The Snake Oil That‘s Been Destroying State Employees for Two Decades
/’ snāk ,oil/
noun – informal – North American
• A product, policy, etc. of little real worth or value that is promoted as the solution to a problem.
How does a government recruit, hire and retain employees from the available workforce while competing at the same time with private sector businesses? How does a government do that while remaining fiscally responsible to its taxpayers? Colorado’s state government found a method to do just that and it worked. Their method worked well for decades.
How did the state do it? The state found balance in a system that assured its workers would be paid competitively compared to other workers in the private sector doing similar jobs. In the most basic of terms, similar jobs between the public and private sectors are what the state refers to as “job classes.” To maintain that balance, the state would regularly go out and survey the salary/compensation market for all of the applicable job classes. The survey would establish a salary range for a job class. New hires with little experience are on one end of the range while experienced, highly skilled workers are on the other end. The mid-point of the salary range would be used to determine the average pay of the job class. If a salary survey found differences in the average pay when compared to the same job class in the private sector, the state would raise or adjust its pay to remain competitive.
Workers within each particular job class would be spread across the salary range using a set system of timed raises. Those raises were known by several different names such as “stepraises,” “predictable pay raises,” or “automatic anniversary increases.” Each step raise was considered a “base building” raise that would move the state employee through the salary range until they reached the top end of the pay range.
In 2002 that all changed. Colorado’s Governor at the time, Bill Owens (R), and his staff came up with the Pay for Performance Plan. Pay for Performance was signed into law by Governor Owens in May 2000 with a start date of July 1, 2002. Pay for Performance was founded in the roots of the Republican ideology of the time that the majority of government employees were lazy and did the minimum amount of work necessary to receive their secure monthly paycheck. The belief was that government workers should be held to the same standards as private-sector employees, who get paid based on their level of output and are thus rewarded for high levels of performance.
On the surface, Pay for Performance resonates in the “common sense” area of the brain. People who strive to be the very best at what they do should be rewarded. But the comparison of a private-sector employee to a state employee is not an apples-to-apples comparison. For example, in the private-sector,
if a salesperson at Company X sells 1,000 more widgets than another salesperson, then that salesperson is compensated with higher pay and/or a financial bonus. It makes sense. But, how exactly does that transfer over to state employees? What defines a high-performing State Patrol dispatcher or evidence technician? What defines a high-performing State Trooper? Using the previous private-sector example, can you imagine the public outcry if a State Trooper’s pay raise for the year was based on the number of tickets they wrote or based on a percentage of the dollar amount of the fines associated with those tickets?
The reality is state employees perform jobs that are unique to the services required by the State. Certain jobs or job classes may translate across the board from the private to the public sector, like for example, an administrative assistant. However, some jobs are exclusively unique to state service. Take, for example, the Port of Entry officer.
Port of Entry officers are responsible for the safety of hundreds of thousands of commercial motor vehicles that operate on Colorado roadways every year. Their expertise is in the field of inspecting commercial motor vehicles and enforcing commercial motor vehicle regulations. If you’re not familiar with the
complexity of commercial motor vehicle regulations, just picture the I.R.S tax code on steroids and you have your answer. Port of Entry officers are also woefully underpaid, and with the present rate of inflation, this makes an already challenging living wage that much more difficult. For years, the Port of Entry has been dealing with high turnover rates and an inability to recruit new officers into their ranks. Whenever executive leadership is asked about
what is being done to address the issue of Port Officers’ pay, their answer always points to the Department of Personnel & Administration’s (DPA) inability to find a comparable “job class” to compare them to.
The irony of that answer is in the answer itself. The duties of a Port of Entry officer are so specialized that the DPA apparently can’t find another outside “job class” to compare them to. What makes it even more frustrating for Port of Entry officers is that the DPA’s search has dragged on for years. Meanwhile, Port of Entry officers remain stalled at the bottom of their meager pay range. In general, when you think of other highly specialized vocations, like airline pilots or nurses, the natural inclination is an expectation that their pay will be higher to match their level of expertise. Inexplicably, this logic hasn’t been applied to the expertise of Port of Entry officers.
A Bad Idea Meets the Perfect Storm
The premise of the Colorado State Personnel Pay for Performance (P4P) Program was based on two key components. The first was an objective employee performance evaluation system. The second was a commitment by the state to annually fund the P4P program to support “base building” raises matching the three percent provided under the previous state personnel “step system.” The annual funding of the P4P program was to be “cost or revenueneutral,”
meaning that the three percent funding for “base building” would always be there, insulated from Colorado’s varying economic
conditions.
P4P’s structure was conceived at the height of the dot-com bubble and signed into law before the events of September 11, 2001. By the time P4P went into effect July 1, 2002, Colorado’s economy was still reeling from the burst of the dot-com bubble and the Sept. 11 attacks. In hindsight, P4P’s problems were evident in the first year of the plan in FY 2002-2003. Here’s an excerpt from the Department of Personnel & Administration’s (DPA) FY ’02-’03 Annual
Report (emphasis added):
“…Pay for Performance (P4P) payouts began July 1, 2002. Governor Owens, the Joint Budget Committee (JBC), and the Division of Human Resources deserve credit for proceeding with this important program. As funding for FY ’02-03, the P4P “pot of money was just over 60 percent of the dollars that used to be paid to state employees in the form of automatic anniversary increases. This reduction in the funding that Governor Owens and DPA requested was disappointing, since the P4P program was supposed to be “revenue-neutral.” Instead, only about $9 million was appropriated [to fund P4P] rather than the $15 million that would have comprised the old anniversary pot.”
