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Peay defeated Taylor in the election of November, 1922. Inaugurated as governor on January 16, 1923, Peay undertook a major reorganization of state government, partially to strengthen education, but also to improve transportation. The Tennessee Department of Highways and Public Works (now [[Tennessee Department of Transportation]]) was established as part of Peay's reorganizational efforts. He was re-elected in 1924.
Peay was governor during the [Scopes Trial]. Although he had signed the [[Butler Act]] banning the teaching of the theory of evolution, given his emphasis on and support for [[public education|education]], it seems unlikely that he was pleased with the nature of the publicity that this event gave the state. (The state government had engaged [[William Jennings Bryan]] to defend the law and prosecute [[John T. Scopes|Scopes]], however.) Peay was reelected to a third term in 1926. His health seemed to be declining, and many suggested that attempting to get the [[Tennessee General Assembly|state legislature]] to fund his education plans properly (which was difficult in view of the limited tax base in the Tennessee of the 1920s) was taking a toll on him. When he died in late 1927 after having had a particularly protracted battle over school funding with the legislature in the spring of that year, many citizens, especially the more progressive ones, reacted almost as if the legislature had killed him.
No Tennessee governor had ever died in office before (neither has any done so since). There was a tremendous outpouring of grief, particularly in some parts of the state, where schools were dismissed, flags flown at half-mast, and people, especially governmental officials, dressed in even more black than was already typical for the time, and all of the traditional symbols of mourning were employed. Peay was succeeded under the terms of the [[Tennessee State Constitution]] by [[Speaker (politics)|Speaker]] of the [[Tennessee State Senate|Senate]] [[Henry Hollis Horton|Henry Horton]]. In honor of Peay's leadership in roadbuilding, a bridge over the [[Cumberland River]] in [[Jackson County, Tennessee]] (now demolished) was named in his honor the next year. A newly-acquired normal school in [[Clarksville, Tennessee]] (now [[Austin Peay State University]]) was named in his honor in 1929. [[Tennessee State Route 14|State Route (SR) 14]] from [[Memphis, Tennessee|Memphis]], to [[Cotton Lake, Tennessee|Cotton Lake]], then [[Tennessee State Route 54|SR 54]] to [[Brownsville, Tennessee|Brownsville]], then [[Tennessee State Route 76|SR 76]] <ref>http://parispi.net/articles/2008/10/21/news/from_the_p_i_files/doc48fe010b78a89974152974.txt</ref> to [[Clarksville, Tennessee|Clarksville]] is also named in his honor, as are buildings at most of the other state universities in Tennessee.
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