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F I S C A L I M P A C T R E P O R T

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

1/19/2006

1/23/2006 HB 78

SHORT TITLE STATE EMPLOYEE SALARY INCREASES

SB

ANALYST Moser

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$187,482.3

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates Appropriation in the General Appropriation Act, HB2 and HB 7

Relates to Appropriation in the General Appropriation Act , HB2 and HB 7

SOURCES OF INFORMATION

LFC Files

Report of the Legislative Finance Committee to the Forty-seventh Legislature, Second Session,

January 2006 for Fiscal Year 2006-2007, Volume I. pp. 116-122.

Responses Received From

Higher Education Department (HED)

State Personnel Department

Public Education Department

Department of Cultural Affairs

Department of Corrections

SUMMARY

Synopsis of Bill

House Bill 78 appropriates $187,482,250 from the General fund for the purpose of providing sal-

ary and benefit increases to public employees. The salary increases apply to public school em-

ployees, faculty and staff at post-secondary educational institutions, executive classified employ-

ees, executive exempt employees, legislative permanent employees, judicial employees, district

attorney employees and state police. The bill contains language to ensure that employees whose

salaries are funded from non-general fund appropriations will be covered by the same salary in-

crease provisions in the bill. It also provides benefit increases for public and higher education

employees and funds increasing the employer contribution to the educational retirement fund by

three-fourths of a percent.

House Bill 78 – Page

2

FISCAL IMPLICATIONS

The appropriation of $187,482,250 contained in this bill is a recurring expense to the General

Fund. Any unexpended or unencumbered balance remaining at the end of Fiscal Year 2007 shall

revert to the appropriate fund. The State Personnel Office indicates that $22,784.944 is not suffi-

cient funding to provide classified employees governed by the Personnel Act indicated in Section

1 – Part 5 with the proposed salary increase included in this bill. It would require $23,867,484 to

provide a 2% of actual pay increase and then a 3% of pay band midpoint salary increase or

$23,587,118 to provide a 2% of pay band midpoint salary increase and then a 3% of average ac-

tual pay increase in general fund (including compounding the second part of the increase) de-

pending on the interpretation of the language as indicated in paragraph 3 of the Technical Issues

in this FIR. If correct an additional $802.2 thousand may need to be included. The amount in the

bill is based upon consensus numbers reached with DFA regarding general fund costs for classi-

fied employees.

The State Personnel Office also indicates $502,130 is not sufficient to provide state employees

classified as probation and parole officers, librarians, library technicians, library assistants, and

police, fire and ambulance dispatchers as indicated in Section 1 – Part 10 with the proposed sal-

ary increase included in this bill. It would require $585,263 in general fund to provide the addi-

tional three percent increase indicated in this bill.

SIGNIFICANT ISSUES

This bill provides for the following salary and benefit increases. It differs form the executive’s

proposal by providing larger increases to judicial, legislative and exempt employees and by pro-

viding state classified employee salary increases to be effective July 1, 2006 rather than the ex-

ecutive’s proposal of July 1, 2006 for the 2 percent increase and January 1, 2007 for the average

3 percent compa-ratio adjustment:

1.

An increase of the base salary for the chief justice of the Supreme Court to $115,040.

This will result pursuant to Section 34-1-9 NMSA 1978 in a 7.4 percent increase for all

other justices, judges and magistrates;

2.

An average 5 percent increase for all other employees of the judiciary based upon a plan

as developed by the Administrative Office of the Courts (AOC);

3.

A 5 percent increase for district attorneys;

4.

An average 5 percent (2 percent increase and an average 3 percent compa-ratio adjust-

ment) for all district attorney permanent employees;

5.

An average 5 percent (2 percent increase and an average 3 percent compa-ratio adjust-

ment) for all incumbents governed by the Personnel Act;

6.

An average 5 percent increase for all executive exempt and legislative employees;

7.

A 10 percent increase for all commissioned officers of the Department of Public safety

(state police, motrr transportation and special investigative officers).

8.

A total compensation increase of 5.25 percent consisting of a 4.5 percent increase for

all executive exempt teachers and all public education employee and funding for statu-

tory third tier increases. Additionally an additional “employer” contribution of .75 per-

cent to the educational retirement fund.

9.

A total compensation increase of 5.25 percent consisting of a 4.5 percent increase for all

faculty and staff of two and four-year public post-secondary institutions and an additional

“employer” contribution of .75 percent to the educational retirement fund; and

10.

An additional 3 percent increase for state employees classified as probation and parole

officers, librarians, librarian technicians, library assistants and police, fire and ambulance

House Bill 78 – Page

3

dispatchers.

