A Performance Audit
A Report on Executive Compensation at State Agencies
August 2018
Summary Analysis
The State Auditor’s Office conducted a study of 71 executive officers’ salaries and assigned salary ranges at select state agencies. The State Auditor’s Office determined that disparities exist among the annual base salaries and salary groups of some executive officers compared with the annual base salaries and salary groups of other executive officers and/or the salaries of other management employees at state agencies. Specifically,
- Twenty-one (16.8 percent) executive officers were among the top 125 highest paid management employees at state agencies. However, the remaining 104 (83.2 percent) employees were in other management positions at state agencies.
- Fifty-four executive officer positions are currently assigned to a salary group with a pay range that may limit the ability to offer a market-competitive salary. While reassigning 51 of those executive officer positions to a higher salary group would incur no cost, the annual cost to bring the 3 remaining executive officers who hold those positions to the minimum of the new salary group is $10,637 for each year of the 2020-2021 biennium.
- Market data indicates that the current salary group 8 may no longer offer a salary range that allows for a salary competitive with similar professional positions in the market for three state agencies with the largest budgets and number of full-time equivalent employees.
Executive officers for state agencies make decisions that directly affect the delivery of services to the citizens of Texas. Therefore, it is in the State’s best interest to ensure equitable pay for executive officer positions to help recruit and retain qualified executive officers capable of effectively and efficiently managing state agencies.
The two highest paid executive officers at state agencies, based on annual base salaries, are the executive officers at the Teacher Retirement System and the Department of Transportation. The Teacher Retirement System’s board of trustees sets the annual base salary for the executive officer position, which is also eligible for additional compensation.
The State Auditor’s Office conducted a market comparison using public and private sector data appropriate to the nature and complexity of 71 executive officer positions that were exempt from the State’s Position Classification Plan during the 2018-2019 biennium. Based on that analysis, 54 executive officer positions may have a recommended salary group that is higher than their currently assigned salary group.
Pay compression occurs when the pay of a subordinate employee comes close to, matches, or exceeds the pay of a direct supervisor, including an agency’s executive officer. When that occurs, the difference in pay may be disproportionate to the difference in the responsibilities, which could create internal inequity.
To determine whether pay compression exist, the State Auditor’s Office reviewed the annual base salaries as of June 30, 2018, of executive officers and full-time classified, unclassified, and other exempt employees at state agencies (excluding higher education institutions; legislative agencies; elected officials; the Secretary of State; the courts; and self-directed, semi-independent agencies).
- A total of 30 employees at 14 state agencies had annual base salaries that exceeded the annual base salary of their executive officer (see Table 5 on the next page). Those employees’ salaries exceeded their executive officers’ salaries by $738 (or 0.5 percent) to $297,250 (or 116.0 percent) annually. That was a slight increase since fiscal year 2016, when 28 employees at 13 state agencies had annual base salaries that exceeded those of their executive officers.
- A total of 43 employees at 20 state agencies had annual base salaries that were the same as or within 10.0 percent less than their executive officer’s annual base salary (see Table 6 on page 19). That has improved significantly from fiscal year 2016 when 138 employees at 21 agencies had annual base salaries that were within 10.0 percent less than their executive officer’s salaries.
In a survey that the State Auditor’s Office conducted in March 2018, of the 68 executive officers that completed the survey, some executive officers expressed concerns about their annual base salary, assigned not-to-exceed rate, and salary group assignments.
Table 7 lists the job titles and salaries of the 30 highest paid medical positions. All but one of these positions are at the Health and Human Services Commission. Table 8 shows the 30 highest paid investment positions. The majority of those positions are at the Teacher Retirement System and the Employees Retirement System.
Salary adjustments for executive officer positions have varied among state agencies, with changes ranging from a decrease of 11.5 percent to an increase of 32.8 percent over the 5-year period.
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