Thursday, October 7, 2021
OPEA presentation began at 2 hours and 16 minutes:
The House Rules Committee chaired by Representative Mike Osburn conducted the state employee compensation interim study. OPEA was joined in presenting by a great group of state employee advocates. Listed in order of presentation:
Oklahoma Human Capital Management
Tennessee State Employees Association
Tennessee Department of Human Resources
Oklahoma Department of Transportation
Oklahoma Department of Mental Health and Substance Abuse Services
Representative Mike Osburn Press Release:
Osburn Examines Market- and Merit-Based Compensation for State Employees
OKLAHOMA CITY – Rep. Mike Osburn, R-Edmond, today held an interim study examining the implementation of a market-based pay scale system and a merit-based, or pay-for-performance, bonus system for state employees. The study was held before the House Rules Committee, which Osburn chairs.
“We want Oklahoma to be one of the most desirable places to work in the entire nation,” Osburn said. “Better compensation, bonuses and rewards competitive with the private sector will help us attract and retain quality state employees to deliver better, faster and more efficient state services to Oklahomans who deserve the very best.”
Last year, Osburn accomplished through legislation the state’s first civil service reform in nearly 40 years. Today’s study is the next step.
“We’re moving from the unsexiest bill to something I think is far more exciting,” Osburn said.
Today’s study included a review of House Bill 3293 from 2014, which created the State Employee Compensation Program to attract, retain and reward quality employees with competitive total compensation based on relevant labor markets.
Osburn said that bill came with an estimated price tag of $38 million, and it was passed at a time followed by difficult budget years, so it was never fully funded. Still, the base exists in statute upon which to build, he said.
The Office of Management and Enterprise Services (OMES) was responsible for coordinating the implementation of the program.
Jake M. Smith, administrator of Human Capital with OMES, today gave a 2020 compensation report that included a market comparison, showing the average state employee salary of $50,051 is about 11% below market. State benefits of $29,371 are almost 13% below market.
Smith also detailed benefits of the state’s new electronic performance management program, which will replace the current paper evaluation system. Several state agency directors who spoke later in the study said they are excited about this new tool.
Osburn also invited several Tennessee officials to discuss their state’s use of a market-based salary system and a merit-based bonus system, which the state began in 2012 and fully implemented by 2019. He believes a review of what’s worked in Tennessee will help Oklahoma.
Lesley Smith, deputy commissioner of the state of Tennessee’s Human Resources Department, said pay is the No. 1 reason people leave state government, she said, but workplace culture also is important.
Keeping government from growing also is significant to the state’s executive. As a result, they are doing more with less. But that is where making great hiring decisions to get the right employee and then paying them and rewarding them well is important.
This is why evaluation is key. Smith said when they first looked, every employee was getting rated at the highest performance level. But they weren’t curing world hunger, they were simply getting top compensation for reporting to work. The state now has a much more robust performance management system.
Terry Carroll, government affairs director for the Tennessee State Employees Association, said the old system allowed employees to reach the highest level quickly but with little oversight. He said one of the toughest issues in the beginning was employees who felt they’d been downgraded.
Securing adequate funding from the state’s General Assembly and pay and bonus amounts that change each year depending on state allotment are other challenges.
Study attendees next heard from several Oklahoma state agency directors.
Dawn Sullivan, deputy director with the Oklahoma Department of Transportation, said it would be very beneficial for Oklahoma to create a statewide compensation philosophy.
“I think we all would agree that we want top talent and we want to retain the best,” she said. “To incentivize achievement through performance pay is very exciting.”
But there has to be a dedicated funding stream for market adjustments to maintain a quality workforce, she said. And in order to have a fair pay system, there has to be an equally fair performance management system.
ODOT and other agencies for years were able to pay less than market because state benefits were very good, she said. Changes such as freezing the benefit allowance and to retirement, however, have reduced benefits with no compensatory revision to base salary. Rising insurance costs also have led to less take-home pay.
She also said flat budget years combined with requirements to increase employee pay force agencies to either finding efficiencies, cut their workforce or cut the number of projects or services provided.
Cutting ODOT’s eight-year plan is something they never want to do. But finding efficiencies has been accomplished through technology and sharing services with other agencies.
Another issue is tiered salary increases. They are a great motivator for entry level positions but becomes a demotivator at higher levels, Sullivan said. To increase pay for technical skill workers, for instance, ODOT has had to promote employees to supervisory positions, but skillsets often don’t match.
“We’ve been bloated as far as supervisory levels in order to compensate our employees,” she said, “and that is not necessarily a good way to manage humans.”
Pam Mulvaney, director of Human Resources Management and Development for the Department of Mental Health and Substance Abuses Services, commented on the current worker shortage. She said the department is losing staff to higher salaries in the private sector.
“Right now, you can drive down the street and see multiple help-wanted signs. We’ve got a Burger King that’s getting built close to us that’s paying $13.50 (an hour), which is what we just raised our lowest level mental health techs to.
“For us to provide services we have to have quality people to work, and that is why this study is so important,” she said.
Sterling Zearley, executive director of the Oklahoma Public Employees Association, wrapped up today’s study by outlining what the association wants to see from the Legislature. First, he reiterated the point that a statewide compensation philosophy is necessary. Next is recognizing the value of state employees and the breadth of the services they provide. A commitment to funding also is a top priority. That means bringing all state employees to 90% of market value by 2023, he said. He also said a benchmark by an independent evaluator every four years and yearly internal studies to keep the compensation package on track, among other things, are necessary.
He said he’d rather see the state spend more money to keep good employees than having to retrain new employees because of high turnover.
Mike Osburn represents District 81 in the Oklahoma House of Representatives, which includes part of Edmond in Oklahoma County.
TOPIC OF THE PROPOSAL:
The proposal for this interim study will be to examine the implementation of both a market-based pay scale system for state employees as well as a merit-based ‘pay for performance bonus system. The state of Tennessee began using both a market-based salary system and a merit-based bonus system in 2012 and have fully implemented both by 2019. A review of those policies can address how the state of Oklahoma can improve state employee compensation and ensure that the retention of quality employees increases.
2) A study of the Tennessee TEAM Act and the associated ‘Pay for Performance’ bonus system or P4P.
3) A review of the Tennessee Individual Performance Plan used for ‘P4P’.
4) A review of the Oklahoma ‘PMP’ system currently in place for state employees
Discussion on how to develop policies related to the establishment of market and merit-based payscale systems