State Buyout Offer Shows Mixed Results

By Andy Meek

Phil Bredesen

The administration of Gov. Phil Bredesen today will begin notifying a little more than 2,000 state employees who have applied to participate in a buyout plan whether their applications have been accepted or not.

The buyout plan represents an effort to shave about 5 percent of the state’s work force. Employees who accept the voluntary buyout package will receive a mix of benefits including temporary health care coverage and tuition assistance.

Under review

On a conference call with reporters last week, Bredesen said the program hadn’t so far produced the results he wanted to see. Of the 12,000 state employees eligible to take part in the buyout, Bredesen said barely more than 2,000 had applied.

The goal was a minimum of 2,300. Following Bredesen’s conversation with reporters Tuesday – when he spoke by phone from New York where he had been meeting with the three bond rating agencies that keep an eye on Tennessee’s finances – the numbers did improve a small bit. But the change hasn’t been much.

Heading into today, the most current numbers available from the state showed 2,130 people have applied for a buyout.

“Until (today), the state will be reviewing the applications received in each department and agency to see whose applications can be accepted,” said Lola Potter, spokeswoman for the Tennessee Department of Finance and Administration.

Her boss – Tennessee finance commissioner Dave Goetz – accompanied Bredesen to New York for his round of bond rating agency presentations. Bredesen, while on that trip, pointed to the state’s effort to trim its employee headcount to find cost savings instead of raising taxes as something that appeared to please the rating agencies.

“We’ll know where we are (this) week,” Bredesen said. “We need $64 million annually in state savings (from the buyout), and we’re going to get them. … I think it’s been our willingness to address this issue without playing games or hoping for better times in the future or something like that that really has impressed these ratings agencies and gives me good confidence that outside people are looking in and saying, ‘You’re managing yourself well here.’”

Low burden

Coincidentally, the Washington-based research group The Tax Foundation released the results of a tax study Thursday that echo Bredesen’s remarks about the state’s financial picture. While the results weren’t directly related to his point about the buyout program, The Tax Foundation’s study found that Tennessee’s state and local tax burden is among the lowest in the nation.

But that shouldn’t be taken as an indication major structural challenges in state finances still don’t pose a headache. The buyout program, if nothing else, is evidence of that. So is Bredesen’s suspicion that Tennessee’s sales tax holiday each spring might have to be put on hold until the state gets back onto firmer financial footing – something else he shared with reporters during last week’s conference call.

“One of the things the ratings agencies have been doing over the last couple of years is being more explicit about the particular criteria that they use in assessing whether someone’s (bond rating) is AAA, AA or whatever,” Goetz said. “We have been obviously paying a lot of attention to those particular criteria and believe we can make a good case that in fact Tennessee meets almost all of those criteria. That we have plans in place that will sustain that going forward.”

The finance experts from the ratings agencies Bredesen met with didn’t ask many questions during the governor’s presentation.

“I think the fact that we are managing in a down economy by adjusting our expenses to correspond to our income, not by dipping into reserves deeply – those kinds of things play very well with this group,” Bredesen said. “The fact that the Legislature agreed with preserving both the rainy day fund and the TennCare reserves at their current levels has also been very helpful and impressive to them.”