County Turns to Furloughs
The temporary measure will rely on expanded unemployment benefits to blunt the loss of county tax revenues related to the coronavirus pandemic.
by Jesse Fox Mayshark and Scott Barker • April 20, 2020
The upcoming furloughs of Knox County employees announced Friday by County Mayor Glenn Jacobs will likely affect hundreds of workers — but only temporarily, county officials emphasized.
Federal assistance is temporarily pushing unemployment payments in Tennessee up to $875 a week.
“We are facing this challenge directly and making decisions that will help us continue providing the services our residents depend on,” Jacobs said, citing anticipated declines in sales tax revenue from the economic slowdown. “The decision to furlough employees was incredibly difficult and the hardest move I’ve made as mayor.”
Jacobs gave few details when he announced the measure on Friday, but said the furloughs would begin May 9 and last eight weeks, which would bleed a few days into the next fiscal year. Furloughs could be extended beyond the first week in July, he said.
The county general government and several of its fee offices currently have many employees at home essentially unable to work because their operations are closed or severely limited.
The plan announced by Jacobs on Friday would place many of those employees and others in departments throughout the government on furlough, allowing them to file for two months’ of expanded unemployment benefits.
The furloughs are intended to generate short-term savings, not long-term cuts. Furloughed employees will retain their benefits, including health coverage.
“We expect these furloughs to be temporary and hope that everyone will be back to work very soon,” Jacobs said. “Though this certainly isn’t something we wanted to do, we need to watch our spending during these uncertain times.”
The rationale for the move is a huge boost in unemployment benefits through the end of July under the federal CARES Act. The federal government is adding $600 a week on top of each state's regular payments, which in Tennessee top out at $275.
The combined $875 a week is equal to a $45,500 annual salary, which would cover the regular paychecks of many of the employees to be furloughed. That allows the county to move those weeks of pay off its own books.
“For some people, that would be a pay raise,” said County Trustee Ed Shouse, who will be furloughing some of his employees. “It’s not like anybody’s going to be put out in the street.”
The maneuver essentially uses state and federal unemployment dollars to save the county money on salaries and wages as the fiscal year ends. The savings would reduce the amount of money the county needs to draw from its reserves during the last two months of the fiscal year, Knox County Finance Director Chris Caldwell said.
“We are anticipating using fund balance in FY ’20 due to the impact of COVID-19 on our local economy, thus anything to alleviate that pressure benefits the county’s financial position,” he said.
Caldwell said the county has about $195 million in cash reserves. “While the county is flush with money currently, the decisions we’re making today is to anticipate what our cash reserves will be in August and September,” he said.
The mayor’s office said the number of employees to be furloughed and a target amount for savings haven’t been determined.
“We don’t have a target amount in mind, and the range will depend on the total number of furloughs from elected officials,” Caldwell said. “I would estimate we could see savings of around $1 million.”
Among the county functions that have been frozen in recent weeks are its library system and senior centers. The library alone has 140 full-time and 68 part-time employees, many of whom have been sent home since the system closed March 20.
Caldwell said earlier this month the budget shortfall for the current fiscal year could land anywhere between $7 to $18 million, depending on the size of the loss of sales tax revenues.
The state releases local option sales-tax revenues information two months after they are collected, and Knox County is just now awaiting its allotment from February, before the state and local orders restricting economic activity.
The City of Knoxville is facing similar revenue issues — Interim Finance Director Boyce Evans has estimated a $4.4 million shortfall for the fiscal year ending June 30 — but Mayor Indya Kincannon is not contemplating layoffs or furloughs.
“Right now city leaders are doing their best to ‘tighten our belts’ in other ways. It is our intention to keep our employees working and to keep City of Knoxville services going,” city Communications Director Kristin Farley said.
At separate meetings on Friday, Jacobs informed department heads and independent officeholders of his intentions. Department heads were ordered to come up with a plan identifying employees to be furloughed over the weekend.
“We held off as long as we could and do not take this lightly because we know it affects real people’s livelihoods,” Jacobs said.
The independent officeholders, including those running fee offices and Knox County Sheriff Tom Spangler, were asked to participate. Jacobs doesn’t have the authority to order their compliance, but most have agreed.
Shouse and County Clerk Sherry Witt said Friday afternoon that they would develop furlough plans over the weekend. The Knox County Sheriff’s Office did not respond to a request for comment.
Fee offices don’t receive county funding, but they do add to the county’s general fund revenues by passing along funds in excess of the fees they collect. Cutting expenses, Witt said, should increase the amount her office can transfer to the general fund.
“It’s a hard decision,” Witt said. “But we’re going to do what’s best for our employees and what’s best for Knox County.”
Witt’s office has some state-mandated duties that must be continued unabated, such as issuing and renewing license plates. She has already closed satellite offices in response to the coronavirus crisis.
Shouse said he should be able to furlough 24 of the 34 employees in the Trustee’s Office, which collects tax revenues and handles the county’s $30 million in investments. The office completed its busiest time of time of year with the collection of county property taxes, which are due before March 1.
“We run our own shop, but I’m a team player and will do the best for Knox County,” Shouse said.
Even county commissioners aren’t immune — Justin Biggs, who is the collections administrator in the Trustee’s Office in addition to serving as an at-large county commissioner, was among the first county employees to be told he would be furloughed. (County employees are not barred from serving on County Commission.)
Shouse already notified Biggs of his decision. Biggs said he’s concerned that county employees will be out of work just as the private sector is being reopened and there will be more demand for public-sector services.
“We should explore options before moving forward with furloughs,” he said. “The collections in the Trustee’s Office are important.”
Biggs accepted the decision, however, saying, “Ed Shouse is the Trustee and Glenn Jacobs is the mayor.”
Also on Friday, Jacobs’ office sent an email to county employees informing them of his decision. Labeled an “urgent message,” the email outlined the broad terms of the furloughs.
“Furloughed employees will continue to receive health coverage and other benefits from Knox County in addition to up to $275 per week from the State of Tennessee and $600 from the federal government’s Coronavirus Aid, Relieve and Economic Security (CARES) Act funding for a total of up $875 per week while unemployed,” Jacobs wrote.
Furloughed employees will continue working through May 8, and county Human Resources will file unemployment compensation paperwork on their behalf, Caldwell said. “However,” he added, “they will need to do their weekly certifications required by the state. We will go over all the details with the employees this week.”
The county is also hoping for further federal relief from money for local governments. Currently, local governments can only use emergency funding under the CARES Act for expenditures directly related to the coronavirus response.
Future congressional coronavirus relief legislation could include compensation to state and local governments for lost tax revenues, but no agreement has been reached.
“Our government is like any other business operating in the community,” Jacobs said, “and just like the businesses and people we serve, we are experiencing significant loss in revenue because of the COVID-19 pandemic.”