- Associated Press - Monday, March 31, 2014

NASHVILLE, Tenn. (AP) - Gov. Bill Haslam said Monday that he won’t be able to give state employees and teachers a pay increase next year mainly because of reductions due to an ongoing decline in revenue collections, which state officials are looking into.

The Republican governor discussed his budget proposal with reporters Monday. The state finance commissioner was to present the measure to legislative finance committees Tuesday.

Haslam said poor revenue collections are forcing him to make $150 million in reductions for the remainder of this budget year that ends June 30th, and $160 million for next year. Sales tax collections have fallen short by $33 million, and franchise and excise taxes - also known as business tax collections - are down $215 million.

The governor said state officials are investigating to try to find out why collections continue to fall short of projections.

“It’s our job to be digging to try to figure out is something changed fundamentally about that business or have they found a way to lower their tax payments to us,” he said.

Despite the low revenue collections, Haslam said he expects about $73 million in new revenue growth, of which $62 million will go to education. He said he also plans to spend $155 million on TennCare, the state’s expanded Medicaid program that covers 1.2 million Tennesseans.

Haslam said he regrets not being able to give a 1 percent pay increase to state employees and 2 percent to teachers, but he noted that his administration has given pay increases since he took office in 2011. Last year, he pledged to improve the salaries of the state’s teachers so that by the time he leaves office their salaries have grown more than teacher salaries in any other state.

The governor said Monday the improvement of teacher salaries is still a priority.

“The goal hasn’t gone away,” he said. “We have to deal with the realities we have.”

To help offset not getting pay raises, Haslam said, state employees’ health insurance premiums won’t increase by 5 percent as proposed.

However, in the case of higher education, the state is eliminating a proposed increase of $12.9 million, which could lead to higher tuition at the state’s colleges and universities.

“That is a concern,” Haslam acknowledged.

Tennessee Board of Regents Chancellor John Morgan agreed.

“This news certainly puts additional pressure on tuition considerations, but we will work hard to hold any increases to the lowest amounts possible while still meeting the needs of our students,” said Morgan, who oversees six state universities, 13 community colleges and 27 colleges of applied technology.

Even though the administration says the reductions are necessary, House Democratic Leader Craig Fitzhugh of Ripley said the governor’s budget “represents a broken promise to the people of Tennessee.”

“We should not be balancing the budget on the backs of parents, teachers, state employees, colleges and universities, and countless other hard-working Tennesseans,” Fitzhugh said. “The budget presented to us shows misplaced priorities that ignore the need to focus on jobs, education and people.”

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