If I was planning to move to Chattanooga, the payout would nice small bonus, but that's about it.
I found that to be the case throughout a lot of the Blue Ridge area, when I lived there. To a greater extent, unless you're heading to larger metropolis areas like Atlanta, Charlotte, Raleigh, Columbia or Charleston, what you've said is 100% true throughout much of the Southeast. Outside of larger cities, firms don't like to pay much.
It's why I hightailed it to Austin two years ago and haven't looked back except holiday visits to family.
Decent pay here in Knoxville isn't all that difficult, but you do have to hustle and build up a bit of a name for yourself before you can reasonably expect to pull in anything, and it won't approach SV rates. Oh, and you pretty much have to be a .NET developer, although there is some demand for Java and a tiny bit of demand building for Ruby and Python.
Feel free to drop me a line (email is in my profile) and maybe we can help each other out.
I'd kind of like to stay here and find a good engineering position, but I'm concerned that since the COL is so low (=> low starting salary when I graduate) that it may be better to get a job in a big city first and then move back here later.
Unfortunately, half the jobs are at companies you will not want to work at for more than a year (ignore what anyone says about turn over rates, peoples expectations are too low).
My advice for anyone starting out would be to start attending the local user groups (http://www.etnug.org , http://knoxvillesc.org , http://www.agileknoxville.com ) and start working on public stuff that you can point to (put some stuff on git, answer some SO questions).
I have no clue what starting salary around here is currently though, but it should be easy to find out by asking one of the local recruiters. Shoot me an email if you need the names of some of the more trustworthy headhunters in the area.
Plus it's technology agnostic (although samples tend to be in .NET because Knoxville), it focuses less on technologies and more on technique.