By Richard Locker

Gov. Bill Haslam presented state lawmakers Monday night with a $33.3 billion state budget proposal with spending increases for education, higher education and TennCare.

MORE: Text, highlights and video of every governor's annual address.

It also proposes major changes for state employee compensation and calls for a 4 percent increase in the state's share of teacher salaries, to make up for a similar increase Haslam proposed last year but had to withdraw during a budget shortfall.

The level of increase will vary among school districts because local school boards set salary scales for educators, and the percentage of state funding for salaries varies among districts.

A significant increase for higher education was also withdrawn last year, but with more revenue available this year, Haslam proposed to fully fund the performance-based funding formula for colleges and universities next year for the first time. Higher education officials said the $25.7 million increase could result in the lowest tuition increase in several years: zero to 4 percent. The higher education governing boards will decide later the precise amount at each campus.

The budget proposal for new construction and major maintenance calls for spending the largest amount on a single project on a private enterprise -- $165.8 million on the previously announced expansion of Volkswagen's Chattanooga auto manufacturing plant. It contains another $35 million for a separate undisclosed economic development project that won't become public until the project is announced and the money request goes to the State Funding Board.

The second biggest project is $99.5 million for a new science lab at the University of Tennessee Knoxville.

The budget plan, presented during the governor's annual State of the State address to the legislature, now undergoes two or three months of review by legislators and won't become final until approved by the full General Assembly in April or May. It would go into effect July 1.

House Democratic Leader Craig Fitzhugh of Ripley said he's pleased with the teacher pay raise plan.

However, Fizhugh said, "I didn't hear much about helping the working people of our state just a week after this body denied them health care. We're still not talking about paid family leave, overtime compensation, and parental involvement in schools. Democrats think we need a more middle-class outward approach and that's what you'll see from us over the next few weeks."

The governor's proposal would increase the total state budget by $349.7 million from the current year's estimated total of $32.99 billion.

The spending blueprint also contains major changes in how state employees are compensated, although that plan will require separate legislative approval and is certain to generate opposition by workers. Haslam wants to scrap "longevity pay" created decades ago that gives employees after three years of state employment an annual bonus of $100 for each year of service, capped at $3,000.

He proposes to take half of each employee's longevity bonus and embed it in their base salary. The other half would go into a salary pool that would give raises to employees based on their annual performance reviews.

Administration officials said it's possible some state workers will get less pay overall, depending on their performance reviews.

State finance officials predict $330.5 million in new state revenue in the next fiscal year, including $20.2 million from closing some tax "loopholes" and expanding the sales tax to more purchases from out-of-state businesses. The details will be unveiled later in a bill called the Revenue Modernization Act, which Haslam said "aims to level the playing field in terms of sales tax and business taxes (and) capitalizes on trends that we're seeing in product distribution by creating an incentive for companies to use Tennessee's distribution industry."

The budget proposes about $500 million in new state spending -- including $97.6 million for the teacher salary hike, $43.8 million more for local schools under the Basic Education Program formula, the increases for higher education and $62.8 million for TennCare. To balance the budget, it cuts $200 million from existing programs but avoids the large 7 percent cuts that each agency was asked to prepare for last fall. Previewing the budget early Monday, Haslam said education is his priority, especially after he had to slash a planned pay raise for teachers and a substantial increase for higher education last year when state revenue fell below budget estimates.

He told lawmakers later, "Over the past four years, I've met with thousands of educators to get feedback on what's going well in our schools and classrooms and what's not. One thing I hear a lot is frustration about the feeling that their profession is treated like a political football. We have to give our educators more stability and certainty in their classrooms and not change the game on them session after session."

Tennessee Education Association President Barbara Gray, an Arlington Community Schools administrator, said the teacher pay raise proposal "is a great first step to fulfilling his promise to make Tennessee the fastest improving in teacher salaries.... For two years now, the average teacher in Tennessee has seen no real increase in her salary."

Building on the free community college plan for high school graduates that goes into effect this year, Haslam also announced a $1.5 million pilot program to provide "last dollar scholarships" -- on top of other scholarships -- to adults with some post-secondary credit to attend community college.

"Also, beginning this fall, any Tennessee adult will be able to attend a Tennessee College of Applied Technology absolutely free," he said.

HASLAM BUDGET PROPOSAL

Total FY 2016 state budget recommended: $33,339.801,400

Current year total budget: $32,990,128,800

Total increase: $349,672,600

How the budget is funded:

State tax dollars: $15.1 billion

Federal funds: $12.8 billion

Tuition and fees, bonds, other revenue: $5.4 billion

Major capital construction projects:

Volkswagen plant expansion, Chattanooga: $165.8 million

Undisclosed economic development project: $35 million

UT Knoxville Science Lab: $99.5 million

UT West Tenn. 4-H Center, Hardeman County: $15.9 million

East Tenn. State University fine arts classroom building: $39.2 million

Jackson State Community College new health science facilities: $17 million

University of Memphis electric & gas utility upgrades: $3 million

UT Health Science Center security upgrades: $8 million

UTK fire safety upgrades: $3.8 million

West Tenn. Veterans Cemetery improvements, Shelby County: $7.3 million

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