Compa ratio adjustments, depending upon the plan of the particular agency, are scaled to provide

higher level of adjustments for employees who are at the lower ends of a pay plan. For example

the state classified employees pursuant to the collective bargaining agreement would receive the

following adjustments based upon their compa-ratio:

•

<85% = 4.5 percent increase

•

85% to 94% = 3.5 percent increase

•

94% to 105% = 2.5 percent increase

•

>105% = 1.5%

This bill is very similar with respect to the proposal provided by the executive with regard to

state classified employees and facilitating their movement through the pay plan. The bill also

provides SPO authority to develop a plan for both the 2 percent midpoint increase and compa-

ratio adjustment as negotiated by the executive.

The key difference between the executive’s proposal for classified employees and HB 78 is in

the timing of the implementation. HB 78 proposes to award both increases on July 1, 2006.

Analysis indicates that HB 78 places more money into employee’s pockets sooner and yet still

focuses on those employees whose compa-ratio is below the 85

th

percentile and significantly re-

duce compaction throughout the entire pay-plan.

The executive’s proposal calls for a 2 percent midpoint adjustment to be effective on July 1,

2006 and the 1.5 to 4.5 percent compa-ratio adjustment to be effective on January 1, 2007. It is

the opinion of the State Personnel Office that this bill does not support accelerated salary move-

ment within an employee’s pay band to reduce compaction for 6,087 employees with a compa-

ratio less than 85% at the bottom of the pay band. The executive’s pay package provides for a

2% of pay band midpoint salary increase in July 2006 and a percentage of actual pay ranging

from 1.5% to 4.5% in January 2007 based on compa-ratios. The SPO indicates that the execu-

tive negotiated with AFSCME a three year proposal of which this is a part. Subsequent executive

salary packages, to be proposed in FY08 and FY09, will be based upon the FY07 rate resulting

in a slightly higher percentage increase over time. By having delayed implementation, SPO ar-

gues general fund costs are reduced as they are carried forward each year. Analysis indicates that

the executive’s proposal will have an FY07 cost of $16.1 million dollars but the full impact in

FY08 will be approximately $22.7 million.

SPO points out that under the Public Employee Bargaining Act (PEBA), the executive negotiated

in good faith with labor a comprehensive three year compensation plan and specifically did not

include additional increases for probation and parole officers, librarians, library technicians and

library assistants. The Legislature under PEBA retains the authority to appropriate funds as it

deems to be in the best interests of the state. In this regard PEBA is quite clear that the executive

may only recommend to the legislature the compensation language negotiated with the unions

and there is no obligation on the legislature’s part to agree to that language. It is free to accept

modify or reject what was negotiated regarding compensation. It is also important to note that

House bill 78 specifically addresses only the funding for FY07. Future years even though they

have been negotiated cannot be obligated.

SPO states that the additional increases for probation and parole officers, librarians, library tech-

nicians and library assistants will have a negative impact on other employee classifications

House Bill 78 – Page

4

within the impacted agencies and across agencies creating additional erosion to internal equity.

TECHNICAL ISSUES

SPO indicates that it is unclear what employees in “budgeted positions” means in this bill. Typi-

cally, compensation increases are given to term and regular positions, however this language ap-

pears to allow temporary employees in budgeted positions to receive a salary increase. For ex-

ample, there are many budgeted temporary positions for employees who work in the PIT proc-

essing tax returns during tax season at the Taxation and Revenue Department

.

The intention in

drafting this legislation was to exclude from receiving a salary increase individuals whose posi-

tion are not budgeted.

SPO raises concern as to the meaning of the term “incumbents”. The “Personnel Act (Chapter

10-9-1) defines an “employee” as a person in a position in the service that has completed his

probationary period. Traditionally, an incumbent has been defined as a person who is in the em-

ployment of the state.

The language regarding increases for commissioned officers within the department of public

safety refers to those within the state police division. This would exclude those motor transporta-

tion division and special investigative division. This bill should be amended to allow all commis-

sioned officers of the department of public safety with the specified increase. The following lan-

guage is suggested to correct this issue:

Proposed Amendments to HB 78 Section 1, A, paragraphs (5) and (7)

5) twenty-two million seven hundred eighty-four thousand nine hundred and forty-four

dollars ($22,784,944) to provide incumbents in agencies governed by the Personnel Act,

other than commissioned officers of the department of public safety, with a two percent

salary increase and an average three percent compa-ratio adjustment as determined by the

state personnel office;

(7) three million one hundred twenty-seven thousand eight hundred forty-six dollars

($3,127,846) to provide all commissioned officers of the New Mexico state police division

of the department of public safety with a five percent general salary increase and an

additional five percent to address compaction issues for those officers below the rank of

Lieutenant in accordance with the New Mexico state police career pay system and the

Personnel Act as determined by the Secretary for the department of Public Safety and the

state personnel director;

EM/yr:nt