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Tennessee Governor Bill Haslam delivers his first State of the State address to a joint session of the General Assembly on Monday in Nashville. (AP Photo/Mark Humphrey)

NASHVILLE - Gov. Bill Haslam on Monday presented lawmakers a $30.2 billion budget that calls for a fourth straight year of state spending cuts but also provides new money for education and a 1.6 percent pay increase for thousands of state workers, higher education employees and teachers.

The overall budget - Haslam's first as governor - generally follows the "blueprint" recommended last year by his predecessor, Democrat Phil Bredesen and approved by lawmakers.

If approved, the spending plan goes into effect July 1. It envisions a 5.6 percent reduction in spending. Much of the decrease stems from the loss of federal stimulus funds.

The Republican unveiled the budget proposal during his first State of the State address to a joint convention of the General Assembly. Haslam said the state's long-term approach to how it does business must change in fundamental ways.

"Ten years from now we will not - and cannot - be doing government the same way we did 20 years ago," he told the General Assembly. "The time is right to go on a vigorous diet that consumes less and exerts more energy."

Haslam additionally has proposed cutting another $133.76 million in state spending. His budget also calls for eliminating 1,180 state positions, including 575 currently filled ones the administration hopes to reduce largely through attrition from plans to close two developmental centers.

Closer to home, Haslam's proposed budget includes a $34.6 million commitment the state made for infrastructure with regard to the $1.5 billion Wacker Chemical plant now under construction near Charleston, Tenn.

The budget calls for issuing $29.4 million in bonds and relying on cash for the remaining $5.2 million.

Finance Commissioner Mark Emkes referred a reporter's questions to Economic and Community Development Department officials. Assistant Commissioner Mark Drury, the agency's chief spokesman, did not respond to questions over how the money would be spent.

Meanwhile, Haslam's budget calls for cutting TennCare by an additional $39.9 million and higher education by $20.2 million. TennCare hopes to reap $14.9 million in savings by reducing the number of women having babies via cesarean section. That would come by paying doctors less when the procedure is elective and not medically necessary.

Agencies on average are seeing 2.5 percent cuts.

That comes on top of another $654 million in previously made state cuts that go into effect on July 1 under the recommendations made by Bredesen and lawmakers last year.

Haslam said he is continuing funding $160 million of $186.3 million in spending from a special reserve account Bredesen set up for essential services.

Haslam's regular budget includes $63.4 million in growth for the state's Basic Education Program funding formula for K-12 education. The cost of employees' pay raise - their first since 2007 - is $77 million.

House Speaker Pro Tem Judd Matheny, R-Tullahoma, said afterward that he is "pleased" Haslam's budget is "mild so far as the cutbacks. I think it's manageable. He's put forward a very responsible budget."


State appropriations:

? TennCare: $39.9 million

? Higher education: $20.2 million

? Correction: $7.83 million

? Education / pre-k - 12: $3.39 million

? Children's Services: $2.35 million

? Health: $1.99 million

? Intellectual / developmental disabilities: $1.87 million

? Mental health: $1.5 million

? Revenue: $1.1 million

? Other agencies: $53.53 million

? Total recurring reductions: $133.76 million

Source: Governor's Office

Haslam's budget does not recommend a tax increase. But it is built on the assumption that lawmakers will go along with the Tennessee Hospital Association's request to continue a one-year 3.52 percent "assessment" on most hospitals for another year at 4.52 percent.

That will generate $449.8 million in money the state would use to draw down $870.5 million in federal matching funds. Lawmakers argue the money, which will offset what otherwise would be $1.3 billion in TennCare cuts, is not a tax because the industry has asked for the assessment and most hospitals are reimbursed via the federal funds.

While cutting higher education, the administration also assumes that the University of Tennessee and State Board of Regents systems will increase student tuition.

The Tennessee Higher Education Commission last year gave tentative approval to tuition increases of 7 percent for universities and 5 percent for two-year colleges for each 1 percent their state funding is cut.

According to the administration's budget proposal, overall spending fell most because about $2 billion in federal stimulus funds is going away.

"I think that what we are seeing in government today really is the 'new normal.' Every government, ours included, will be forced to transform how it sets priorities and makes choices," he said.

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