NASHVILLE -- Gov. Phil Bredesen and legislative leaders plan to use a combination of program reductions and cash from reserve funds to bridge a budget gap that may climb to $800 million.

The governor unveils the 2010-11 budget tonight during his eighth and final State of the State address to a joint session of the legislature.

Avoiding the details, Gov. Bredesen said last week some "painful" employee layoffs are included in the state spending plan that takes effect July 1.

Tennesseans also should expect reduced services as a result of new cuts, he said.

The latest revisions are on top of $753 million in spending reductions last year that are part of the current budget. The governor also directed agencies to develop plans last fall for additional savings of 6 to 9 percent.

"You can't get from where we are to where we need to be without doing things that people notice," Gov. Bredesen said.

Agencies outlined potential savings from fewer state troopers patrolling state highways to imposing a $10,000 cap on inpatient care for nonpregnant adults enrolled in TennCare.

Gov. Bredesen, however, has ruled out shuttering a state prison that would generate $51 million in savings.

Top lawmakers expect a confrontation over how much money to draw from Tennessee's $533 million Rainy Day reserve fund and $350 million TennCare reserves.

"I think that will be the fight this year," said Senate Speaker Ron Ramsey, R-Blountville.

He expressed a willingness to dip into the funds for a "couple hundred million (dollars)."

But House Speaker Kent Williams, R-Elizabethton, said he favors using $200 million minimum and up to $400 million. He recounted his own experience decades ago as a husband with a young family when he was fired from his state job by a Democratic governor for partisan reasons.

"My philosophy has always been: If your children are going to go hungry or your family's going to suffer medically, that you don't keep money in your savings account," he said.

While lawmakers last spring made the $753 million in cuts to the 2009-10 budget, use of one-time federal stimulus funds delayed $520 million of the changes until the 2010-11 budget.

With stimulus funds going away, the earlier $520 million reductions are coming due, and Lt. Gov. Ramsey and Rep. Williams said there may be an additional $700 million to $800 million in new cuts. State revenues, primarily based on sales tax collections, continue to take a beating from the recession and reduced consumer spending.

"Remember, we really have two years worth of cuts to deal with," Gov. Bredesen stressed, noting that cuts such as the elimination of $110 million in essential access payments to hospitals such as Chattanooga's Erlanger were legally made last year but stimulus funds have delayed their taking effect until July 1.

"What I'm trying to do is just make the best balancing I can of what seems to me to be the most important (programs) for the state to preserve," Gov. Bredesen. "And then the Legislature has its say."

While he has resisted previous efforts to tap into the state's reserves, Gov. Bredesen's postion is changing now.

"As long as they hew to the general notion of respecting what's going on out in the world out there and actually make some cuts and not leave the future governor with a huge problem," he said.

When it comes to budget reductions, a further complication is the administration's intention to increase spending in some areas. For example, the state pension needs $88 million to maintain its soundness. State employee health costs also are going up.

Lt. Gov. Ramsey, who is campaigning for governor, predicted that Gov. Bredesen will provide continued funding for the state's Basic Education Program funding formula for K-12.

According to the General Assembly's Fiscal Review Committee, these funding increases could run into hundreds of millions of dollars, depending on what Gov. Bredesen chooses to include in his budget.