Wyoming lawmakers propose raises amid costly turnover

The budget-making committee of the Wyoming Legislature has recommended increasing state employee compensation for the first time since 2009. In meetings held last month, members of the Joint Appropriations Committee gave initial approval to a trimmed-down version of the $88 million in raises Gov. Matt Mead proposed for state workers. In a press release, Republican leadership called their $80 million proposal for raises, “conservative and sustainable.”

During the coming week legislative staff will work up language describing the raises for the budget bill, the primary legislation to be debated in the session that begins February 10^th. Employees in the executive branch, the University of Wyoming and community colleges, would welcome the raises if they make it into the final budget. Several of those sectors of state-funded workers haven’t had the benefit of an ongoing salary bump since July of 2009.

To be clear, some employees have seen modest pay increases. Last year some 5,000 employees received a one-time merit pay bonus of 1 percent, amounting to about $500 for the average worker. Other employees got raises between 2009 and today, but those were on an individual basis, and conducted within agencies. For all employees, the end of a payroll tax holiday for Social Security taxes and mandated state retirement fund contributions have combined with inflation to eat into the value of take-home pay since 2009.

Faculty members at the University of Wyoming are highly aware of the flat salaries because they operate in a national job market. “[It’s] really frustrating when you see universities in other states, even those with serious financial struggles, find ways to reward their people while Wyoming is lagging behind,” said faculty member Kristi Cammack in an article published by the university. “It’s not very inspiring to be told you’re doing a good job and not get any reward for it.”

For many state workers, the incentive of a pay hike didn’t come soon enough to keep them on the job. In 2012, the most recent year for which data was available, about 1,273 employees changed positions within state government or left the public payroll outright. That turnover has an estimated cost of about $23.7 million per year, according to calculations in the 2012 Wyoming Workforce Report. Much of the turnover cost is due to lost value in employee training, and the expense of hiring new workers.

Similarly, the University of Wyoming has lost 90 faculty members since the last major pay raise in 2009. Many professors went to other institutions, taking with them $20 million in research grant money, which university officials say amounts to a $100 million loss because of a multiplier effect.

Numbers like that demonstrate that setting effective compensation policy for public workers is a complex calculation. Salaries that are below the market can result in high turnover expenses. That, in turn, can offset the cost savings lawmakers may have hoped to achieve by holding the line on salaries.

Gov. Mead’s spokesman Renny MacKay said reducing turnover was one goal of the salary plan. “[Gov. Mead] recognizes the value of state employees and believes that a compensation plan must include raises … to prevent employee turnover so we don’t lose the investment Wyoming has made in its employees,” MacKay said. “You spend years training someone and giving them institutional knowledge, and we don’t want to lose that investment.”

Competitive salaries come at a price, but have the benefit of attracting talented employees. In the realm of K-12 employment Wyoming lawmakers have been willing to loosen the purse strings, which has resulted in a large pool of highly qualified candidates, according to one recent report. Offering high salaries has enabled Wyoming school districts to hire their top-choice candidates 93 percent of the time between 2009 and 2012.

Under the Joint Appropriations Committee proposals, pay for staff and teachers in Wyoming’s K-12 school system would continue its upward trend, though the raises would be in a different format than the rest of the state’s employees. The K-12 system would be given an external cost adjustment (or ECA) of about $29 million, which will help cover things like increased expenses for supplies and utilities. Some of that increased appropriation will go toward paying teachers more. In addition the committee proposes $12 million in state money to pay for employee retirement costs, bringing the total JAC proposal for additional K-12 compensation to $41.3 million.

In the context of the last 30 years, salary raises are a routine part of legislative action. From the 1970s mineral boom, through the lean years of the 1990s and the boom after the year 2000, Wyoming has provided many pay raises to employees. When Wyoming was flush with revenue during the years between 2005 and 2009, the legislature passed pay raises for state employees every session. The amounts ranged from 3 percent to 5.5 percent. For a longer-term history of Wyoming state government pay raises going back to the 1970s, click here.

On a percentage basis, the pay increases proposed by lawmakers this year are somewhat smaller than those seen in the last decade. They follow on several years during which lawmakers had concerns about slowing the growth of the state budget to meet relatively flat revenue projections. The period of flat revenue is expected to last through 2018 and perhaps beyond.

The 2013 fiscal year brought strong revenue for Wyoming, mostly due to investment income. Over the long term, however, the state faces some risks in the form of declining coal production and prices. That may explain Mead’s proposal for smaller raises than those seen during the recent boom, and the Joint Appropriations Committee’s further reduction in the raises.

Wyoming’s publicly funded employees fall into four major categories of those who work for the state, the University of Wyoming, community colleges, and the K-12 system. The Joint Appropriations Committee has recommended raises for each group in 2015-2016. With the exception of community college employees, the committee downsized the pay raises recommended by Governor Mead. (See chart)

State employee pay

Gov. Mead’s proposal to give Wyoming’s state employees a 2.5 percent raise in 2015-2016 was anticipated to cost about $49.9 million. That money would have gone to the 7,848 executive and judicial branch employees paid out of the state’s General Fund. Some 720 additional state positions are funded by other state funds and federal money. The Joint Appropriations Committee’s 2 percent salary raise proposal would cost about $39 million for 2015-2016. That’s 1.1 percent of the total $3.3 billion General Fund budget.

