Montana legislators soon will be debating whether to approve the proposed pay raises for state employees negotiated by Gov. Brian Schweitzer and public employee unions.
They likely will be comparing statistics about state employees’ pay with those of other public and private employees, and perhaps their fringe benefits.
In part because of recent pay freezes, the base pay for Montana state government workers lags further behind the prevailing midpoint of salaries for similar jobs done in the public and private sector in the five-state region, according to a salary survey done for the state.
“As of today, we are 14.48 percent behind the market,” said Paula Stoll, administrator of the state Human Resources Division of the Department of Administration.
Fringe benefits such as health insurance and pensions aren’t included in the comparison.
However, a recent study issued by a conservative think tank, the Montana Policy Institute, concluded that Montana public employees — state and local government and school district —actually earn about the same as their private sector counterparts.
“But when you factor in the fringe benefits, that’s when the public jumps ahead of the private by 15.4 percent,” said Glenn Oppel, the institute’s policy director.
State officials dispute that conclusion.
Pay deal from June
At issue before the 2013 Legislature is whether to approve and fund the pay deal that Schweitzer, a Democrat who leaves office in January, negotiated with public employee unions in June. It calls for giving each worker covered by the plan – a majority of state employees— 5 percent raises in their base pay in each of the next two years at a total cost of $138 million, including $71 million from the state general fund.
These pay hikes would follow what has been a four-year pay freeze for many state employees.
However, about half of the executive branch employees in the 2011 fiscal year received pay hikes under the state’s broadband pay raise.
In 2009, state employee unions agreed to take a voluntary two-year pay freeze when state revenues were falling during the recession. Those making $45,000 a year or less received a one-time $450 payment.
In 2011, the Republican-controlled Legislature rejected a deal reached by Schweitzer and public employee unions for 1 percent and 3 percent raises in base pay over two years.
Gov.-elect Steve Bullock, a Democrat, has endorsed the 5 percent pay raises that Schweitzer and the unions agreed on.
Yet Republicans again will control the state House and Senate in 2013.
Every other year, the state Human Resources Division gets salary surveys so it can compare state workers’ pay with those of people holding similar occupations in the public and private sectors in Montana, Idaho, Wyoming, North Dakota and South Dakota.
The division buys three different salary surveys. One is from Kenexa, formerly Salaries.com. It also also uses regional salary information collected by the U.S. Bureau of Labor Statistics. The third source is from a regional association of state governments.
Classifiers in the division look at U.S. Department of Labor job definitions and pick the ones that best describe 750 state government occupations. They then match the jobs with the salaries from the three surveys.
“We use the median pay – it’s not the average, it’s a median, meaning half of the employers who reported jobs in those occupations were paid less and half paid more,” Stoll said. “We look at what the average our state employees were receiving and then we compare that to the survey data.”
Stoll said the Human Resources Division follows the survey methodology recommended by WorldatWork, a national nonprofit human resources group and the Society of Human Resource Management, the world’s largest human resource management organization.
Under what the state calls Pay Plan 20 — used by a majority of state agencies and covering more than 11,000 state employees, each job is classified and placed into one of nine pay bands. There is a minimum and maximum salary set for each pay band.
For example, a delivery service driver is in Pay Band 1 and a livestock inspector is in Pay Band 3. A registered nurse is in pay band 6, a lawyer in Pay Band 7, a veterinarian in Pay Band 8 and a psychiatrist in Pay Band 9.
The survey found that the average annual base pay for more than 11,000 Montana state employees is $44,145, compared with the $51,620 average for the regional public and private market for a pay gap of 14,48 percent.
The Montana Policy Institute’s Oppel disputes the state’s survey methodology.
“We’re not suggesting state employees shouldn’t be paid more,” he said. “What we’re saying is the argument that they aren’t paid as much as private employees isn’t supported by the data….
“It’s disingenuous to suggest that they aren’t earning as much as their counterparts in the private sector. Policy should be driven by fact, not innuendo and political gamesmanship.”
He said there are two flaws in the state’s across-the-board occupational comparisons.
First, employees within occupational categories aren’t interchangeable, Oppel said. Some are more educated, some are older and some are more experienced, and that should be taken into account.
