Study urges a new approach to Va. employee compensation
Analysis recommends focusing raises carefully, reviewing salaries yearly
“What’s the use of doing a pay-for-performance system if you’re not going to pay for performance?” Col. M. Wayne Huggins, executive director, Virginia State Police Association
Virginia should consider a different approach to compensating state employees, according to a new legislative study that says workforce pay needs to be an annual priority to ensure that agencies can recruit and retain talent, especially in jobs with high turnover and non-competitive salaries.
The Joint Legislative Audit and Review Commission received a comprehensive look at total employee compensation on Monday that found the Virginia government to be comparable to other employers, but primarily because of generous health insurance benefits and retirement benefits that have diminished for newly hired state workers under pension reforms implemented in 2014.
The study recommended that the General Assembly look at requiring the state to consider the competitiveness of salaries and other compensation every year before developing the proposed budget, rather than leaving the issue to political chance, which has made pay raises irregular and unpredictable.
The JLARC staff also suggested that Virginia provide pay raises according to specific needs rather than across-the-board increases that may not help the state recruit and retain talented employees for certain jobs.
“Providing uniform salary increases for all employees does not use funding most effectively because funds are not targeted to where they are most needed,” Jeff Lunardi, the project leader, told the commission. “Virginia’s budget process could better prioritize needed salary increases.”
Employee representatives applauded the recommendation of making employee compensation an annual budget priority instead of an afterthought, but said some study suggestions already are possible if the state would put money
on the table to fund them.
For example, the study recommends that the legislature consider changing state code to allow agencies to give a different percentage raise based on performance, but employee advocates say the state already has a pay-for-performance plan the state rarely has funded.
“What’s the use of doing a pay-for-performance system if you’re not going to pay for performance?” asked Col. M. Wayne Huggins, executive director of the Virginia State Police Association and a former state police superintendent.
Huggins said he also was surprised that the study spent little time on the issue of salary compression — in which pay for veteran employees does not keep up with market pay for newly hired workers — even though it is a consequence of irregular raises over a period of years.
“In the presentation today, there wasn’t a mention of pay compression,” he said.
Huggins and R. Ronald Jordan, executive director of the Virginia Governmental Employees Association, generally agreed with the study’s findings, which show the state struggling to attract and retain employees for certain jobs that are especially vulnerable to high turnover rates in large part because the salaries aren’t competitive.
“The information they provided confirmed many of the things we already knew and the General Assembly had already begun addressing,” Jordan said.
For example, the General Assembly this year restored a 3 percent raise for all state employees that had been approved and then canceled the previous year because of an unexpected revenue shortfall. The budget also included a 2 percent raise for high-turnover, highstress jobs, such as nurses and aides at state behavioral health facilities that have struggled to maintain staffing ratios that the U.S. Department of Justice has scrutinized in the past.
But those jobs continue to represent a case study of state agencies that often cannot hire and keep workers for critical jobs.
“State mental health facilities are significantly understaffed in core positions because of recruitment and retention challenges,” Lunardi said in his presentation.
Another case study came from the Virginia Department of Agriculture and Consumer Services, which employs about 200 people to inspect restaurants, food producers and farms. Those inspectors currently carry caseloads that are twice the federally recommended average, which Lunardi said delays the opening of new restaurants and the ability of farmers to set higher prices for products based on state grading.
JLARC recommends that the legislature establish a work group to “develop a methodology that can be used routinely for prioritizing salary increases for job roles with the most significant workforce challenges.”
While state pay increases the past 12 years have kept ahead of the rate of inflation, those raises have come irregularly in large chunks “to make up for years without salary increases,” the study said.
“Smaller salary increases at regular intervals are more effective,” Lunardi said.
Part of the problem is the process now used for developing the state budget, which “does not compel” the governor or other budget officials to evaluate the competitiveness of employee salaries annually, the project leader said. “Instead, they compete with every other discretionary priority in the state budget.”
The report said the assembly could require the Department of Human Resource Management to report to the governor and budget committees each year on the state jobs “most in need of salary increases,” as well as proposed increases and the cost of paying for them.
Huggins said he likes that idea.
“It would bring the issue to the front burner,” he said.
Part of the challenge for the state is addressing what Jordan called “the stark difference” in compensation of employees in agencies that depend on the state general fund or through non-general funds, such as transportation revenues and tuition for higher education institutions.
However, the study said 75 percent of state agencies “report some recruitment challenges” and most “struggle to find minimally qualified candidates for certain positions.”
“Low starting salaries are the number one reason cited for recruitment challenges,” Lunardi said in his presentation.