Agenda Archives
TPEA's Legislative Agenda for the 77th Legislature - Overview of Results
BackgroundTexas Public Employees Association has adopted a legislative agenda that is focused on three issues of greatest concern to TPEA members and state employees generally. All three items are intended to establish an adequate compensation package for state employees by increasing salaries and maintaining reasonably competitive health insurance and retirement benefits.
The increasing inadequacy of current salaries and benefits for state employees is undermining the ability of state agencies to recruit and retain qualified and experienced personnel to deliver a wide range of state services. Failure to offer an adequate compensation package is causing excessive employee attrition, which creates substantial direct costs for the state. The "brain drain" associated with the ongoing loss of agencies' most knowledgeable and experienced employees is "hollowing" state agencies and threatens the continued delivery of quality public services. Faced with this crisis, the Texas Legislature needs to act aggressively to prevent further deterioration of the state's workforce and provide realistic incentives to attract and retain employees in public service.
Rationale
I. Pay Raise: To maintain quality public services, state government must reestablish a competitive compensation package that enables agencies to hire and retain qualified employees. Analysis of current employment trends indicates that state employee compensation is lagging considerably behind that of other employers. The growing salary disparity between the state and other employees is manifesting itself in high, and accelerating, employee turnover. Excessive employee turnover imposes significant costs on the state and to taxpayers. The most recent report on employee turnover by State Auditor conservatively estimated the cost of turnover at roughly half a billion dollars over the biennium. Prolonged turnover also threatens to hollow out state government, as agencies lose longer-term employees and their accrued knowledge and experience. This loss of knowledge and experience threatens to undermine the state's ability to continue providing quality public services.
Every two years the State Auditor's office releases a Biennial Report on Recommended Adjustments to the Classification Salary Schedule. This report is a highly respected analysis of state salaries to comparable employers. The Auditor's August 1998 report concluded that "State employees salaries have actually fallen 14.2 percent behind the Central Texas market since 1994." The Auditor recommended at a minimum, that classified salary schedules be increased by 3.9 percent for each year of the 2000-2001 biennium. Instead, the 1999 Legislature authorizes a single $100 a month increase for all classified employees, an amount that did not even allow employee salaries to keep pace with inflation. The October 2000 Biennial Report on Recommended Adjustments to the Classification Schedule utilized a different methodology but again found that the "State's salary schedules, as well as actual salaries, have not kept pace with those of the private sector or event other public sector entities." And the report warns "that continuing to lag behind the market places the State in a position that could affect overall services." Based on its analysis, the Auditor's report recommends, effective September 1, 2001, a $200 per month increase for Schedule A salaries and a 10 percent increase for Schedule B salaries. In the second year of the biennium the report recommends an additional $50 per month for Schedule A and 3 percent for Schedule B.
TPEA used the Auditor's 1998 methodology to compare projected salaries at the end of the next biennium, in 2003, with salaries a decade earlier, in 1993. This analysis predicts continues growth in this disparity, with the average state salary expected to grow to $30,280, and the average salary in Central Texas estimated to increase to $36,376 by 2003. If the state attempted to equalize this $6,096 average salary disparity it would require a salary increase of slightly more than 20 percent. TPEA supports an across-the-board salary increase of 16.5 percent over the next biennium, 8.25 percent in each year of the biennium. The biennial cost for this proposal is approximately $2 billion.
Excessive turnover among state employees is tangible evidence that the state is failing to compensate it s employees adequately in a competitive market. The Office of the State Auditor issued reports on state employee turnover for fiscal years 1998 and 1999 and found overall turnover rates of 17.37% and 17.58%, respectively. In both years Texas' turnover rate was significantly higher than that of comparable governmental entities or private employers. A number of state agencies and several job classifications are experiencing what can only be termed "hyper-turnover", with annual attrition rates that exceed 20 and even 30 percent.
From a public policy perspective, excessive turnover is extremely problematic. High employee attrition imposes substantial direct costs to the state in the form of expenses to recruit and train new employees. The State Auditor's reports conservatively estimated the cost of employee turnover to be as much as $10,000 for each employee separation. Consequently, a conservative estimate of the total direct cost of turnover during the 1998-99 biennium is up to a half a billion dollars.
Importantly, it is becoming apparent that ongoing attrition is causing the loss of an increasing portion of the state's most experienced and knowledgeable employees. Over time, the continued erosion of the accrued knowledge and experience of state government employees threatens agencies' ability to continue providing quality public services. Recent retirement projections suggest that the base number of ERS service retirements will steadily rise, increasing by 60 percent between 2000 and 2006. The Auditor's report also found the "For employees under 30, the turnover rate is twice the State's average.", this suggests that Texas is not successfully "priming the pump" by attracting young, career employees to replace older workers as they retire.
II. Health Insurance Benefits: Health insurance benefits are the largest non-salary portion of the state's compensation package. Since the early 1990's the Texas legislature has maintained the same level of partnership with state employees in the provision of health insurance. The state has paid the full premium for individual employees (100% of premium paid for employee) and the state has been an equal partner in providing coverage to dependents (50% of premium paid for dependents). TPEA proposes that Texas maintain this partnership with state employees through the next biennium. The current estimate of the additional funds required to maintain these benefit levels over the 2002-2003 biennium puts that cost at roughly $700 million.
There is a popular belief that state benefits are generous relative to those offered by other employers. However, in analyzing employee benefits its 1998 report, the State Auditor concluded that "The value of state employees' benefits is declining." The report found that benefits as a percentage of payroll for state employees had declined since 1995. Further, with the legislatively-mandated loss of replacement pay in 1995, benefits as a percentage of payroll are now below the national average. To make matters worse, recently approved changes by the Texas Retirement System substantially increase out-of-pocket expenses for state employees by increasing a variety of co-payments, and insurance premiums for dependent coverage will increase substantially in September. For employees with dependants these increased costs will effectively negate the $100 a month pay raise authorized by the legislature in FY 2000.
The state's health insurance coverage has previously been seen as adequate and may have helped to enable the state to attract and retain quality employees. However, it is clear that the value of this element of the state's compensation package has diminished relative to other employers and no longer acts as a competitive counter balance to other employers compensation packages. For that reason, TPEA proposes that the 77th legislature appropriate sufficient funds to hold employees harmless for any increased out-of-pocket costs.
III. Retirement Multiplier: TPEA believes assuring the long-term financial soundness of the ERS and TRS retirement funds is of paramount importance. However, the overall performance of the stock market in recent years has substantially increased returns for both the ERS and TRS retirement funds. TPEA's proposal to increase the retirement multiplier to 2.5% for both the ERS and TRS will improve benefits for current retirees and provide an additional incentive for employees to consider working for the state or to remain with the state, particularly if the legislature raises salaries. This benefit increase would not require any additional appropriated funds.