ARIZONA STATE LEGISLATURE
JOINT LEGISLATIVE STUDY COMMITTEE ON STATE EMPLOYEE COMPENSATION
Minutes of the Meeting
Wednesday, September 27, 2006
1:30 p.m., Senate Hearing Room 109
Members Present:
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Senator Jay Tibshraeny, CoChair |
Representative Bill Konopnicki, CoChair |
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Senator Barbara Leff |
Representative Meg Burton Cahill |
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Bill Bell |
Representative Marian McClure |
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Mark Bogart Geri Davis James Matthews |
Kathy Peckhardt Felecia Rotellini Carl Williams |
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Members Absent:
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Senator Marsha Arzberger |
David Hunt |
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Jessica Anderson Tom Betlach |
Cathy McGonigle Shawn Nau Linda Strock |
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Staff:
Leah Birk, Senate Judiciary Committee Assistant Analyst
Steve Moortel, House Government Reform and Government Finance Accountability Committee Analyst
CoChair Tibshraeny called the meeting to order at 1:30 p.m. and attendance was taken.
Opening Remarks
Senator Tibshraeny, informed the Committee that this was an annual, statutory meeting on State Employee compensation, required by law to submit a report to the President of the Senate, Speaker of the House and Governor of Arizona by December 1, 2006. He stated that the Committee had done a good job over the last two years.
Presentation of State Compensation Ranking and Market Comparison – Arizona Department of Administration
Kathy Peckhardt, Human Resource Director, Arizona Department of Administration (ADOA) Personnel System, submitted a handout (Attachment A) entitled Highlights from the 2006 Advisory Recommendation on State Employee Salaries. She thanked the members of the Committee for its efforts towards providing funding for one of the largest state employee pay increases in many years. She added that the Committee had made progress in closing the gaps between state employee salaries and the market. Ms. Peckhardt explained that last year, the ADOA reported that the market exceeded the average state employee’s salary by almost 22 percent and this year, that margin has dropped to 15 percent. She stated that the need to attract and retain professional and highly trained employees remains a major concern for all State Agencies. She listed reasons to keep competitive salaries for state employees:
On behalf of the ADOA, Ms. Peckhardt gave the 2006 recommendation, which consisted of four components:
In summary, Ms. Peckhardt told the Committee they had made excellent progress toward closing the gap between state employee salary and the market and it was important to build on that progress, continuing to make it a priority.
Senator Tibshraeny reminded the members that this was a statutory Committee that by law, was required to file a report with the Speaker, President and Governor by December 1, 2006.
Representative Konopnicki stated that one recommendation from the previous year was to do the raise early, and state employees would receive two raises in one fiscal year. He expressed concerns about the statement made in the ADOA’s recommendation which stated that a raise should be given by March of 2006 and did not want that to be viewed as punitive.
Leah Birk, Senate Judiciary Assistant Analyst, submitted a handout (Attachment B) that listed the recommendations made by the Committee in 2005, and a handout (Attachment C) detailing state employee pay raises for fiscal year 2006-2007. In reference to attachment C, she remarked that the fiscal year 2006-2007 budget included various state employee pay raises which included a total of $51.7 million in fiscal year 2005-2006 and $168.5 million in fiscal year 2006-2007 for a statewide employee salary increase averaging approximately 6.3 percent. She told the Committee that the salary level of each employee was to be increased by 2.5 percent of salary to be designated as performance pay and a lump-sum amount $1,650. She remarked that agencies must establish performance measures and beginning April 30, 2007, the performance pay will be at risk if the performance measures are not met. Ms. Birk added that entry level salaries for Correctional Officers, including the statewide pay raise, were increased by $5,300. The entry level salaries for Juvenile Correctional Officers, including the statewide pay raise, were increased by $4,100. The entry level salaries for Highway Patrol Officers, including the statewide pay raise, were increased by $3,700. She explained that the Department of Health Services received $3.1 million in fiscal year 2006-2007 for salary increases of Direct Care Workers at the State Hospital. She said that $1.4 million were appropriated for market adjustments in fiscal year 2006-2007 for the salaries of the Auditor General’s professional staff.
Senator Leff asked the Committee what the purpose would be for an additional pay raise in March as opposed to a raise for the next fiscal year.
In response to Senator Leff, Bill Bell stated that ADOA’s intention was to provide facts for the Committee. He said that ADOA was not trying to send a message or be punitive or suggest anything out of the ordinary, other than to reflect what occurred last year and to call the Committee’s attention to how the raise was given and what that will mean for this coming year.
Kathy Peckhardt remarked that ADOA’s recommendation was to put this in the budget cycle early, again making it a priority and that it would only be eight pay periods within fiscal year 2006.
