- Associated Press - Monday, January 30, 2017

NASHVILLE, Tenn. (AP) - Republican Gov. Bill Haslam on Monday outlined a $37 billion annual spending proposal that would include the state’s first gas tax hike in nearly three decades, extend his signature Tennessee Promise free community college tuition program to adults and boost salaries for state employees, teachers and college workers.

Haslam in his annual State of the State address urged lawmakers to approve his plan to boost annual transportation revenues by $280 million, largely by raising the tax on gasoline by 7 cents per gallon and by 12 cents for diesel.

The governor acknowledged that it may be tough to persuade fellow Republicans to “hit the green button” to vote for a tax increase, especially while the state enjoys a projected surplus of more than $1 billion and revenue growth approaching that same amount.

“I would rather not address this either,” Haslam said. “I would rather be known as the governor who worked with the General Assembly to cut $500 million in taxes, brought our debt to record low levels and introduced the Tennessee Promise.”

“But imagine what kind of Tennessee we would be if two different governors and two different General Assemblies did not have the foresight to address our infrastructure needs back in the 1980s,” he said. “Without them, many of the roads we now take for granted and hundreds of thousands of jobs wouldn’t be here.”

The governor said the new revenue is needed to tackle a more than $10 billion backlog of road and bridge projects across the state, and warned that failure to approve the program could result in local governments being forced to raise property taxes.

To balance against that tax increase, Haslam wants to cut the sales tax on groceries, the tax on income from stocks and bonds, and corporate taxes for manufacturers. That package of cuts would total about $280 million, which Haslam said is four times more than the state’s largest previous tax cut.

House Minority Leader Craig Fitzhugh, D-Ripley, said he was disappointed that the governor only wants to cut half a percentage point from the state’s 5 percent sales tax on groceries.

“I don’t think that’s enough for the consumer that’s going to have to pay that gas tax right off the bat,” Fitzhugh said. “We can do better than that.”

Haslam’s 32-minute speech was punctuated by chants of hundreds of protesters who crammed into the Capitol to voice their opposition to the policies of President Donald Trump and Republicans in the state Legislature.

Haslam’s spending plan would allocate most of the revenue growth to paying for those tax cuts and increased costs for schools, higher education, TennCare, building projects, and pension and health care obligations for retired state workers. Those priorities account for 95 percent of the revenue growth projected for next budget year, he said.

Haslam’s Tennessee Reconnect proposal to cover the community college tuition for adults received one of the largest ovations of the night. The governor said the plan would be the first of its kind in the country. It would be open to any adult Tennessean who has lived in the state for at least a year and does not have an associate’s or bachelor’s degree.

“No caps. No first come, first served,” he said. “All.”

Haslam said the program is key toward his goal of increasing the percentage of people with higher education degrees to 55 percent by the year 2025. The current rate is about 39 percent. About 900,000 adults in Tennessee have attended some college but have no degree.

Before the speech, Haslam sent an email to state workers to inform them of $77 million in pay raises and rate adjustments in the upcoming budget year. Haslam said the new money will be distributed based on performance and in the form of market rate adjustments aimed at high-turnover positions in state government.

The governor says his administration has increased state workers’ salaries by 15 percent since he took office in 2011 and added more than $100 million for salary market adjustments.

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