The other problem, he said, is the state fails to include fringe benefits – an important part of a worker’s total compensation — in its survey.
The Montana Policy Institute hired two economics professor, William Even of Miami (Ohio) University and Donald Macpherson of Trinity University, to analyze the Montana salary data. After comparing employees of similar personal and professional characteristics and including benefits, they concluded Montana public employees receive pay and benefits that are 15.4 percent greater than comparable private sector workers.
The Montana Policy Institute isn’t taking a stand on whether legislators should approve the proposed pay deal, he said.
“That’s up to them,” Oppel said. “We’re just throwing more information into the public debate. It’s the first time the public has been able to see a different perspective.”
State officials disagree with the institute’s findings.
“Our data doesn’t show it,” Stoll said. “We’re confident that the data is reliable. It’s a process that we’ve come up with using common surveying techniques, and it’s been periodically reviewed by policymakers here in the executive branch and by legislative branch employees.”
In the past, the Human Resources Division included employers’ benefits in its surveys. Stoll said the state dropped that in 2007 after finding benefits too difficult to compare.
Stoll and a legislative fiscal analyst separately estimated that including state government’s benefit package would lower the gap in state employees’ total compensation by about four percentage points. That would still leave public employees trailing private workers by 10 per cent or 11 percent gap in total compensation, she said.
Barbara Wagner, senior economist for the state Department of Labor and Industry, questioned the Montana Policy Institute study.
“Their study is the only study I have read that finds Montana’s state workers are compensated significantly more than the private sector,” Wagner said. “Some find that certain occupations are paid higher (and some are paid lower), some find that certain education levels are paid higher (and some paid lower) and some don’t find any significant differences between private and public pay.”
Wagner said it’s really hard to determine what benefit levels are in the private sector because they are highly dependent on the size of the business. Because the state government is one of Montana’s largest employers, state government’s benefit levels probably should be compared to those offered by other large employers, she said.
Turning to pay, Wagner said, “There’s a big difference between the education levels that are required for jobs in the public sector vs. the private sector. About 75 percent of jobs in our private sector don’t require a college diploma. In comparison, roughly half of public sector jobs require a college degree.”
She said her research has found that people with high education levels in the private sector are paid significantly more than their counterparts in the public sector. For those with lower levels of education, the public sector pays more than the private sector. Retail is one of the largest private employers, and employees there typically don’t get the benefits such as health insurance, she said.
A report, not recommendation
The two economists who did the analysis for the Montana Policy Institute have done similar work recently on public versus private compensation for conservative think tanks in other states, including Wisconsin, Virginia, Rhode Island and Idaho.
“The state think tank world is like a network,” Oppel said. “We’re all paying for and using data from national organization and networking.”
He emphasized that the institute’s study is not an issue brief or policy recommendation, but just a report relaying information from the economists for legislators and other Montanans to consider.
Eric Feaver, president of the MEA-MFT, the state’s largest union representing teachers and public employees, isn’t buying that argument. He argued that the Montana Policy Institute is hardly a neutral research group.
“I think the MPI simply wants to trash state government,” Feaver said. “Their agenda is to drown government in a bathtub. Their ideological bias is to do government in and privatize all of the government.”
The Montana Policy Institute describes itself as a “policy research organization that equips Montana citizens and decision makers to better evaluate state public policy options from the perspective of free markets, limited government, individual rights and individual responsibility.”
Worry over recruitment
Stoll, of the state Human Resources Division, said she worries about the state’s ability to recruit and recruit and retain employees, particularly for certain jobs, if the pay gap continues.
“We’re really concerned about overall competitiveness right now because of our retirement rates, and we’ve seen a drop in the number of qualified people applying for certain jobs,” she said.
She said the Consumer Price Index for All Urban Consumers, or CPI-U, covering all urban households in metropolitan statistical areas and urban places of 2,500 or more, has averaged about 2.8 percent over the past three years.
“If it holds onto that 2.8 percent and the Legislature were to approve the 5 and 5 (percent pay hikes), two years from now we’re still going to be below the prevailing labor market,” Stoll said.
The state is finding it particularly hard to recruit engineers, environmental scientists, others in the hard sciences and public defenders, said Bonnie Shoemaker, compensation and classification program coordinator in the division.