Haslam made the announcement during his State of the State address, which included details of his $32.6 billion state spending proposal and a rundown of some of his top legislative priorities for the year.
The new education plan, called “Tennessee Promise,” is an addition to his so-called “Drive to 55” initiative, whose goal is to improve Tennessee’s graduate rates from colleges and universities from the current 32 percent to 55 percent by 2025.
Under the new proposal, graduating high school seniors will be able to attend two years of community college or a college of applied technology free of tuition and fees.
After graduation, students who choose to attend a four-year school will be able to do so as a junior. Haslam plans to fund the program — expected to cost about $34 million annually — through an endowment made up of lottery reserve funds. The state has about $400 million in reserves.
“Through the Tennessee Promise, we are fighting the rising cost of higher education, and we are raising our expectations as a state,” he said. “We are committed to making a clear statement to families that education beyond high school is a priority in the state of Tennessee.”
Tennessee Board of Regents Chancellor John Morgan said he was thrilled to hear the announcement about the program.
“We very much appreciate the governor ... recognizing that this is something that truly can make the difference in the lives of individuals,” said Morgan, who oversees six state universities, 13 community colleges and 27 colleges of applied technology.
The governor plans to also put $47 million into the state’s school-funding formula following criticism that the current Basic Education Program does not adequately fund districts statewide. Haslam is also allocating $63 million to give teachers a 2 percent raise.
“In Tennessee, education is a priority,” he said. “We’ve ... set a goal to be the fastest-growing state in the country when it comes to paying our teachers.”
Earlier in the day, Haslam met with reporters and reiterated what state financial officials have been reporting over the past several months, that revenue collections have failed to meet projections.
He noted the state has $260 million in new revenue for the budget year beginning in July. However, $180 million will go toward costs to TennCare — the state’s expanded Medicaid program — and $120 million is proposed for education.
He also said health insurance costs for state workers are up $40 million.
“So, before putting anything toward anything else, we already have an $80 million deficit,” which will require the state to make some cuts, he said.
Haslam had warned that a large part of TennCare’s budget would be used to care for the thousands of people identified by the federal health care law’s online exchanges as eligible for TennCare but not enrolled.
Officials had projected that the exchanges would identify nearly 47,000 people who fall into that group.
However, TennCare Director Darin Gordon told Haslam during a budget hearing in November that the figure will more likely be about 52,000 for fiscal year 2015.
Gordon said that was concerning, “but at this point, we don’t have anything to cause us to revise our numbers.”
Tennessee is among 36 states that have deferred operation of the exchanges to the federal government, and Haslam in March declined to accept $1.4 billion in federal funds to cover about 140,000 uninsured Tennesseans under the terms the money was offered.
In his speech, Haslam acknowledged that trying to meet the needs of TennCare — which covers 1.2 million Tennesseans — has meant “squeezing out other critical needs,” but he once again defended his decision not to accept the federal funds.
“My concern has been that the federal government isn’t giving us the tools to do that in a cost-effective way or in a way that will ultimately impact the health of Tennesseans for the better,” he said.