The average salary for a Wyoming state employee is about $50,286 per year. The state also covers employee health insurance and a large portion of the money paid into the state retirement fund. When those added benefits are counted, the average total employee compensation is roughly $75,000 in salary and benefits.

The majority of state workers, some 4,900, earn salaries of less than $50,000. The compensation on the high end of the salary scale raises the average to more than $50,000. The University of Wyoming football coach, for example, makes $750,000 per year. That’s not unusual. In 37 states the highest-paid public employee is an athletics coach.

Wyoming’s compensation for state employees is in the middle of the pack when compared to other states, according to Dean Fausset, director of the state Department of Administration and Information. However, he noted that some 76 percent of employees are paid less than the Market Policy Position (MPP), which is an estimate of what they could earn with similar skills in the private sector. Recent legislatures have made an effort to provide raises to those employees earning less than 91 percent of the MPP. Fausset said that has brought many employees closer to market, yet because of new hires about 14 percent of Wyoming’s employees are still paid less than 91 percent of the MPP.

Fausset noted that the proposed salary raises wouldn’t result in a full 2 percent raise to every state employee. Instead, “The people furthest from market would get larger increases in addition to the better performers in the employee evaluation system,” he said. “Employees have a little bit of ownership in this.”

That approach appeals to Chamois Andersen, an employee at the Wyoming Geological Survey in Laramie. She appreciates the employee evaluation system set up under Gov. Mead, which guides workers to set goals that will then be measured by their managers. “I’ve been evaluated for the last 5 years as to my performance,” Andersen said. “To see that materialize in the form of a raise is very fair.”

Increasing salaries could reduce the challenges of worker recruitment for agencies like the Oil and Gas Conservation Commission, which competes directly with industry to hire workers with knowledge of geology, engineering and energy production. “We’ve recently had a few openings and it’s been a real challenge to attract qualified candidates because of the salary levels. So its a struggle,” said Grant Black, Wyoming Oil and Gas Conservation Commission supervisor.

That said, Black believes that many skilled workers prefer the stability of a government job where layoffs are rare compared to the volatility of working in the energy industry. “We have very knowledgeable people who work in some of our positions for reasons other than the pay,” Black said.

Black said he thinks the salary raises would help with retention of his employees, but that they need to be balanced with the state’s other fiscal priorities. “I certainly agree that we have to have the right resources to do the job, Black said. “But we also have to be cognizant of the resources we have available and make good use of them.”

Fausset said it’s uncertain how pay raises would affect the turnover of state employees, particularly for those in the first four years of their career with the state, when attrition is highest. “It is our hope turnover would be reduced because of pay increases, but employees leave for a lot of reasons,” Fausset said. “Employees do leave because of pay. That isn’t the sole factor, but it is part of it.”

Cost pressure on UW professors

For University of Wyoming professors who compete on the academic job market, stagnant pay is perhaps a larger motivator to seek greener pastures. In the years since the last pay increase in 2009, the university has seen 90 professors leave, many of them standouts in their fields. That contrasts with an earlier period when the university’s relatively flush fiscal position created an inflow of faculty.

“Back in 2008-2009, Wyoming hadn’t fully realized the impact of recession, and the university was in a great place to poach top notch talent from around the country,” said Bill Mai, the university’s Vice President for Administration.

“Then you follow that up with five years of no ability to do anything salary-wise for people, and they are going to move on to the next spot,” Mai said. “If the implication is there is no hope for future raises, (professors) are going to start looking, and you’ll lose your best and brightest right away. … Five years (without raises) sets a pretty big track record in those people’s minds.”

Meanwhile, as the economy recovers, other universities have started to offer higher pay. Recent data published in the Chronicle of Higher Education indicates that faculty salaries at UW are 11 percent to 16 percent below the market average paid at peer institutions.

“It’s an international market in which salaries rise every year, and so every year without a pay increase puts us further behind our competitors,” former UW Provost Myron Allen explained in a UW article published in July 2013. “There are plenty of institutions looking to steal our best people and willing to pay the higher salaries required to do so. … Even our most loyal professors become susceptible to job offers from other universities when, year after year, the state fails to reward their performance at UW.”

The cost of losing professors at the university is particularly heavy when research funding is taken into account. Grant funding for research made up $123 million of the $544 million budget for the school in 2013. In an opinion piece published last summer titled “UW faculty raises will save money for Wyoming,” UW vice president for research Bill Gern projected the full cost of lost grant money due to the 90 faculty departures:

“In almost all cases, those teachers/researchers left for higher-paying jobs. With their departure, about $20 million in active grants was lost — dollars that would have supported jobs in Wyoming had they stayed. The additional secondary economic loss to the state as a result of those faculty departures is around $21 million. What community in Wyoming can stand the loss of a $21 million business?

