Shelby County Needed a State Waiver to Borrow $125 Million. Its Last Budget Was Never Approved.

MEMPHIS, Tenn. - Before Shelby County could borrow up to $125 million to meet payroll, it had to ask the State of Tennessee for permission.

The Tennessee Comptroller's Division of Local Government Finance received an emergency waiver request from the county on July 20. State law required it, because the county's fiscal 2026 budget was never approved by the state. Without the waiver, the county could not issue the debt at all.

The Comptroller's office said it had no concerns with the request and expected to approve it. It also said it anticipated the county's fiscal 2027 budget would be filed before its August 31 due date.

The borrowing itself, approved by commissioners on July 27, was covered in our July 29 report, including the vote and the estimated interest cost. This is a follow-up on the part that was not: the waiver, and the filing deadline now 28 days out.

The sequence

The county's prior-year budget was never approved by the state. That fact required a waiver before the county could borrow. The county borrowed to make payroll for roughly 4,600 employees. The next budget is due August 31.

The notes are structured as tax and revenue anticipation notes, a short-term instrument repaid when property tax revenue arrives, and are to be repaid before June 30, 2027.

It is the county's second borrowing to fund operations in under a year. In November 2025, commissioners approved a $43 million loan from the county's own debt service fund to its general fund to ease a cash-flow crunch.

The case that this is ordinary

Anticipation notes are a standard municipal cash-flow tool, not new debt for new spending. Property tax revenue in Tennessee arrives largely between December and February, while payroll and vendor obligations run every two weeks all year. Many local governments bridge that gap with short-term borrowing, and doing so is neither unusual nor a sign of insolvency on its own.

The county has consistently characterized the notes in those terms. The Comptroller's office, which had every opportunity to object, did not.

What distinguishes a routine timing gap from a warning sign is the trend, not the instrument. Two operating borrowings in under a year, growing from $43 million to $125 million, and moving from an internal transfer to an external instrument, is a trend worth reading in the documents rather than taking on assurance.

Why it matters for Memphis

Shelby County residents pay for this borrowing. Anticipation notes carry interest and issuance costs, and those are real dollars that fund no service.

The timing compounds it. County Mayor Lee Harris and Sheriff Floyd Bonner are both term limited and leave office September 1. Voters choose their successors on Thursday. Whoever is seated in September inherits this debt, the August 31 budget filing deadline, and whatever the state does with that filing.

The county is also the funding body for Memphis-Shelby County Schools, whose budget it has not yet approved. Classes began August 3. The amended district plan, closer to $1.8 billion, does not reach commissioners until August 10.

A funding body that borrowed to make its own payroll in July, under a waiver it needed because its last budget was never state-approved, is the same body scheduled to take up a $1.8 billion school appropriation August 10.

Accountability watch

Who is accountable: The Shelby County Board of Commissioners, chaired by Chairwoman Shante K. Avant, which approved the borrowing. County Mayor Lee Harris and the county administration, which prepare the budget filed with the state. The Tennessee Comptroller's Division of Local Government Finance, which did not approve the fiscal 2026 budget and granted the waiver.

What is pending: The county's fiscal 2027 budget filing with the Comptroller, due August 31, 2026.

Timeline: $43 million internal loan approved November 2025. County adopted its own budget June 29, 2026. Waiver request received by the Comptroller July 20, 2026. Borrowing of up to $125 million approved July 27, 2026. Fiscal 2027 budget due August 31, 2026. Notes repayable before June 30, 2027. Mayor Harris and Sheriff Bonner leave office September 1, 2026.

Status as of August 3, 2026: Approved. Fiscal 2027 budget not yet filed.

How to verify: Request the borrowing resolution and its recorded vote from the Commission's Minutes Department; the resolution states the amount, term, rate and security. The Tennessee Comptroller's Division of Local Government Finance can confirm the status of both the fiscal 2026 and fiscal 2027 county budget filings and the terms of the waiver.