Phil Bredesen

Gov. Phil Bredesen said Tuesday he hopes to cut the state’s budget and staff next year without any employee layoffs or significant cuts in services.

“I don’t think a little paring back here for a year or two is necessarily a bad thing, and I think we’ll get through it just fine,” Gov. Bredesen told the editorial board of the Chattanooga Times Free Press a day after announcing plans to cut $468 million from next year’s budget. “We haven’t even begun to draw blood on these things.”

But in Nashville, some Democratic lawmakers voiced concerns over the impact of the budget cuts, benefits changes and tax revisions proposed by the governor just days before the Legislature is set to adjourn for the year.

Tennessee State Employees Association Executive Director Jim Tucker was incensed over learning that employees would be paying more for their health insurance in addition to receiving no pay increases.

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.

“I think they purposely did not provide us enough information on a timely basis that we could properly react to the proposed budget,” Mr. Tucker said.

Gov. Bredesen said he has realized since January that the slowing economy might force some budget cuts. But the governor said the full extent of the revenue downturn was not known until this month when April sales tax collections fell by more than 4 percent from a year ago and the state funding board predicted a budget shortfall next year of $468 million to as much as $585 million.

Gov. Bredesen ruled out any tax increase, except some “technical corrections” to close some tax loopholes, and he refused to dip into the state’s reserve funds, fearing “the economy could get even worse.”

“We’re not going to increase taxes or play games with your money to get out of this,” he said. “We’re going to do the same kind of thing that you have to do and that is to find some ways to cut back and stay within our budget.”

Gov. Bredesen said he is using a more optimistic forecast of a $468 million shortfall to develop his budget plan. He asked department heads to identify ways to streamline their services and identify job classifications or business units that could be trimmed or closed.

By June 6, to cut 2,011 jobs for the fiscal year that starts July 1, the governor expects to offer incentives to about 30 percent of the state’s 47,079-employee work force, hoping they’ll voluntarily quit or retire.

With $50 million for employee buyouts — or nearly $25,000 for each of the affected workers — Gov. Bredesen expects more state employees will volunteer to quit or retire than he needs.

“We’re probably going to end up having 2,000 happy employees (offered incentives to leave),” he said.

Gov. Bredesen, a former Nashville mayor and founder of HealthAmerica, a health maintenance organization, or HMO, said he has “never known an organization that couldn’t operate with 5 percent fewer employees.” University of Tennessee President John Petersen told him last week that he already was planning for a 3 percent cut in funding next year, Gov. Bredesen said.

While the Democratic governor mounted a public relations blitz to press his case on budget reductions, several fellow Democrats on the House Finance Committee criticized some key aspects of the administration’s approach.

House Majority Leader Gary Odom, D-Nashville, asked state Finance Commissioner Dave Goetz why the state cannot cut about 3,100 unfilled positions to achieve reductions instead of cutting 2,011 employees to get $64 million in recurring savings.

“I guess I’m having a little bit of a question about why we’re proposing to, at least on paper, fund ... vacant positions that we obviously are functioning without,” Rep. Odom said. “Our budget should reflect the exact number of employee positions that we intend to have during the next fiscal year.”

Mr. Goetz said the state has an employee turnover rate of about 11 percent and “cumbersome” state rules often delay hiring.

Rep. Nathan Vaughn, D-Kingsport, took the administration to task for bringing the $468 million in cuts in the waning days of the legislative session, leaving lawmakers little time to delve into recommendations.

“I don’t think they (employees) expect us to make decisions about their lives within less than a week and then run out of Dodge and have people basically beating us up for the next seven months until we come back here and then we say we get it,” he said.

Rep. Vaughn also criticized large pay increases top administration officials got last year while most state employees received 2 percent to 3 percent increases. Now, he noted, the administration is forcing state employees to pay more for health insurance by increasing copayments and deductibles.

“We’re asking them to take a hit like this in actually taking home less money,” he said.

Rep. Tommie Brown, D-Chattanooga, said the administration should provide figures on downsizing for each department.

“I have very grave concerns about leaving this place,” she said.

Rep. Odom weighed in later with more criticism, disagreeing with Gov. Bredesen’s assertion that his 2008-09 budget proposal would be balanced without the need for new taxes.

The House leader announced last week he would not push the administration’s “technical corrections” bill that would do away with a tax break for family-owned limited-liability companies. The provision would generate about $15 million.

“Contrary to the assertion we heard last night (in Gov. Bredesen’s speech) that this budget contains no new tax ... this is a tax increase,” Rep. Odom said.

Gov. Bredesen said the funding shortfall this year is bigger than any he has faced as governor, but the state’s fiscal condition is much better than when he became governor in 2002.

“Back when I was in my first few months in office, I didn’t know we were going to close the books come June because we basically used up all of our reserves,” he said. “We have strong reserves today in TennCare and our Rainy Day Fund is at a record level, so in terms of being able to weather the storm, we’re in a vastly different position today.”

Without the TennCare reforms adopted by the state over the past five years, the state would be needing another $500 million to pay its bills “and I don’t know how we could have done it,” Gov. Bredesen said.