NASHVILLE (AP) — Gov. Bill Haslam on Monday presented a $32.7 billion annual spending plan to lawmakers that includes a staffing shake-up at the troubled Department of Children's Services, a heavy investment in construction projects around the state and a large deposit into the state's cash savings fund.

The Republican governor also formally introduced his proposal to create a limited school-voucher program in Tennessee to allow parents to use public money to send their children to private schools.

"If we can help our lowest-income students in our lowest-performing schools, why wouldn't we?" he said in his 43-minute speech to a joint convention of the General Assembly.

According to legislation filed in the Senate on Monday, the program would be limited to 5,000 students in failing schools in the school year that begins in August, and grow to 20,000 by 2016.

Haslam acknowledged that the proposal will be "hotly debated," and Democrats issued a statement criticizing the plan.

"The administration is putting forward a radical, unfunded mandate in the form of a school voucher proposal designed to rip millions of dollars from public education," House Minority Leader Craig Fitzhugh, D-Ripley, said in the statement.

Republican Senate Speaker Ron Ramsey of Blountville, meanwhile, suggested that lawmakers may want to go further than the governor's proposal.

"Parents know what's best for their kids," Ramsey said. "Whether you're in a failing school or not-failing schools, if there's a better school you can go to, you ought to be able to do it."

The governor's budget proposal also includes the next steps in reducing the state's sales tax on groceries, inheritances and gifts. He also wants to raise the exemption for seniors who owe taxes on interest and dividend income.

The state expects to add $17 million in revenues to its coffers after Amazon.com starts collecting state sales taxes on items bought online by Tennesseans. That tax goes into effect in January 2014.

Haslam last week appointed a senior adviser to analyze operations at the Department of Children's Services after an independent monitor revealed that nine more children had died in 2011 and 2012 than the agency had previously reported.

On Monday, he announced plans to lay off 10 employees in the department's human resources and inspector-general's offices, and eliminate another 20 unfilled administrative positions. But he also wants to hire 62 caseworkers, investigators and attorneys, and improve salaries.

"Children's Services deals with very difficult family situations, and we ask a lot of our caseworkers who are walking straight into these homes to protect Tennessee children," he said. "We should be paying them more, and we should also do a better job of setting them up for success by making sure they have the skills and experience it takes to do these emotional and difficult jobs."

The governor recommended a $6.7 million increase in the total DCS budget, about $2 million less than Commissioner Kate O'Day requested during budget hearings in November.

Haslam did not use the occasion to announce a decision on whether the state should expand eligibility to Medicaid to an estimated 145,500 uninsured Tennesseans.

Under the health care law, the federal government would pay 100 percent of cost increases for the expansion in the first three years and 90 percent thereafter. The Republican-dominated Legislature is skeptical of most facets of President Barack Obama's health care law, but the governor noted that several hospitals — especially those in rural areas — could close without the added funding.

"Most of us in this room don't like the Affordable Care Act, but the decision to expand Medicaid isn't as basic as saying, 'No Obamacare, no expansion,'" Haslam said.

Haslam said regardless of the decision on expansion, the state will begin to feel the pressure of increased Medicaid costs because several provisions of the new health care law go into effect in January 2014.

Haslam stressed that Tennessee's finances have remained strong despite the economic downturn.

He noted that Tennessee has been among only a small number of states that hasn't cut K-12 education spending in the past two years, even though it has cut a variety of taxes.

Haslam plans to spend $1.1 billion on construction and maintenance, led by $307 million in higher education, $146 million for state office buildings and $61 million for state prisons.

The governor also plans a large deposit into the state's cash reserves, or rainy-day fund. The fund was drawn down from about $750 million to a low of about $257 million. About $100 million has been restored over the past two years, and the governor wants to add back $100 million in the upcoming budget year.

"We've seen the realities of rainy days," Haslam said. "And it is our responsibility to make sure the state is prepared for them in the future."