P4P’s funding didn’t get any better from there. State employees’ salaries began to stagnate as they were no longer able to move up the salary range scale. If that wasn’t bad enough, the State compounded the problem by taking more money out of workers’ paychecks by passing on increased health care premiums, and more recently by making them pay more to fund the State’s plan to fully fund PERA.
In a 2014 article about pay compression, the former Executive Director of the Colorado Association of State Employees, Miller Hudson, noted that the former Senate Majority Leader Jeff Wells, who ran the Department of Personnel during Governor Bill Owens’ second term, had remarked, “I never would have voted for pay for performance if I’d known it wasn’t going to be funded.”
The Compression Headache
After 20 years, the results of the Pay for Performance system are clear. Pay for Performance is an unmitigated disaster for the State of Colorado. For the citizens of Colorado, it has resulted in wasted tax dollars and reduced services. The continuous turnover of state workers leaving state employment for higher-paying jobs has resulted in a revolving door process of hiring and training new employees, just to see them walk out the door a few years later after seeing no movement in their pay. Vacancies in critical job positions go unfilled resulting in reduced or delayed services to the citizens of Colorado as evidenced by the Colorado Department of Transportation’s (CDOT) inability to hire snowplow drivers to plow our highways.
For state employees who do stay on the job, Pay for Performance leaves a nagging feeling of being undervalued as they progress in job experience and years of service without seeing any significant pay increases.
20 Years of missed base building pay raises have resulted in a “compression” of workers stuck in the lower pay ranges of their job class. This is how the
Department of Personnel & Administration (DPA) describes “pay compression” in an FY 2022-2023 Decision Item budget request:
“Pay compression is a compensation issue that develops over time. It occurs when there’s little difference in pay between employees regardless of differences in their respective knowledge, skills, experience, or abilities. When it occurs, it can be found between 1) tenured employees and new hires (when new hires join at compensation levels similar to long-term employees), and 2) managers and their direct reports (when there are small wage
differences between employees within the same job classification). Compression issues statewide have been developing over the last several years, and have been exacerbated by adjustments to the State’s minimum wage.”
Here’s an example of what pay compression looks like from DPA’s testimony before the Joint Budget Committee in September 2022:
“Minimal State Trooper pay difference between new employees and existing employees. For example, a one-year Trooper has a salary of $87,672 and a ten-year Trooper has a salary of $89,976. This is less than a 3% difference.”
If you’re the ten-year trooper in this example, pay compression does wonders for your morale and only serves to fuel the nagging feeling of being undervalued.
The Three Ways toGet a Raise
If a state employee wants to see a significant pay raise, their only options are to promote, transfer to another department, or leave state employment. Unfortunately, for the Colorado State Patrol more and more troopers are choosing the latter. Why? Because certain city and county law enforcement agencies in the state are offering higher pay and significant signing bonuses to experienced officers who join their departments. For example, the Loveland
Police Department is offering a $15,000 hiring bonus for experienced officers. $15,000 goes a long way toward treating the nagging feeling of being
undervalued.
The Elephant in the Room (2010)
In 2010, after 8-years of stagnating pay compression for state employees, a bipartisan group of lawmakers recognized the growing problem that P4P created. Even in the sluggish Colorado economy of 2010, the legislature realized the need to fix the broken Pay for Performance system.
The bipartisan lawmakers came together and created a bill to address the pay compression issue by moving away from a Pay for Performance system back to a system of base-building step raises. The bipartisan bill made it to then-Governor Bill Ritter’s (D) desk. Governor Ritter vetoed the bill. In a June 2010 Denver Post article about the veto, Jessica Fender writes:
“In his veto message…Ritter lamented the current pay-for-performance system of increases that he (Ritter) said are rarely funded and unevenly distributed among state workers. But he (Ritter) criticized House Bill 1409 for putting default pay hikes before the Governor’s Office and legislators for approval each year.”
The irony of Ritter’s reason for vetoing the bill is that, in the end, it only delayed the inevitable by kicking the proverbial can down the road for future Governors and legislators. Unfortunately, his veto decision only served to exacerbate the cost of the solution. In his 2014 article about pay compression, Miller Hudson wrote, “In 2006 Milliman & Company estimated this cost [to move state employees into their proper salary range] at $90 million.” Hudson
went on to write that the cost would be closer to “$250 million for all future years”. Keep in mind, this article was written in 2014. Add eight years to that figure with the current rate of inflation and the number becomes staggering.
With Ritter’s veto of the bill, pay compression would be allowed to grow for another 12 years. Legislators, in each of the 12 legislative sessions to follow, tip-toed around the ever-growing “elephant in the room.” The elephant in the room has now grown so large that it has become impossible to ignore.
How Do You Eat an Elephant?
The Pay for Performance problem has grown so large that it now transcends any political bickering or grandstanding from either party. A Republican Governor might have started the snowball rolling down the hill, but three consecutive Democratic Governors over the course of their combined 15 years in power have failed to address the issue head-on.
It appears now that the 2023 Legislature might finally be forced to stop tip-toeing around the elephant in the room and sit down at the proverbial table to tackle the issue. As the old adage goes, “How do you eat an elephant? One bite at a time.” In this case, one caveat should be added to this adage, “Don’t eat alone.” Bipartisan support is crucial to addressing the issue.
It would be naive to believe that this complex an issue could be resolved in one single legislative session. Multiple legislative sessions might be required to rescue state workers from 20 years of sluggish salary growth under the P4P system. But lawmakers in the 2023 session can set the tone for future sessions by working together to address the issue pragmatically.
The eyes of nearly 40,000 state employees and their family members will be on those lawmakers this year during the 2023 session. Any failure to tackle the issue head-on and bring a start to the end of this unmitigated disaster by the sound of the closing gavel just might be the tipping point for many state workers to walk out the door of state employment for the last time.
