KNOXVILLE, Tenn. (AP) — Faced with a faltering economy and falling tax collections, Tennessee is turning to its public colleges and universities, and its health care programs for the poor, to absorb a new round of budget cuts worth more than $106 million.

The 42,000-student University of Tennessee system and the 180,000-student Tennessee Board of Regents system have been told to develop a plan to save $43.7 million.

TennCare, Tennessee’s $7 billion expanded Medicaid program, will have to find ways to save $44 million, while the remaining $20 million in savings will be spread across state government.

The flow of money from Nashville to local governments for K-12 education will not be affected, though no state agency, including the state Department of Education, will be exempt from belt-tightening.

“This is an interim step towards being able to deal with what is a very serious fiscal crisis,” Finance and Administration Commissioner Dave Goetz said in a teleconference from Nashville.

The impact on colleges, social service providers and others is not immediately clear.

TennCare spokeswoman Marilyn Wilson said the agency was already working to cut unlimited home care benefits for about 1,000 patients and reduce payments to providers for wheelchairs and other “durable medical equipment” because of skyrocketing costs.

“We are always looking for ways to stretch our resources,” she said. “Now, we are looking to stretch them even further because when the economy takes a downturn, we get an uptick in enrollment. And we are already starting to see this.”

For colleges and universities, “it will be safe to assume there will be hiring freezes and elimination of unfilled positions,” said Rich Rhoda, executive director of the Tennessee Higher Education Commission.

Tennessee State University in Nashville and Southwest Tennessee Community College in Memphis already were considering layoffs because of budget cuts. Gov. Phil Bredesen’s administration had already shaved $460 million off the $28 billion state budget, including  a $56 million hit to higher education, which responded by raising tuition for students.

The administration has since withheld another $126.5 million in appropriations to state agencies. The new request for $106 million comes on top of that. The entire $232.5 million potentially could be freed up and spent later, but Goetz told higher education officials to not count on it.

“Coming on top of the reduction previously enacted, this, of course, is a serious concern for the university,” UT President John Petersen said in an open letter on his Web page. “We will focus on protecting our core mission and the quality of our education and research product,” he wrote. “Our people are a critical element of that focus.”

UT-Knoxville Faculty Senate President John Nolt fears the shortfall will translate into permanent budget reductions, faculty losses and program cuts at UT’s flagship campus.

“We are cut to the bone here. There is no fat to trim,” he said. “So the more budget reductions we have, the more we have to just lop things off.”

Bob Adams, Regents’ vice chancellor for business and finance, said it may be too late in the academic year for the system’s six universities, 13 two-year colleges and 26 technology centers to cut faculty. “But I am sure non-faculty will get a hard look,” he said.

Some Regents schools may be able to dip into their reserves to get through the year. Goetz said the state’s rainy-day fund may be a similar option for state government.

In a state where sales taxes account for two of every three tax dollars — and sales of big-ticket items like automobiles fell 30 percent in September — Goetz predicted Tennessee’s fiscal situation will get worse before it gets better and recovery may take longer than anyone expected.

Tennessee’s general fund tax collections missed projections by $50 million in the first month of the July-through-June fiscal year.

“I don’t know that anyone can predict what will be the net result of the financial crisis of September,” Goetz said. “We just know it is going to be much worse.”