A report by the Division of Human Resources last week reinforced conclusions of a special legislative interim committee that state workers continue to lag behind the private sector in employee compensation. And without significant change, according to the report, the exodus of state employees to other public agencies or private businesses will result in a drain of talent and experience from state government.
Ann Heilman, division administrator, submitted the report on Idaho State Employee Compensation Dec. 1. The 23-page document outlines the recent history of employee compensation and includes recommendations for improvement.
The report recommends that a 5.7 percent CEC for state employees be included in the governor’s budget for FY07 (see below). The fiscal impact on the state’s general fund would be approximately $33 million.
In its executive summary, the report says the intent of the Legislature is “that state employees may expect to advance in the salary range to the labor market average rate for the pay assigned to the classification.” For that to happen, the report continues, “salary ranges need to reflect the increase in the market. Funding also needs to be provided to keep current employees' salaries at market.
“The market pay rate philosophy collapses when consistent funding is not available for these two key components. The challenge to fund state employee pay increases appeared to have surfaced in 1980. The pay disparity has compounded each year the state has not funded market competitive employee pay increases.”
Where does that leave state employees?
“The situation has now become critical,” according to the report, “because the impact of extremely low wages is increasing the cost of government in terms of turnover, training and quality of the workforce. Individuals with particular skill sets command a certain level of pay in the marketplace. Low unemployment rates mean effective and efficient employees have many job options. The state’s workforce is directly impacted by economic laws of supply and demand.”
The report says Idaho’s current Legislature and administration (and those immediately preceding) “inherited this market wage lag.” No specific annual funding and only a few market-based adjustments have been required the past 21 years.
“In hindsight, perhaps the 1994 system design was too broad, with too much discretion built in at the appropriation and allocation decision points. It has not produced the results that were intended. It is time to change,” according to the report.
The Division of Human Resources includes a number of recommendations intended to address employee compensation and market competitiveness. But it cautions that a “standard delivery of a flat CEC percentage increase will not be sufficient to address problems with the system. Conservative, serious approaches, strategically aligned to improve the state’s position to compete for staff who will deliver effective and efficient service, are what DHR recommends.”
Its other recommendations to the governor include:
According to the report, for each one percent increase
in CEC, the fiscal impact on the state’s general fund is approximately
$5.8 million. Fully funding the recommended 5.7 percent overall CEC
increase would cost about $33 million for FY07.