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Guv Budgets $164M in Bonuses Amid Cutbacks

Is now a good time for Tennessee to be handing out government-employee bonuses? Absolutely, say Democrats. Republicans want to think on it some. Taxpayers might be forgiven for perceiving some “contradictions,” they say.

Despite plans to slash health care for the poor and issue pink slips to hundreds of state employees, Gov. Phil Bredesen wants to give teachers and the state workers who keep their jobs a bonus check.

The governor’s $28.41 billion proposed FY2011 budget calls for issuing government, higher education and some K-12 workers a one-time gratuity amounting to 3 percent of their yearly salary. It is designed to help offset a three-year pay freeze for state employees, administration officials say.

The average state employee who makes $47,000 a year could collect an additional $1,410.

“I know our state employees are glad to be working, but they have been without raises since 2007 and I would like to recognize their dedication by using some of our reserves to continue the enhanced 401k match at its current level and also pay them a three percent bonus,” Bredesen said in his State of the State speech Feb. 1.

The administration is, however, leaving to lawmakers’ discretion the question of whether all employees should receive a flat 3 percent bonus, or if it ought to be weighted differently for different income levels, said Finance Department spokeswoman Lola Potter.

Members of Tennessee State Employees Association oppose Bredesen’s proposed layoffs. But they’re uninterested in trading away the potential bonuses to help keep co-workers employed, and would “ride us out of town on a rail” were the suggestion put seriously forward by union leadership, said Robert O’Connell, the association’s interim director.

Democrats at the Capitol are generally voicing enthusiasm for the $164.7 million bonus package as well.

House Democratic Caucus Chairman Mike Turner, who applied last year to lead the state employee union, believes the bonus is overdue, and said he doesn’t want to see pay schedules “get any further behind.” Sen. Roy Herron, D-Dresden, described the bonus proposal as essentially a “cost of living adjustment” for state workers who are “struggling to get by, too, like a lot of other Tennesseans.”

But the bonus package will ultimately have to draw support from Republicans, who control both chambers of the General Assembly. And some aren’t so sure it’s a wise fiscal move while dipping into savings to fund government operations.

After all, the governor is also proposing to increase a number of taxes and fees to boost state revenues in addition to lopping off $200.7 million from TennCare, laying off 767 government employees, and pulling about $202 million from the state’s rainy-day reserves to stave off further budgetary belt-tightening.

“I agree that we have some employees that are hard workers and probably are not being paid what they should be for the job they are doing. But it seems kind of hard to justify giving somebody a bonus when you’re laying other employees off,” said Sen. Jim Tracy, R-Shelbyville, an owner of an insurance company who said he’s resorted to cutting employee hours to avoid reducing staff during tough economic times.

Lt. Gov. Ron Ramsey, R-Blountville, said it’s too early to tell how the issue will shake out. Ramsey, a candidate for governor, said he can see “the contradiction, so to speak” in handing out bonuses while simultaneously shedding jobs. He echoed the governor’s sentiment that most people who continue to work in this economic climate are probably just thankful for a steady paycheck.

“The average person working a job right now is just happy to have a job and no one is getting raises at this time,” he said.

In fact, large and mid-sized companies across the country are expecting to offer modest pay increases this year to valued employees, according to a recent study by Mercer, Inc., a global consulting, outsourcing and investment services company.

Of the companies surveyed for the study, salaries are projected to grow by about a 2.3 percent average in 2010, according to Mercer’s “2009/2010 U.S. Compensation Planning Survey Update,” which also reported that salaries grew 2.1 percent last year.

Thirty percent of firms had pay freezes in place during 2009, but that number is expected to drop to 14 percent this year, according to the November analysis involving more than 350 U.S. employers.

The federal government would need to OK the TennCare cuts. If it doesn’t, lawmakers will have to find somewhere else to slice out $200 million. House Republican Caucus Chairman Glen Casada said the state may have to consider using the bonus money if those cuts aren’t approved.

To offset the TennCare cuts, the Tennessee Hospital Association is proposing a tax on hospitals’ revenues. But, Casada said, that plan could also fall through.

“We don’t have too many other options to look for, for that size and that amount of money. So, yes, the teacher, employee bonus could be in trouble under those two scenarios. By fact, there’s no other alternative,” he said.

One option floating around the capitol is cutting down the size of the bonus, said Casada, a member of the House Finance, Ways & Means Committee.

“Is 3 percent too much? Is 2 percent too much? I don’t know. In my opinion there needs to be something, but how much?” he said. “That’s where everyone is right now.”

Workers in about 44,800 state government jobs — from driving TDOT trucks to working as a head administrator — would get a $45.6 million chunk of the total, according to Bredesen administration. Professors, staff and other workers filling 21,400 jobs in Tennessee colleges and universities will split $51.3 million in bonuses.

State employees and workers in higher education last saw a raise in 2007.

Legislators last offered a $400 bonus two years ago to state employees with at least three years on the state payrolls, said the Finance Department’s Potter. During the 2006-07 budget year, employees who were scheduled at least 1,600 hours, or 30 hours a week, received a $350 bonus. Both bonuses omitted employees on mandated pay schedules.

The K-12 public schools system employees, who would also receive bonuses under the governor’s plan, are not included in the ongoing state employees pay freeze. Some 64,750 teachers, 4,300 administrators and other licensed education personnel like guidance counselors and school psychologists would split $67.8 million.

The thing that ought to make the bonuses most palatable to lawmakers concerned about spending is that it is one-time money only, said Sen. Jim Kyle, D-Memphis, whereas pay raises cost the state year after year.

“It’s a lot easier to find $170 million in non-recurring money than it is to find $50 million in recurring money. If we’ve got the money, I’d rather give our employees a bonus than I would let that money sit in a savings account. They need that money,” said Kyle.

Kyle, the Senate Democratic leader and a 2010 candidate for governor, has said he’s generally pleased with the proposed budget, but that the cuts to TennCare and state staffing levels could change as lawmakers tinker with the budget over the next few months.

Andrea Zelinski can be reached at 615-489-7131 or andreazelinski@tnreport.com.

4 replies on “Guv Budgets $164M in Bonuses Amid Cutbacks”

Government workers like yourselves are overpaid . Why do you think all state workers need a increase and a bonus? GOVERNMENT AND STATE WORKERS ARE OVERPAID, PLUS HAVE TOO MANY BENEFITS . Our poor old seniors could not receive $8.00 a month increase in pay. I have not seen a teacher nor state worker that does not have a new car, a new home, takes a three month vacation . You need to see outside the political box of government. Who pays your salary? Teachers and State workers?

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