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Tennessee Gov. Bill Haslam delivers his State of the State address to a joint session of the General Assembly, Monday in Nashville.


Here's 10 items you should know about Tennessee Gov. Bill Haslam's $32.6 billion spending proposal for the budget year beginning in July:

DRIVE TO 55: The governor is proposing to waive tuition to two-year colleges in the state as part of his "Drive to 55" campaign to increase higher education graduation rates from the current 32 percent to 55 percent by 2025. The program would be paid for through an endowment created with lottery reserve money. He has also earmarked $15 million in new spending toward the effort.

K-12 EDUCATION: The state would spend $47 million to pay for growth and inflation in the statewide school funding formula. Another $63 million would go toward a 2 percent pay increase for teachers, the first step in the governor's goal of increasing those salaries in Tennessee more than in any other state by the time he finishes his second term. Haslam is up for re-election this fall.

COLLEGE TUITION: The budget proposal does not include the $40 million in operational expenses for colleges and universities that the Board of Regents schools had called for in order to keep tuition increases between 2 percent and 4 percent. The schools raised tuition by up to 6 percent for the current academic year, and have resorted to double-digit increases in previous years.

PAY RAISES: Teachers would receive a 2 percent pay raise, while state employees would state employees would get 1 percent. But the Haslam administration says after these, it will move away from across-the-board increases in favor of performance-based raises.

LAYOFFS: The spending plan calls for eliminating 664 positions in state government, including 100 that are currently filled. The reductions would bring the total number of state employees to 43,227 - about 3,000 fewer than when Haslam came in to office. The administration says it expects that trend to continue amid improvements in efficiency and technology.

RESERVES: The state's Rainy Day Fund would get a $40 million deposit to bring the reserve fund to nearly $500 million. The state would dip into 14 reserve funds worth $140 million to help close this year's budget books.

TENNCARE: Growth in the state's expanded Medicaid program is projected to cost the state an additional $180 million in the upcoming budget year, $77 million of that coming from the cost of covering a projected 52,000 people who were unaware they were eligible for the program until they were informed through the federal health care overhaul. Haslam has so far declined to participate in federally funded Medicaid expansion, though his budget does assume lawmakers will approve a $532 million assessment on hospitals and nursing homes to draw down federal money.

NEW SPENDING: Haslam is proposing $7 million in new spending for the Department of Intellectual & Developmental Disabilities and $6.4 million for the Department of Children's Services. About $1.7 million of that money is for transitional services related to the planned closure of the Clover Bottom Developmental Center in Nashville in May 2015. It would also pay for 40 new field service workers and case managers at DCS.

TAXES: The spending proposal includes the latest step toward doing away with the state's inheritance tax, but does not include any changes to the state's Hall income tax on interest and dividends.

BUDGET TOTAL: Haslam's annual budget proposal is $32.6 billion, about 2 percent less than the estimated combined state and federal spending in the current budget year.

NASHVILLE - Republican Gov. Bill Haslam has vowed to make education a priority in Tennessee and he backed that up with a pledge Monday to allow any graduating high school senior to attend a two-year higher learning institution for free.

Haslam made the announcement during his State of the State address, which included details of his $32.6 billion state spending proposal and a rundown of some of his top legislative priorities for the year.

The new education plan, called "Tennessee Promise," is an addition to his so-called "Drive to 55" initiative, whose goal is to improve Tennessee's graduate rates from colleges and universities from the current 32 percent to 55 percent by 2025.

Under the new proposal, graduating high school seniors will be able to attend two years of community college or a college of applied technology free of tuition and fees.

After graduation, students who choose to attend a four-year school will be able to do so as a junior. Haslam plans to fund the program - expected to cost about $34 million annually - through an endowment made up of lottery reserve funds. The state has about $400 million in reserves.

"Through the Tennessee Promise, we are fighting the rising cost of higher education, and we are raising our expectations as a state," he said. "We are committed to making a clear statement to families that education beyond high school is a priority in the state of Tennessee."

Tennessee Board of Regents Chancellor John Morgan said he was thrilled to hear the announcement about the program.

"We very much appreciate the governor ... recognizing that this is something that truly can make the difference in the lives of individuals," said Morgan, who oversees six state universities, 13 community colleges and 27 colleges of applied technology.

The governor plans to also put $47 million into the state's school-funding formula following criticism that the current Basic Education Program does not adequately fund districts statewide. Haslam is also allocating $63 million to give teachers a 2 percent raise.

"In Tennessee, education is a priority," he said. "We've ... set a goal to be the fastest-growing state in the country when it comes to paying our teachers."

Earlier in the day, Haslam met with reporters and reiterated what state financial officials have been reporting over the past several months, that revenue collections have failed to meet projections.

He noted the state has $260 million in new revenue for the budget year beginning in July. However, $180 million will go toward costs to TennCare - the state's expanded Medicaid program - and $120 million is proposed for education.

He also said health insurance costs for state workers are up $40 million.

"So, before putting anything toward anything else, we already have an $80 million deficit," which will require the state to make some cuts, he said.

Haslam had warned that a large part of TennCare's budget would be used to care for the thousands of people identified by the federal health care law's online exchanges as eligible for TennCare but not enrolled.

Officials had projected that the exchanges would identify nearly 47,000 people who fall into that group.

However, TennCare Director Darin Gordon told Haslam during a budget hearing in November that the figure will more likely be about 52,000 for fiscal year 2015.

Gordon said that was concerning, "but at this point, we don't have anything to cause us to revise our numbers."

Tennessee is among 36 states that have deferred operation of the exchanges to the federal government, and Haslam in March declined to accept $1.4 billion in federal funds to cover about 140,000 uninsured Tennesseans under the terms the money was offered.

In his speech, Haslam acknowledged that trying to meet the needs of TennCare - which covers 1.2 million Tennesseans - has meant "squeezing out other critical needs," but he once again defended his decision not to accept the federal funds.

"My concern has been that the federal government isn't giving us the tools to do that in a cost-effective way or in a way that will ultimately impact the health of Tennesseans for the better," he said.