Memo: State OK’d to grant raises to some
24,410 employees eligible; $27.5M yearly cost forecast
State agencies are allowed to grant performance-based raises to their employees of up to 2.8 percent of each agency’s total annual base salaries in the coming fiscal year and the maximum-authorized raise is 10 percent, the director of the state Department of Finance and Administration said Tuesday in a memo to agency directors.
About 24,410 state employees are eligible for the performance-based raises, effective July 1, and, if each state agency uses all the money that it could for these raises, the total projected cost would be $27.5 million more a year, said Scott Hardin, a spokesman for the finance department.
The employees eligible for these performance-based raises work at state agencies other than the state’s colleges and universities, the Department of Transportation, the Game and Fish Commission, and the state’s constitutional officers, he said.
Among larger agencies, the Department of Human Services could spend up to $7.3 million on performance-based raises for its employees, while the Department of Correction and the Department of Health could spend up to $3.8 million and $2.5 million, respectively, on raises in fiscal 2019 that starts July 1, according to the finance department’s figures.
The Department of Community Correction may spend up to $1.3 million on raises, while the Arkansas State Police and the finance department’s Revenue Services Division could each spend up to $1.2 million, the finance department estimated.
Larry Walther, director of the finance department, wrote Tuesday in a memo to state agency directors that “due to your efforts, implementation of the new pay-for-performance system went smoothly,” and he praised their “judicious application of the new standards.
“After a review of revenues and the performance results, I am pleased to announce that sufficient revenues exist for performance pay,” he wrote in his twopage memo.
“The cumulative total for all performance pay increases cannot exceed 2.8% of each agency’s total annual base salaries. The cost of any performance pay increases is expected to be borne by the agency out of existing funding,” Walther said. “General revenue agencies may, after absorbing any performance pay costs from existing funding, seek funding from the Performance Pay Fund (formerly the Merit Adjustment Fund) to help offset remaining costs of performance pay increases.”
The performance-based pay system allows state agencies to grant no raises to state employees with “unacceptable” evaluations and up to 10 percent raises for employees with “role model” evaluations, Walther said in his memo. Employees with “needs development” evaluations can get up to 2.5 percent raises; those with “solid performer” evaluations are eligible for up to 5 percent raises; and those with “highly effective” evaluations can get up to 7.5 percent raises, he said.
Walther told agency directors that the Office of Personnel Management has financial modeling capabilities “to help each of you determine what percentages you can assign to each performance level, while remaining within the 2.8% percent cap.”
Sen. Bart Hester, R-Cave Springs, a member of the Joint Budget Committee, said he trusts Walther’s judgment in allowing agencies to spend up to 2.8 percent more on performance-based raises.
He said the state’s citizens salary commission recently granted 3 percent raises to elected officials, and he would rather get no pay raise as a lawmaker and allow state employees to get larger raises.
Sen. Larry Teague, D-Nashville, the Joint Budget Committee chairman, said allowing state agencies to spend up to 2.8 percent more on performance-based raises seems fair and reasonable to him.
He said he’s not a believer in the new performance-based pay system, nor is he against it.
“I just need to see how it all plays forward,” said Teague.
Last July, the state instituted an overhaul of the pay plan covering more than 25,000 full-time employees to boost the government’s competitiveness with salaries in the private sector.
The pay plan overhaul was projected by the state to cost between $57 million and $60 million a year and boosted the average annual salary for the employees it covered from $38,461 to $40,772. The pay overhaul was largely financed through budget savings, state officials said.