LITTLE ROCK, Ark. (AP) - Arkansas' governor is proposing a $5.6 billion budget that increases funding for the state's Medicaid program and sets aside surplus money for future tax cuts and highway needs.

Gov. Asa Hutchinson on Tuesday proposed increasing state spending for the fiscal year that begins July 1 by nearly $173 million. Most of that increase goes toward Medicaid. Hutchinson said the funding increase is lower than what was originally proposed for the program last year.

The Republican governor proposed setting aside nearly $16 million in surplus money for highways and $48 million for a reserve fund that sets the stage for future tax cuts.

Hutchinson also asked the state's four-year colleges to freeze tuition rates for in-state residents, citing a $10 million increase in performance-based funding for higher education.

Some universities have responded:

President Houston Davis, University of Central Arkansas

"We respect and understand the governor’s recommendation and the legislative budget process. Both tuition and state funds are key components of our budget, and we are consistently evaluating all funding resources available to our institution. We are always very mindful of the financial barriers that our students face. We will do what is necessary to ensure that our students continue to get the quality education that UCA offers."

President Dr. Chuck Welch, Arkansas State University System

“We respect, understand and share the governor’s concerns about keeping in-state tuition affordable. One of the top ASU System strategic planning goals is to use the CPI as the guide for tuition requests from our campuses. Our Board of Trustees and campus administrators believe strongly in producing a high-quality, affordable education, and we will certainly enter budget planning this spring with every intention of answering this challenge from Governor Hutchinson. The ASU System has also been engaged in a comprehensive, systemwide efficiency study to help us identify ways to increase revenue, reduce expenses and reallocate resources. The primary purpose of this study is to reduce reliance on student tuition. Additionally, we continue to pursue new revenue streams through public-private partnerships and innovation activities. In the absence of dedicated state funding for capital improvements, deferred maintenance, health insurance costs, and faculty and staff salaries, it’s going to take continued creative thinking and changes in how we operate to meet the short-term and long-term needs of our students. This is precisely why the ASU System has been proactive in the past few years in containing costs, seeking new revenue streams and promoting maximum efficiency in our operations.”