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Tennessee Gov. Bill Haslam speaks to supporters in Nashville after being re-elected Tuesday, Nov. 4, 2014.

NASHVILLE - As Gov. Bill Haslam kicks off his first round of public budget hearings Monday, he finds himself caught between some fellow Republicans who want to reduce taxes and critics who say previous spending reductions have harmed some state services.

Toss in demands from public employees for a pay raise, problems with two major business taxes and other woes, and it looks like Haslam will have his hands full first in shaping and then defending the spending plan he will present to the Legislature early in 2015.

The governor, who will be inaugurated for a second four-year term in January, knows the drill.

"It's easy to say I'd like to cut taxes. I would, too," Haslam told reporters earlier this month. "It's easy to say I'd like to spend more. I would, too."

But, the governor said, "we have to present a balanced budget."

Haslam ordered state departments in August to submit plans detailing how they would cut up to 7 percent of their budgets. That was after the state wound up with a $300 million shortfall in the 2014 budget year that ended June 30.

But those cuts are all theoretical right now. The actual amount of any reduction hangs on how much state tax collections rebound, on what needs are most pressing and on Haslam's own spending priorities.

So far this year, general fund revenues are running $91 million above projections. The 2014-15 budget is $32.4 billion. Some $12.9 billion of that comes from the federal government and the rest from state sources.

Beginning Monday morning, five state agencies will detail their priorities and where they might cut if necessary.

One is the troubled Department of Children's Services, where hardened teen felons rioted and escaped from a Nashville facility in September.

House Minority Leader Craig Fitzhugh, D-Ripley, blamed previous budget cuts for the chaos.

"I'm convinced the problems we had in Children's Services were, frankly, from cutting staff too quickly and making some changes to save some short-term money instead of trying to make sure we accomplish our long-term goals," Fitzhugh said.

That's happening in several areas, Fitzhugh said, noting unemployed Tennesseans are having problems finding work because of major cuts at state career centers.

But Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, disagreed things have gone too far.

"I think [the governor] has been very judicious in the cuts that he's made," he said. "At the same time, we're seeing increasing funding demands."

Some Republicans plan to push again to phase out the state's Hall income tax on bond interest and stock dividends, at a cost to the state of about $250 million.

House Majority Leader Gerald McCormick, R-Chattanooga, and Senate Majority Leader Mark Norris, R-Collierville, have countered with their own plan to reduce the state sales tax from 7 percent to 6.75 percent. That would be a similar revenue loss to the state.

McCormick and Norris said that instead of picking and choosing among taxes, lawmakers should hold a general discussion about tax reform in the context of the state budget.

McNally, meanwhile, points to ongoing problems with the state's franchise and excise business taxes, which came up far short last year.

"It'll be a challenging year, but I'm hopeful that we meet the challenge and at least not play any games with revenue [estimates] or anything like that," McNally said.

Meanwhile, teachers, state workers and higher education employees remain unhappy over Haslam's reneging earlier this year on a pledge to give raises. The governor had promised teachers a 2 percent raise with 1 percent for state workers. Higher education would have gotten $12.9 million for salaries.

Then the shortfall ballooned, causing Haslam to scrap the plan.

John Summers, executive director of the Tennessee State Employees Association, said state workers have "met Gov. Haslam's challenge of becoming a more customer-focused, efficient and effective workforce."

Noting the state's first quarter growth was the strongest since 2011, Summers said the association "is hopeful that this year state employees will receive the hard-earned pay raise they deserve."

But Summers added that workers don't plan to "sit idly by hoping" for that. The group has launched a statewide petition asking Haslam for more money, he said.

On Friday, Haslam spokesman David Smith summarized Haslam's approach to budgeting.

"Putting together a budget is about funding priorities in the context of balancing revenues and expenses," Smith said. "It isn't typically about making choices between a good program and a bad program but often making tough decisions among a number of good ones."

Contact staff writer Andy Sher at or 615-255-0550.