Short
If property tax collections or sales tax revenue come in below projections, districts may face difficult choices — cutting programs, deferring maintenance, or asking local governments for additional appropriations. TISA addresses state funding, but local budget realities remain a district-by-district challenge.
For more on how TISA is affecting districts statewide, see: TISA's Impact on Tennessee Districts.
