One of government's largest expenses is real estate: the costs of property acquisition, construction, leasing, operation and maintenance for the facilities that house government operations. These costs are usually buried within multiple departmental budgets, so most government officials and taxpayers have no idea what their governments spend on buildings and properties or what opportunities exist for cost avoidance. In Tennessee, real estate is our state government's fifth-largest expense, after health care, education, human services and public safety.
Months ago, when the pandemic struck, many businesses and governments closed offices and sent workers whose jobs didn't require a physical presence home to work virtually. For most governments, the move has been seen as a temporary expedient to reduce the spread of COVID-19. But Tennessee had a three-year head start with a program that had already significantly reduced its real estate footprint while improving the efficiency of its operations.
Since 2017, Tennessee has been implementing a program we call Alternative Workplace Solutions (AWS). By allowing employees to do their jobs wherever they can best meet their customers' needs — such as working from home, working from vehicles, and sharing remaining office workspaces — the state has improved customer service, boosted worker productivity and job satisfaction, and reduced its need for expensive office space.
I became commissioner of Tennessee's Department of General Services in January 2019, and I quickly recognized the immense potential of the AWS program. That September, I detailed some of the program's results: In the departments where we had implemented AWS, we had reconfigured and reduced office space by a total of 375,000 square feet, saving $5 million in annual real estate costs. We had cut our need for office space to the point that we'd been able to sell one state office building and were preparing to sell another.
Meanwhile, sick-leave usage was down, and valuable long-time state employees told us that the opportunity to use AWS had led them to delay their plans for retirement. We also knew that AWS was aiding recruitment: New hires were telling us that the flexibility offered by AWS in where and how work is done played a part in their decision to consider a career in state government instead of the private sector.
At that time, 11 of the 23 cabinet-level departments had completely adopted AWS, and six were in progress. A total of 22 percent of the executive branch workforce of some 38,000 employees was using one of the three AWS work arrangements. Then, when the coronavirus pandemic struck, Gov. Bill Lee directed that all state employees with the capability of working from home begin doing so, and we realized that AWS could help us respond quickly to that previously unanticipated need.
Tennessee requires that employees and their supervisors receive appropriate training to ensure they are prepared for the changes that AWS brings to their work. Our Department of Human Resources immediately streamlined the training process and reduced some requirements. Agencies partnered with the state's Strategic Technology Solutions division to source quickly the proper equipment (laptops, headsets, video and Web conferencing software) for employees beginning AWS. This effort helped us move an additional 35 percent of our workforce out of state buildings in four months. Today, some 57 percent of executive branch employees are working from home.
The full results from our rapid expansion of AWS aren't in yet, but what we have done is anything but a temporary expedient. We're planning to build on the gains we've made and apply those lessons going forward to reduce our need for office space in the highly competitive Nashville market even more than we already have. Our TennCare department is planning to vacate a 100,000-square-foot building that we will refill with workers from other agencies. Many of our other departments, including Education, Transportation, and Commerce and Insurance, are planning significant reductions in their downtown office space as well. Altogether, state agencies are planning reductions in operational space that our real estate division predicts will allow us to vacate more than 337,000 square feet over the next two fiscal years.
In coming months and years we'll better understand the longer-term financial implications of AWS, as we are able to sell unneeded buildings and property and delay or cancel construction projects that are no longer essential. But we know already that it will be good news for the state's budget and for our taxpayers. As our federal, state and local governments search for ways to recover from the devastating financial impact of COVID-19, AWS is a tool they should strongly consider.
The writer will be discussing Tennessee's experience with AWS, both its impact and lessons learned, during the National Association of State Chief Administrators' virtual Thought Leadership Series July 28-Aug. 13. Registration is free for state government employees.
