In a city where the typical worker is paid nearly 10 percent less than the U.S. average, Chattanooga still has some of the highest paid workers in government.
As the home of the nation's biggest public utility and one of Tennessee's biggest public hospitals, Chattanooga has 15 government employees who are paid more than the president of the United States and 47 who are paid more than what the president's Cabinet officers earn to run the biggest departments of the federal government.
Even though three of Chattanooga's highest paid public employees stepped down from their posts in the past year, Chattanooga still had two government managers with salaries of more than $1 million and 45 others who were paid more than $200,000, according to salary data provided to the Chattanooga Times Free Press in response to records requests.
The biggest salaries were paid to managers of two of Chattanooga's five biggest employers — the Tennessee Valley Authority and Erlanger Health System.
TVA, the nation's biggest government utility which provides electricity to parts of seven Southern states, had 34 of the 50 highest-paid government employees in Chattanooga last year.
Erlanger, which operates Chattanooga's biggest hospital, had nine of the city's top 50 paid public employees, not counting the earnings of the surgeons and other doctors who practice at Erlanger.
"Agencies like TVA and Erlanger are not primarily funded by the taxpayer, and they must compete for engineers, doctors and other high-skilled workers with private companies," said C. Warren Neel, executive director of the Corporate Governance Center at the University of Tennessee who has studied government and corporate compensation of executives. "To get the best people to run a complex organization or business, you need to pay competitive salaries."
But the highest paid managers in Chattanooga at TVA and Erlanger left in the past year and have been replaced so far with lower-paid managers.
TVA's former chief operating officer, Bill McCollum Jr., left his $1.5 million-a-year job last month and has not been replaced. TVA's former head of nuclear construction, Ashok Bhatnagar, left his $1.02 million-a-year job last year and was replaced by Mike Skaggs, who was paid $780,300 last year.
Erlanger's former CEO, Jim Brexler, was forced to give up his $550,017-a-year job in December. Charlesetta Woodard-Thompson replaced Brexler as the hospital's interim CEO, and her $486,737 salary is $62,250 less than what her predecessor was paid.
Ron Loving, a retired TVA executive who is chairman of the Erlanger board of trustees, said he expects the hospital will hire a permanent CEO before the end of the year.
"It's absolutely essential that we attract and hire the talent necessary to carry out our mission," Love said. "To carry out the very complex work at institutions like Erlanger and TVA, it's often necessary to recruit from a national field of candidates."
The top TVA and Erlanger managers in Chattanooga were each paid more than the $400,000 salary provided to President Barack Obama. But pay consultants said the top leaders were still paid less than their counterparts at other utilities and hospitals.
Lifting the pay cap
For the first half-century of TVA's 77-year history, its employees weren't allowed to make more than members of Congress, who now are paid $174,000 a year. But a 2006 revision of the TVA act lifted the pay cap for TVA's top managers.
Last year, 155 TVA managers across the Valley were paid more than members of Congress.
Janet Herrin, TVA's $756,811-a-year executive vice president for people and performance, said the TVA Act now "requires a compensation plan based on prevailing pay for similar positions" in the private sector. But TVA's pay consultants, Tower Perrin, estimates TVA's top executives are paid only a third to two-thirds of what private utilities pay their top leaders.
Compensation to employees at TVA pumps more than $400 million a year into the Chattanooga area economy but still represents "a relatively small — but essential — part of TVA's budget," Herrin said.
"A skilled TVA workforce is good for the public," she said. "It keeps operations safe, service quality high and prices low. That's good for the regional economy."
Competing for talent
Gregg Gentry, Erlanger's $222,301-a-year human resources director, said Erlanger "must offer competitive salaries in order to recruit and retain leadership talent.
"The scope of responsibilities for Erlanger's leadership team is significantly more complex than others in the local health care market," he said. "Erlanger is a $600 million business with five campuses, two community health centers, as well as the region's only Level 1 Trauma Center, dedicated Children's Hospital and only academic teaching center."
Gentry said to help cut Erlanger's losses incurred in the past year, the hospital expects to cut overall personnel expenses this year by $10 million.
Erlanger's top manager, Woodard-Thompson, was paid less than 10 percent of the $6.8 million compensation package given last year to the head of BlueCross BlueShield of Tennessee, Vicky Gregg. The Erlanger head also was paid nearly 9 percent less last year than her counterpart at Memorial Health System, Chattanooga's second biggest hospital.
Memorial Hospital CEO James Hobson was paid $534,481 in the fiscal year that ended June 30, 2011, according to the hospital's most recent tax filings with the Internal Revenue Service. The non-profit hospital, which is owned by Catholic Health Initiatives, had eight local executives who were paid more than $200,000 in fiscal 2010-11, compared with seven executives who were paid above $200,000 at Erlanger in the same year.
The highest paid executives at Memorial included Sarah Fellowes, chief medical officer who was paid $357,972; Carol Newton, chief financial officer who earned $305,922; Jaqueline Jackson, vice president and service line administrator who was paid $276,218; Andrew McGill, vice president of development who was paid $270,718; Debra Moore, senior vice president and administrator at Memorial North Park who was paid $257,726; A. Nasser Khalifeh, chief physicist who was paid $229,538; and Gordon Utgard, a project manager who was paid $222,874.
Five educators and administrators at the University of Tennessee at Chattanooga also were among the 50 highest-paid government employees in Chattanooga.
Henry McDonald, the former director of the NASA Ames Research Center who helps lead the SimCenter as the chair of excellence in computational engineering, was the highest-paid state employee in Chattanooga last year with an annual salary of $245,906. The director of the SimCenter, David Whitfield, also was among the top-paid professors at UTC with an annual salary of $226,560.
The two computational engineering professors helped establish the SimCenter at UTC in 2002 as UTC's first doctoral program.
But even as UTC's highest paid faculty members, McDonald and Whitfield still received less than a third of what was paid to UT's highest salaried employee. Dr. Christopher Knott-Craig, a thoracic cardiovascular and pediatric surgeon at UT's Medical School in Memphis, was paid a state salary of $781,250 last year.
Local governments pay leaders less
Only one employee of Hamilton County government placed among the top 50 paid public employees. Medical Examiner Frank King was paid $195,024 last year to serve as the coroner for the county.
The head of the single largest employer in Chattanooga — Hamilton County Schools Superintendent Rick Smith — was paid $163,500 last year. Smith was the highest-paid person in the 4,300-employee school district, but was still paid nearly 20 percent less than his predecessor, Jim Scales. He did not earn enough to be among the top 50 paid public employees in Chattanooga.
The top paid employees of any area municipality were Chattanooga City Court Judges Russell Bean and Sherry Paty. But their $156,792-a-year salary didn't place the city judges among the top 100 paid public employees in the region.
The top pay of government workers in Chattanooga still was only a fraction of the salary given to Chattanooga's highest-paid business executive.
Unum Corp. President Tom Watjen, who heads the world's biggest disability insurance company, received a compensation package worth $10.1 million in 2011.
According to the U.S. Bureau of Labor Statistics, the average Chattanooga worker last year was paid $44,772l, or $861 per week. Chattanooga pay averaged 9.2 percent less than the U.S. average of $49,660, BLS reported in its annual occupational wage survey.
Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...