Pay increases for state employees should be based on performance appraisals instead of across-the-board increases, a legislative panel was told Tuesday.
Rep. Leslie Osborn, who conducted Tuesday's study before the House of Representatives Appropriations and Budget Committee, said she plans to file legislation to be considered next year that would establish performance appraisals and evaluate jobs so that state positions are paid 80 percent of what is paid by private companies.
“We need to look at are we paying our employees something that is relatively close to market, something where we can recruit and retain the best members to run our core services,” said Osborn, R-Mustang. “I personally believe we can find the dollars to fund it.”
The last across-the-board increase for state employees was a 5 percent increase six years ago, and benefits since then have been gradually reduced, said Sterling Zearley, director of the Oklahoma Public Employees Association.
Many state employees are asked to do more either because of layoffs the past couple of years as a result of an economic downturn in the state or because of agencies having trouble filling the budgeted posts they do have, Zearley said.
About 3,800 state jobs have been cut since 2009, he said. About 34,000 employees, or the same number of state employees as in 1983, work for various state agencies. That number does not include those who work for higher education or public schools.
Osborn said she also likes the idea of a $1,000 bonus in the next fiscal year for state employees who meet or exceed standards.
Osborn, who filed legislation this year to cut the state's top personal income tax rate of 5.25 percent to 2.25 percent and eventually eliminate it, said she plans to try again next year to lower income taxes.
“It can all work together,” she said.
Osborn said she's working on a more moderate version, which would reduce the income tax rate to 4 percent if there is certain growth in state revenue.
Committee Chairman Earl Sears said the state, which saw actual revenue growth for this fiscal year's budget for the first time in four years, should consider increasing employee pay.
Sears, R-Bartlesville, said he is optimistic revenues again will increase for the 2014 fiscal year, which starts July 1. Lawmakers will get their first idea of how much money is available to spend when the first revenue estimate is made in December.
“At least if we have some money, we need to start looking at what we can do for salaries, benefits,” he said. “I personally would like to tie it to performance merit, not across-the-board. The days of just straight across-the-board raises are just no longer the standard.”
Sears and Osborn said they would consider an across-the-board cost-of-living increase until a performance appraisal system is fully in effect.
Focus on performance
State Finance Secretary Preston Doerflinger said he opposes across-the-board raises and longevity-based pay but supports an appropriate level of compensation based on performance appraisals.
“For fiscal conservatives, it's not a sin to talk about paying state employees appropriately,” he said. “The thing we need to focus on is performance. … I'm not a fan of awarding compensation across the board.”
Zearley, whose organization represents about one-third of the state's approximately 34,000 employees, said the state would be able to keep more qualified employees if it could bring salaries closer to what is being paid for similar jobs by private companies.
Competitive market compensation for state positions and pay for performance are essential in order to keep a trained and knowledgeable work force, he said. He suggested state pay be brought up to 80 percent of the private market and eventually increase to 90 percent.
Zearley said no price tag is available on the cost to the state to make that increase because the differences between state and private pay for all state positions haven't been determined.
A 1 percent across-the-board increase would cost about $15 million, he said.
Increasing pay for state workers partially could be funded from savings by having lower turnover, he said. Oklahoma's 13 percent turnover rate costs the state about $90 million in training employees to replace workers who retired or quit.
State employee salaries are about 19 percent below those paid for similar jobs in the private sector, Zearley said.
The lack of a recent pay increase and higher pay offered by private companies are main reasons for the state's turnover rate, which is more than twice the 5 percent rate considered ideal, said Lucinda Meltabarger, a human resources administrator in the state's personnel office.
Many state employees are leaving for the energy field, where accountants, engineers, truck drivers and oil rig workers are needed, Zearley and Meltabarger said.
A correctional officer's starting salary is $11.83 an hour; oil-field workers can earn as much as $25 an hour, Zearley said. Meltabarger said information technicians are paid about $20,000 more at local oil companies than at the state.
Jonathan Small, policy analyst for the Oklahoma Council of Public Affairs, a conservative think tank, said the state's retirement system is outdated.
He recommended the state move its defined benefits pension plan to a defined contribution plan for new state employees, which is similar to what is being offered in the private sector. Defined contributions plans, similar to a 401(k) plan, move with the employee; previously state employees spent their entire career with the state, while now newer employees are leaving after seven years, which is before the required eight years to be vested in the state's pension plan.
But he said the state can't afford to match salaries offered by the private sector, nor should it.
“That's why it's called state service,” Small said.