Summary of Report 98-708

August 1998

Report Number 98-708

Overall Conclusion

We recommend that the Legislature increase the Classification Salary Schedules (Schedules) by a minimum of 3.9 percent for each year of the 2000-2001 biennium. This would cost approximately $472 million for the biennium ($155 million in fiscal year 2000 and $317 million in fiscal year 2001). These recommended increases would only maintain the State's position in the market as of 1998. A booming economy, tight job market, and low unemployment have all led to a shortage of skilled state employees. The State cannot keep the Schedules at their current levels if it wants to successfully attract and retain these workers.

Key Facts and Findings

• On average, state employees have cumulatively lost $5,438 in real earnings over the last five years. This loss is due to inflation. This is even more a cause for concern since many private sector employees have actually gained real earnings in recent years since their salary increases exceeded inflation.
• The State's classified salary schedules have not kept pace with national and regional salary structure increases in recent years. State employees' salaries have actually fallen 14.2 percent behind the Central Texas market since 1994. The State will continue to lose ground compared to the market if the Schedules are not increased in fiscal years 2000 and 2001.
• The value of state employees' benefits is declining. Benefits for new state employees who are ineligible for benefit replacement pay lag the national average. The State's total compensation package, including base salaries and benefits, is vital to maintain a competitive position. As benefits decrease, the importance of competitive salaries increases.
• The State's turnover rate has steadily increased over the past three years. In 1997, the State spent between $93 and $186 million on turnover-related costs. Turnover is costly for the State as it reduces efficiency, interrupts operations, and lowers employee moral.
• A percentage increase, rather than a flat-dollar increase, is necessary to address professional and managerial employee salaries which lag the market more than those of other state positions.

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