“And while this number is big enough, the departure of high-performing research faculty is far greater because their economic loss to the university and the state is felt for a number of years. It is here that the financial loss becomes great, because it is additive year after year. It takes time for a new faculty member to gain research competitiveness and significant external funding — perhaps a decade. In that intervening decade, Wyoming’s estimated loss is at least $75 million. None of this revenue would have been lost if the original faculty member remained at UW.

“And here’s the rub: An average 1 percent pay raise for UW employees costs about $1.8 million annually. If UW had been able to grant 1 percent raises each of the past four years, the total cost would have been $18.2 million — a significant amount of money, but still less than has been lost in direct research grants, and much less than the secondary economic loss, together totaling close to $100 million.

WyoFile spoke with a professor who is leaving the University of Wyoming after this semester for a better paying job. That professor did not wish to be named, but he had this critique about the legislature’s spending on campus: “They are happy to invest when it comes to building new buildings, but when it comes to taking care of people in them, that’s a different story,” the professor said. “We are one of the better funded states in the nation. It doesn’t have to be this way.”

The JAC’s recommendations of 2 percent merit-based raises in 2015-2016 would benefit the 3,065 faculty and staff at the university. For more detail on UW salaries, see this summer 2013 report from former UW Associate Provost Carol Frost.

Community Colleges

In contrast to the University of Wyoming, community colleges have fared somewhat better on the salary front since 2009. That’s because this part of the state education system had more flexibility in shifting block grant funding to cover salaries and employee health insurance and retirement.

Gov. Mead considered that when drafting his recommendation for community college salary increases, recognizing that those institutions had been able to offer larger and more frequent pay increases than at UW and the executive branch. In light of that, he recommended $3.65 million for a 2 percent salary increase for community college employees over the biennium.

The Joint Appropriations Committee followed Mead’s recommendation exactly, then moved forward $102 million in capital construction and major maintenance projects at community colleges. Those funds will go to Gov. Mead’s recommended projects at Laramie County Community College and Eastern Wyoming Community College. It will also fund additional community college enhancements in Cheyenne, Gillette, Riverton, Sheridan, and Casper.

K-12 cost adjustment

Out of all the employees working in Wyoming’s education system, the legislature has put the most investment into teacher and staff at K-12 schools. Lawmakers made teacher pay a major priority starting in the middle of the post-2000 energy boom. They were enabled to do so in part because K-12 funding comes out of the School Foundation Program fund, which is separate from the General Fund and has its own mineral-driven revenue streams.

While these and other investments in education have not resulted in dramatically improved student performance, they have certainly accomplished their goal of making teacher pay more competitive. Wyoming currently offers the highest pay for teachers out of any of its neighboring states by a significant margin: an average annual salary of $59,168 in Wyoming versus an average of $48,394 for all the surrounding states. That’s about 22 percent higher than all neighboring states. The state’s pay for teachers also beat the national average for the year 2012 by nearly $3,000. A recent report showed that cost pressures that would lure teachers away from Wyoming are small, but increasing slightly.

Prior to the Joint Appropriations Committee (JAC) budget hearings in December, the committee adopted a plan to provide an External Cost Adjustment  (ECA) for K-12 schools of $38.9 million or 2.09 percent. Gov. Mead supported that proposal, but in its January meetings the JAC reduced the ECA to a about $29 million. However the committee then added in $12 million for K-12 retirement costs, bringing the total compensation package to $41.3 million. If approved by the full legislature, that money would be provided to school districts in a block grant. The funds could be used for teacher salaries and other forms of compensation, as well as for supplies, utilities, and other costs.

The K-12 salaries, like other salaries, inspired debate among lawmakers. On several occasions Sen. John Hastert (D-Green River) unsuccessfully tried to persuade JAC co-chair Sen. Eli Bebout (R-Riverton) to follow Gov. Mead’s recommendations for teacher salary raises.

“The reason we are in a position to do this today is because we saved in the past,” Bebout said in declining to raise funding for teachers to the level Hastert wanted. “If we hadn’t done this in the past we wouldn’t be here today, and I’m just looking to the future.”

“Are there teachers and state employers starving to death? No,” said JAC co-chair Rep. Steve Harshman (R-Casper). “Are there people who have seen real wages decline in the last couple years? Yes. They pay more in Social Security, and retirement and wages are frozen.”

Harshman, who himself is a teacher and coach in Casper, supported the raises as a way of maintaining Wyoming’s lead on teacher salaries. “We’ve done tremendous work and spent gobs of money (on K-12),” he said. “These are moderate increases on the great work we’ve done in the past. That maintenance piece is huge. It’s like maintenance on anything else.”

Editor’s note: This article was updated to reflect $39 million as the correct amount of the JAC salary raise proposal for executive branch, UW, and community college employees. A separate update was made to put the JAC’s K-12 compensation package at $41.3 million including $12 million for employee retirement costs and about $29 million for an external cost adjustment.

— Gregory Nickerson is the government and policy reporter for WyoFile. He writes the Capitol Beat blog. Contact him at greg@wyofile.com. Follow him on twitter @GregNickersonWY.

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