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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

1/22/2007

HB 9

SHORT TITLE

PUBLIC EMPLOYEE SALARY INCREASES

SB

ANALYST Moser

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$183,444.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates Appropriation in the General Appropriation Act

SOURCES OF INFORMATION

LFC Files

Responses Received From:

NM Department of Corrections (NMDC)

NM Higher Education Department (NMHED)

No Responses Received From

:

State Personnel Office

SUMMARY

Synopsis of Bill

House Bill 9 appropriates one hundred eighty-three million four hundred forty-four thousand and

fourteen dollars ($183,444,014) from the general fund for the purpose of providing salary and

benefit increases to public employees factoring in the employee’s job performance and other fac-

tors such as compa-ratio. The salary increases apply to public school employees, faculty and staff

at post-secondary educational institutions, executive classified employees, executive exempt em-

ployees, legislative permanent employees, judicial employees, district attorney employees and

state police. The bill contains language that ties the increase to the employee’s job performance.

The bill ensures that employees whose salaries are funded from non-general fund appropriations

will be covered by the same salary increase provisions in the bill. It also provides benefit in-

creases for public and higher education employees and funds increasing the employer contribu-

tion to the educational retirement fund by three-fourths of a percent

House Bill 9 – Page

2

FISCAL IMPLICATIONS

The appropriation of $183,444,014 contained in this bill is a recurring expense to the General

Fund. Any unexpended or unencumbered balance remaining at the end of Fiscal Year 2008

shall revert to the appropriate fund. The amount in the bill is based upon consensus numbers

reached with DFA regarding general fund costs for classified employees. There may be some

question regarding the amounts specified for classification upgrades due to different method-

ologies utilized in compiling the data. The LFC staff and SPO are working to refine these

numbers.

SIGNIFICANT ISSUES

House Bill 9 establishes a linkage between job performance and pay allowing employees o

be able to receive salary increases that are directly linked to their job performance. This

would address inequities that exist when all employees receive the same salary increase re-

gardless of how well they perform their job. The Hay Group established in its report to the

LFC in the summer of 2006 that NM by moving away from recognizing job performance

and pay was moving counter to the trend in the nation. This bill will begin the process to

once again link pay with job performance and begin to provide a means to recognize and

reward employees in a meaningful fashion.

This bill provides for the following salary and benefit increases:

1.

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

developed by the Administrative Office of the Courts (AOC). The executive proposed a

three percent increase for employees that were not justices or magistrates.

2.

A 5 percent increase for district attorneys as compared to the 3 percent proposed by the

executive.

3.

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

ment) for all district attorney permanent employees;

4.

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

ment) for all incumbents governed by the Personnel Act. The executive proposal is for a

phased implementation with two percent being awarded in July 2007 and a compa-ratio

adjustment being awarded in January 2008. This phased approach makes the FY08 effec-

tive value of these executive increases to be 2.9 percent.

5.

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

compared to the executive’s recommended 3 percent.

6.

A 5 percent increase for all commissioned officers of the Department of Public safety

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

7.

A total compensation increase of 5 percent consisting of a 4.25 percent increase for all

executive exempt teachers and all public education employees and funding for statutory

third tier increases. This is inclusive of the additional FY08 “employer" contribution of

.75 percent to the educational retirement fund.

8.

A total compensation increase of 5 percent consisting of a 4.25 percent increase for all

all higher education employees. This is inclusive of the additional FY08 “employer" con-

tribution of .75 percent to the educational retirement fund.

9.

An additional 5 percent increase for staff attorneys of the District Attorneys, state em-

ployees classified as attorneys within the office of the public defenders, correctional offi-

cers, juvenile correctional officers, librarians, librarian technicians, library assistants.

House Bill 9 – Page

3

10.

An additional 7 percent increase for state employees classified as probation and parole

officers.

The AOC recommends that the language be modified to allow them to grant an average in-

crease of 5 percent based upon their established matrix and past record with linking pay and

performance.

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.

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 pro-

vides SPO authority to develop a plan for both the 2 percent midpoint increase and compara-

tio adjustment using employee job performance as a key element and HB 9 grants a higher

increase for employees than negotiated by the executive. Analysis indicates that HB 9 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 reduce compaction throughout the

entire pay-plan.

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 compensation language negotiated with the unions and there is

no obligation on the legislature’s part to agree to that language. The Legislature is free to ac-

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

note that House bill 9 specifically addresses only the funding for FY08.

PERFORMANCE IMPLICATIONS

The SPO indicates that by working on only a few separate classifications, this bill does not fully

support accelerated salary movement within an employee’s pay band to reduce compaction at the

bottom of the pay band impacting SPO’s performance measure focusing on average employee

pay targeted at 95% percent of the SPO Board approved comparator market. However, the classi-

fications with few exceptions are the same as the executive proposed as part of the budget re-

quest. HB 9 was developed absent the data to establish the need for additional classes. The SPO

and LFC staff should review these and if necessary amend the bill to include additional classes

rather than eliminate those proposed in HB9.

ADMINISTRATIVE IMPLICATIONS

The State Personnel Office indicates that it would provide human resources administration to

ensure effective implementation of an approved pay package. The Human Capital Management

team assigned to the SHARE office would be able to write an automated computer program to

process salary increases.

TECHNICAL ISSUES

The SPO indicates that it is unclear what employees in “budgeted positions" means in this bill.

Typically, compensation increases are given to term and regular positions, however this language

appears to allow temporary employees in budgeted positions to receive a salary increase. For

House Bill 9 – Page

4

example, 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.

It is unclear as to what the term “incumbents" means. The “Personnel Act (Chapter 10-9-1) de-

fines an “employee" as a person in a position in the service that has completed his probationary

period.

GM/mt