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An exterior view of the Tennessee State Capitol building.

NASHVILLE - The lingering aftershocks of 2008's Great Recession are changing the face of Tennessee government, particularly its size. Most state functions are operating with almost 10 percent fewer workers now than before the downtown.

Data compiled by legislative analysts shows there were 47,102 full-time positions supported by the general fund in the pre-recession 2007-08 budget. That has fallen to a projected 42,856, or about 9 percent, in the 2012 state budget that took effect July 1.

The information is based on annual figures for the last five budget years compiled by the House and Senate finance committees and the Office of Legislative Budget Analysis.

Figures exclude the Transportation Department, which is funded separately. That department lost 6.24 percent of its workers during the period and has 4,667 in the current budget.

Higher education employees also weren't included in the analysis.

"Having fewer state employees is rough," said Robert O'Connell, executive director of the Tennessee State Employees Association.

"Fewer employees mean fewer services," O'Connell said. "That's just the way the math goes. When the people of Tennessee see the potholes not being filled and see kids in the middle of the night not being rescued from bad situations [by state workers], they're not going to like that one bit."

The recession and the ensuing modest recovery have pounded revenues in Tennessee and other states. Tennessee legislative analysts estimated the share of the budget funded by state taxes and fees dropped some $1.5 billion between fiscal year 2008 and FY 2012.

Federal stimulus funds helped, but most of that money is now gone, and Congress is showing little appetite for providing more aid.

Tennessee revenues are improving - this year's 4.5 percent estimates are turning out to be more like 5 percent so far in the state's $31.6 billion budget.

But they still are expected to come in short of FY 2008 levels until next year.

Ripple Effects

The face of state government is changing in other ways as well, sometimes for budgetary reasons and sometimes not.

For example, the state's Department of Mental Health plans to shut down Lakeshore Mental Health Institution in Knoxville and outsource patient care to private providers. Haslam's mental health commissioner, Doug Varney, said the patients can be handled more cost effectively that way.

Some 375 employees would lose their jobs, although officials say they should find work with private providers or elsewhere in state government.

Last month, Gov. Bill Haslam directed state agency heads to prepare plans to slash 5 percent from their budgets. He also called for abolishing any state position that has been vacant for more than a year.

In response, Children's Services Commissioner Kathryn O'Day proposed shutting down the Taft Youth Center in Pikeville. That would cost some 200 jobs, but O'Day said the teenage offenders could be served more cost effectively at the other four state-operated centers.

O'Connell said employee numbers have been slashed in past recessions but eventually rebounded.

"I'm a little worried now that the money just isn't there; it's a political stance. There's no doubt the money's improving," O'Connell said.

Haslam has emphasized that state government officials should question all services to decide whether they are a state responsibility and if they could be done more efficiently or outsourced.


The impact of cuts is felt in other areas such as grants and, increasingly, by TennCare providers.

After concluding hearings last week on the upcoming 2012-13 budget, Haslam said he will focus on maintaining state funding for local education and increases in areas ranging from TennCare to state employee health costs.

"The revenue picture is better, but we have increased funding obligations," Haslam said.

Haslam said the current budget anticipated $300 million in new revenue but faces some $500 million in needs for built-in costs. And that doesn't include $160 million in nonrecurring funding for "core" services that goes away July 1.

Those core services are considered especially sensitive. They include areas such as mental health peer support centers, although mental health officials hope to spare cuts there. Together, the shortfall and funding loss represent a $360 million gap.

Tennessee and primarily TennCare, the state's version of Medicaid, have been helped considerably by a 4.52 percent assessment on hospital revenues.

But Uncle Sam owes the state $82 million for TennCare services, which Congress has not agreed to pay.

On Jan. 1, the state will cut 4.25 percent in reimbursements for group-home operations at Chattanooga's Orange Grove Center, which cares for severely mentally retarded people, many of whom also have health issues.

Orange Grove Executive Director Kyle Hauth said if the reduction goes through, it "will have devastating implications for Orange Grove, more specifically people who are served in our intermediate care facilities."

TennCare officials say Orange Grove and similar providers could face another 5.5 percent in reimbursement cuts.

Darin Gordon, TennCare's director, told reporters last week that TennCare has experienced six years of cuts and is running out of options.

"Each year it's going to get more challenging," he said, noting many states long ago began slashing provider reimbursements.

Haslam said he hopes that shuffling priorities will help avoid the full 5 percent cuts he's asked agencies to plan for.

Still, the Republican governor is banking on revenue growth, not tax increases, to fill gaps.

"I sure don't see any kind of tax increase," he told reporters last week. "I don't see that as a possibility at all in [next] year's budget.

"I do think, hopefully, we'll see some real revenue [growth]. We've seen some encouraging signs there."