Haslam unveils budget proposal, $100 million for employee and teacher raises

Gov. Bill Haslam's proposed $37 billion budget for fiscal year 2017-18 will include no new debt for the second straight year, and continued spending on pay raises for teachers and state workers, capital improvements for public buildings across the Volunteer State and boosting the state's rainy day fund to a record total.

Haslam laid out his budget proposal Monday ahead of his State of the State address to the General Assembly. The plan includes the proposed new revenue from his broad plan to pay for a backlog of transportation projects by boosting the tax on gas and diesel fuel.

The governor's gas tax proposal, one of his signature initiatives this year known as the IMPROVE Act, includes tax reductions in other areas.

Haslam is proposing to boost the state's tax on fuel and diesel by 7 and 12 cents, respectively, coupled with cuts to the state's franchise and excise tax, a cut to the Hall income tax on investment income and the state sales tax on food. The cuts are estimated to save taxpayers $217 million.

"Budget really does drive policy," Haslam said. "You make a lot of decisions about what you're going to do when you make budget decisions ... particularly how you're going to care for the most vulnerable citizens."

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Matt Murray, associate director of the Boyd Center for Business and Economic Research and director of the Howard H. Baker Jr. Center for Public Policy at the University of Tennessee, said Haslam's IMPROVE Act proposal included "an array of revenue enhancements" that typically don't fare well in conservative legislatures.

The proposed tax increase coupled with the measure to index the taxes to maintain consistent revenue over time has been met with resistance from lawmakers.

Murray said that inclusion is important but one Haslam might be willing to renegotiate if it becomes a "showstopper" for lawmakers.

Haslam's budget spending proposal is roughly $1.7 billion more than the current fiscal year's. About $18 billion of the state's budget will come from the federal government, an increase of about $1.5 billion, according to administration figures.

About $132 million will be allocated to the state's rainy day fund under the plan, boosting it to about $800 million — the highest on record. In fiscal year 2011, the entire rainy day fund was at $284 million. Here's a look at some highlights of Haslam's proposed budget:

Higher education

The budget proposal calls for another round of robust funding for higher education, including more than $434 million for capital projects, setting the stage for a flurry of construction on campuses across the state.

Haslam essentially agreed to fund every project requested by the Tennessee Higher Education Commission. It was the commission’s largest request in recent memory.

“This represents a historic level of investment in higher education infrastructure,” said Mike Krause, the executive director of the commission.

The proposed budget includes more than $43 million for a new building at the overcrowded Motlow State Community College campus in Smyrna and more than $51 million for improvements at the state’s network of 27 technical colleges.

Teacher raises

Education again is a focus of Haslam’s budget plan.

Under Haslam's proposal, state employees, regular employees and those in education sectors, are due to get at least a 3 percent raise. More than $100 million has been allocated for 4 percent raises for teachers

The plan marks the third year in a row Haslam has set aside money for teacher pay.

In the past two years, Haslam has set aside $200 million for raises, although the money doesn't guarantee every teacher will see more on their paycheck because districts have the power to decide exactly how they allocate those funds.

The plan also sets aside $22.2 million for the state's growing English language learning population. And it calls for $59.4 million for the annual Basic Education Program, the system used to fund K-12 education, inflation and growth and $18 million to provide for an increase in the number of students enrolled in Tennessee.

TennCare 

The bulk of TennCare’s proposed budget increase is due to high prescription costs. TennCare is the state's Medicaid program.

The agency needs an additional $14.9 million due to higher costs for brand-name and specialty drugs.

There also is a roughly 12 percent increase in the amount of money it owes the federal government for Medicare Part D premiums — the prescription drug coverage portion — incurred for the people who are dually eligible for Medicaid and Medicare. In fiscal year 2017, the bill for the premiums was about $220 million, which cannot be negotiated.

TennCare also is asking for $11.6 million in state funding to add 700 more people to its Employment and Community First CHOICES program. The federal government will contribute $22.2 million.

Capital investments

Haslam said he's bucking previous budget tradition by working in a recurring budget item to fund the maintenance of state buildings, a measure that has never been done.

"When we've had good years, we've paid to take care of our buildings, when we didn't, we wouldn't, and that's not a good way to take care of things," Haslam said.

Capital investments include mainly maintenance of state-owned or operated buildings and facilities.

Criminal justice

The governor’s budget proposal beefs up public safety, setting aside $3.4 million to fund 25 additional Tennessee Highway Patrol troopers to patrol the state’s roadways.

It also provides money to add positions within prosecutors’ and public defenders’ offices statewide, though each office will not necessarily get additional staffing.

More than $1.5 million is earmarked for 18 additional positions in public defenders’ offices, nine of which are for assistant public defenders. More than $2.2 million is allocated for expanding prosecutors’ offices in the state with an additional 27 positions, seven of which are for assistant prosecutors and six of which are for coordinators who work with witnesses and victims.

Adam Tamburin, Kirk Bado, Stacey Barchenger, Holly Fletcher and Jason Gonzales contributed to this report.

Reach Jake Lowary at 615-881-7039 and on Twitter at @JakeLowary. Reach Joel Ebert at jebert@tennessean.com or 615-772-1681 and on Twitter @joelebert29.