PSN's judgment looks like it is primarily based on immigration legislation:
Tennessee passed a remarkable five bills on immigration, the worst being a law that eliminates Tennessee’s driving certificate program, effectively eliminating 50,000 undocumented immigrant drivers who had previously demonstrated the ability to drive safely. The legislature also gave the Governor authority to negotiate an agreement with the federal government to train Tennessee Highway Patrol troopers as immigration agents, which could be problematic if it increases the practice of profiling.Fortunately, Tennessee is not at the "bottom of the barrel" in the PSN report with neighboring Georgia and Mississippi, and several positive legislative events are identified.
Some extreme anti-immigration measures were defeated, the state reduced the food tax, a provision to privatize some new toll roads was removed from their approval, SCHIP health care for children was expanded, and the Tennessee Clean Water Act of 2007 was passed. However, these progressive initiatives were not enough to pull Tennessee up to the top of the list with "Star States," like Colorado, Maine, and Washington.