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NASHVILLE — Gov. Phil Bredesen told lawmakers Monday that state taxpayers “expect us to live within our means” as he fleshed out plans to slash nearly a half billion dollars from the state budget.

“We need to act decisively and conservatively,” Gov. Bredesen said. “This is not a time for a lack of resolve; this is not a time for wishful thinking.”

Declaring that the economy is in a recession with no clear sign that the nation has hit bottom, Gov. Bredesen outlined $468 million in cuts to his proposed $27.88 billion budget for the 2008-09 fiscal year. The cuts include slashing $80 million from a $100 million TennCare program that helps some higher-income Tennesseans deal with expensive medical bills that exceed their ability to pay.

Staff Photo by Allison Kwesell -- Tennessee Gov. Phil Bredesen talks to the Chattanooga Times Free Press editorial board about a proposed state budget for the 2008-2009 fiscal year.

The governor’s original budget had called for reopening the “medically needy” program to admit substantially more Tennesseans.

Gov. Bredesen announced few details on a proposed voluntary buyout program designed to encourage 2,011 state employees to leave rather than face layoffs. He expects to save $62.9 million by reducing the state’s work force by 5 percent.

The state expects to begin making offers on voluntary buyouts for selected employees by June 6 and is setting aside $50 million for the move, he said.

The governor called the job cuts “particularly painful to me” but noted he could have instead pushed for layoffs. If enough employees don’t sign up for reductions, Gov. Bredesen warned that there will be layoffs.

Employees protest

But the governor’s calls for “belt tightening” did not go down well with Tennessee State Employees Association officials. They said that although pleased the governor is looking to make reductions voluntary, they don’t think any cuts to the 47,000-employee work force are necessary.

“Let me be clear,” association President Zoyle Jones said, “that the Tennessee State Employees Association does not believe that reducing the number of state employees is the correct course of action.”

State employees advocate using $750 million from the state’s rainy day fund, a reserve account, to offset the need to cut for now. Gov. Bredesen said he intends to keep the rainy day fund from being used, noting it may be needed next year or in the future if the economy does not pick up.

State employee officials seemed particularly upset to learn Monday of the administration’s plans to use $100 million from other reserves and cost-cutting measures to create an economic contingency fund to lure major companies to Tennessee.

Theo Morrison, a lobbyist for the employees association, said savings from other reserve funds and one-time K-12 education savings “need to be set aside for state employees.”

“If you can do that,” Mr. Morrison said of the contingency fund, “why even think about getting rid of positions.”

Bredesen administration officials refused to say whether the economic contingency fund could be used to attract automaker Volkswagen to Tennessee. Gov. Bredesen did not mention the fund at all in his speech.

The administration previously announced cutting $86.5 million to continue reforms of the state’s Basic Education Program, $22 million to expand prekindergarten programs and $55.8 million from higher education.

The administration also announced that it should reap an additional $24.7 million in savings in the current year from the Basic Education Program because of less-than-expected student enrollment and so-called reversions.

Lower-than-expected BEP growth also allows the state to put in just $56 million, instead of the $83 million Gov. Bredesen had expected, into the BEP for fiscal year 2009, which takes effect July 1.

Tenncare cuts

The TennCare cuts are in a medically needy program that once had some 96,000 Tennesseans enrolled but now has 50,000 after the state began slashing TennCare rolls in 2005 and 2006. The people in the category ordinarily have too much income to qualify for Medicaid programs such as TennCare, but they can become eligible for “spending down” their resources for medical bills.

TennCare Director Darin Gordon said the state only recently has started examining whether those remaining on the medically needy program remain eligible. He said probably 40,000 of those still in the program are ineligible now.

The $100 million would have allowed the state to bring the program back up to 100,000 people. Mr. Gordon estimated that at $20 million, about 20,000 enrollees would be in the program.

On his way to the House chamber to deliver his speech, Gov. Bredesen was greeted by protesters from groups including the Tennesseans for Fair Taxation and the Tennessee Health Care Campaign.

Donning rain coats and other gear, the groups urged Gov. Bredesen to tap the rainy day fund and close off corporate tax loopholes they say could raise $120 million to $250 million in new revenue.

No to taxes, but ...

But earlier in the day, Gov. Bredesen ruled out enacting “major” new taxes, although he stood beside a Department of Revenue “technical corrections” bill projected to raise about $27 million in new revenue, much of it coming from eliminating a tax write-off for family-owned, noncorporate entities.

Sen. Bo Watson, R-Hixson, a Finance Committee member, said he wasn’t shocked by anything the governor proposed.

“I think we were kind of anticipating the employee severance package,” Sen. Watson said. “We don’t know the details. ... We won’t know the details until we adjourn.”

He said lawmakers are trying to wind up the session this week, and “I’d say that’s an executive branch decision.”

Sen. Andy Berke, D-Chattanooga, said changes to the budget are necessary.

“Any time that business is having problems and families are having problems, you’re going to find that government is having problems as well,” he said. “It’s time to tighten our belts and make sure we live within our means.”

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