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Larry B. Martin

NASHVILLE -- Tennessee state agencies are being asked to outline spending cuts of up to 3.5 percent in discretionary spending as the Haslam administration begins to develop its 2016-2017 fiscal year budget.

In a memo to agency heads and budget officers, dated Monday, Finance Commissioner Larry Martin that while revenues in the 2014-2015 fiscal year "were strong, the challenge remains to achieve operational efficiencies throughout government and to secure the resources necessary to support Education, TennCare and our valued state work force."

Republican Gov. Bill Haslam issues similar instructions annually and the administration often doesn't make the entire outlined cuts across the board. But it does provide budget officials a plan to where they can and often do cut in individual agencies. Last year, Haslam directed agencies to prepare plans to cut up to 7.5 percent.

The latest instructions come amid concerns over the adequacy of staffing and pay at state prisons which has already generated one House committee hearing with a Senate hearing pending. Meanwhile, Haslam officials are asking companies to offer plans for outsourcing building management and operations for higher education, state parks and other functions not already covered by Haslam's privatizing of management services for many state office buildings.

In this year's budget instructions, Martin is telling officials to submit reduction plans in two parts with one that would not affect the "over appropriations," that is, the amount of unspent agency money normally expected to return to the state's general fund at the end of a fiscal year. Directive No. 2 calls for a list of base spending cuts that would offset any proposed cost increase request in other areas.

Martin said even agencies funding from specially dedicated taxes and fees or departmental revenues "should also consider reductions to reduce costs. Internal service fund programs are required to submit a 3.5 percent reduction plan that specifies the impact on agency billing rates."

Moreover, Martin's memo says, "all cost increase requests should have justification and a clear linkage to departmental goals." Increases "deemed mandatory" due to state or federal law, the state's various court orders stemming from cases that got the state in hot water legally, and contractual obligations "should be clearly identified and given highesty priority."

And "any cost increase requests that are offset by a proposed reduction should also be given priority and high consideration over other cost increases," Martin says. "Any cost increase requests not meeting the above criteria should be very limited and listed as lower priority items."

Capital outlay and capital maintenance requests "should include essential and high priority items only," the memo says.

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