Representative Konopnicki reminded the Committee how difficult it was to get the raise last March. He said there were a number of members who literally laid everything on the line so that state employees could receive the raise and that part of the motivation that the CoChairs had for pushing the raise in their respective bodies was the increase that was coming in retirement. He explained that they wanted some of that money ahead of time as to soften the blow.
Bill Bell told the Committee that ADOA agreed with representative Konopnicki’s comments and that what they wanted to do was to continue to stay the course, provide much needed dollars to state employees and did not want to send out a punitive message.
Public Testimony
Lisa Frace, Arizona Board of Regents, submitted a handout (Attachment D) entitled Annual Personnel Report for the Arizona University System. She said that each year, The Board of Regents was required by statute to submit an annual personnel report for the University System to the Governor and the Legislature. She stated that the Universities were able to make improvements in the relative faculty percentile ranking against peers. She remarked that the Regents and Universities were grateful for the investments in University salaries. Ms. Frace explained that Arizona Universities were not able to consistently compete for faculty in the national arena. She stated that increases in retirement costs along with inflation have far surpassed the funding available for funding increases over the past several years.
Discussion
Representative McClure suggested that the Committee try to proceed with an early bill but not implement it until after the fiscal year begins and by doing so, would send a clear message to state employees that they are still number one priority.
Senator Leff remarked that the Committee should acknowledge the fact that there was a five year plan and not do a bill early. She said the Committee should send the message that this is the commitment this Committee made one year ago, the commitment stands and for the next five years, these salary increases will be part of the budget because that was the commitment that was made. She added that doing anything earlier would only raise questions.
Representative Konopnicki agreed with Senator Leff’s statement by saying that the commitment was to have a five year plan and that this was something that should be done very carefully. He also added that he would like to see something done to try offsetting retirement costs.
Carl Williams stated that the Committee does have a commitment to a five year plan but this was part two of the original five year plan which was not met in the proper time frame. He said that although this was a re-commission of the original commission, the Committee had to keep that in mind also. He remarked that traditionally during the budget process, every issue gets addressed and then state employee money was whatever was left over. Mr. Williams told the Committee that what state employees ask is for legislators to focus on them at the beginning of the budget process, not necessarily at the start of the year.
Felecia Rotellini explained that the goal was to get the 8.29 percent over the next three years and to stay the course, keeping the commitment to the five year plan.
Representative Burton Cahill asked the Committee if it was factoring in increased medical premium costs.
Representative Konopnicki responded by saying that in fiscal year 2006-2007, medical premiums were factored in by the Committee and paid for by the State.
Representative Burton Cahill stated that the Committee must always factor in increased medical premium costs.
Representative Konopnicki suggested that the Committee move forward with the current recommendations with the focus not shifting from the base salary increase.
Senator Leff said that state employees should know that they were held harmless on health coverage for the last three years. She stated that the Legislature had done a lot to help state employees that might not have been recognized. Senator Leff opined that employees might feel better if they actually realized what their health insurance could have cost.
In response to Senator Leff, Kathy Peckhardt remarked that when ADOA issued newsletters announcing the dates for open enrollment, the issues of health care costs covered by the State were addressed.
Representative Konopnicki moved that the Committee accept the recommendations made by ADOA with the exception of the salary increase coming in March and the inclusion that the State would pick up any additional cost for health insurance as part of the total employee package. The motion carried by voice vote.
Felecia Rotellini stated that she was on the board that oversees the Deferred Compensation Fund and that many state employees could benefit from utilizing that fund as another means of saving for retirement. She suggested the Committee look into matching a minimum amount of money per month which could help the employee through their own deferred contribution plan.
Representative Konopnicki responded by saying that issue was looked into a number of years ago and one problem that occurred was that all state employees have to be treated the same. He said it was not a bad idea, but it had a lot of factors involved and should be looked at very carefully.
Bill Bell stated that ADOA would volunteer to put information together regarding Ms. Rotellini’s suggestion.
Carl Williams asked the Committee what percentage of state employees currently took part in the Deferred Compensation Fund.
In response to Mr. Williams, Ms. Rotellini stated that it was under 50 percent.
Senator Tibshraeny stated that he had no problem with the Committee discussing this further.
Senator Leff opined that if the Committee wanted to raise state employee salaries, it should concentrate on one thing. She explained that it wouldn’t come out to be 15 dollars per employee, matched by the State, it would come out as $500 million dollars from the budget.
Senator Tibshraeny agreed with Senator Leff in saying that the goal at hand was big enough, and the Committee could possibly discuss matching funds next year.
There being no further business, the meeting was adjourned at 2:20 p.m.
Respectfully submitted,
Jeff Turner
Committee Secretary
(Tapes and attachments on file in the Secretary of the Senate’s Office/Resource Center, Room 115.)
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Joint Legislative Study Committee on
State Employee Compensation
September 27, 2006
Page 1
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