Gov. Bill Haslam outlines $32.7 billion spending plan [The Knoxville News-Sentinel, Tenn.]

Jan. 29--NASHVILLE -- Gov. Bill Haslam's plan for spending $32.7 billion in the next year -- more state money than this year, but less in federal funds -- encompasses expansion in some areas, reductions in others and two small tax cuts.

The budget for the fiscal year beginning July 1, outlined in Haslam's third "State of the State" speech to a joint session of the House and Senate on Monday evening, provides housing for prisoners and technology for education as perhaps the most notable areas for increased spending as compared to recent years.

But the biggest increase, as usual, is in TennCare, up about $350 million. A new budgeting maneuver is used to offset a reduction in federal TennCare funding. Basically, managed care organizations will begin paying the state's tax on insurance premiums and the money raised will be used in TennCare.

For K-12 education, Haslam proposes giving schools statewide $51 million toward "technology transition upgrades" and $34 million for "increased security measures."

There's also $22 million in the budget to build a new high school at the Tennessee School for the Deaf in Knoxville.

In higher education, Haslam wants to allocate $307.3 million for capitol projects, including $24 million to convert the steam plant on the University of Tennessee'sKnoxville campus from burning coal to natural gas. Haslam characterized the plant currently as "one of the largest sources of air pollution in Knox County."

An unusual provision is that the $24 million plant conversion will use money from the anticipated -- but not finalized -- resolution of a legal dispute over how much money is due the state from a lawsuit settlement with tobacco companies.

The governor also proposes to start a $35 million endowment to provide scholarships to students from low-income families through the Tennessee Student Assistance Corp., which will be given anextra $5 million in the coming year.

Haslam said the UT and the Board of Regents systems have committed to hold tuition increases next year to no more than 6 percent at four-year colleges and 3 percent at two-year schools.

For prisons, almost $50 million in new annual funding is allocated to cover the cost of keeping state prisoners in local jails and $21 million to cover the cost of inmate medical and mental health treatment. Meanwhile, $30.2 million is included for construction needed to add 512 inmates to the capacity of Bledsoe Regional Correction Institute.

Among other provisions of the governor's budget proposal:

-- There is a 1.5 percent across-the-board pay raise for state workers, teachers and higher education employees, collectively costing the state $76.5 million. There's also money to cover most of an increase in their health insurance premiums.

-- Haslam also sets aside another $27.9 million for increasing salaries of selected state workers based on a "salary study" to be implemented later this year on top of $30 million being held in this year's budget to be allocated to state employee based on the jobs they do and their performance.

-- There is an increase of 286 new state employee positions -- 62 of them in the embattled Department of Children's Services -- and elimination of 588 positions for net overall job cuts of 299. Of the abolished job positions, the highest number (41) are in the Department of Intellectual and Developmental Disabilities with the Department of Agriculture accounting for 37 and the Department of Revenue 34.

The two tax cuts:

-- A reduction from 5.25 percent to 5 percent in the state sales tax on groceries, the second step in a Haslam plan announced last year when the rate was lowered from 5.5 percent. The move will cost the state an estimated $21.2 million per year in revenue.

-- The Hall tax on stock and bond income would be revised to provide higher exemptions from the levy for people over age 65. Currently, the 6 percent tax is imposed on income over $26,200 for single people 65 or older; $37,000 for couples. The new exemption level would rise to exemption to $33,000 for singles; $59,000 for couples. Officials say the change will mean about 8,400 people no longer pay the tax, but it will cost the state just $1.5 million.

Related document: Gov. Bill Haslam's State of the State address on Jan. 28, 2013

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