Assigned to APPROP                                                                                          FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR S.B. 1202

state employees; pay increase

Purpose

            An emergency measure that appropriates a total of $59 million in FY 2005-2006 and $169 million in FY 2006-2007 from the state General Fund and other funds for a state employee salary increase averaging approximately 6.3 percent and exempts state officers and employees from the state merit system who are appointed or employed after December 31, 2006.

Background

            In 2005, the Legislature authorized a 1.7 percent salary increase for state employees to offset the increase in the employee share of retirement costs.  In addition to the 1.7 percent adjustment, Department of Public Safety officers received an approximate pay raise of $1,900, while assistant attorneys general received an approximate $4,500 pay raise.  Instead of the 1.7 percent adjustment, correctional officers and juvenile correctional officers received a $1,410 pay raise.

            In December of 2005, the Joint Legislative Study Committee on State Employee Compensation recommended to the Legislature and Governor the following:

• A 7.5 percent increase across the board with the goal of reaching 100 percent of market in five years.  A portion of that amount shall include performance pay.
• Address the universities’ desire to have flexibility in awarding performance pay.
• Absorb the health insurance increases for state employees.

            State employees who are considered exempt or “uncovered” are not subject to the personnel rules encompassed in the state merit system.  Eighty-five percent of state employees under the Arizona Department of Administration Human Resources personnel system are considered covered. Positions not covered by the state merit system are specifically outlined in statute. 

            The fiscal impact to the state would equal a total of approximately $59 million in FY 2005-2006 and approximately $169 million in FY 2006-2007 from the state General Fund and other funds for state employee pay raises.

Provisions

Salary Increase

1. Appropriates $46 million from the state General Fund and $14 million from other funds in FY 2005-2006 for a state employee salary increase for the pay period beginning February 25, 2006. 

2. Appropriates $130 million from the state General Fund and $39 million from other funds in FY 2006-2007 for a state employee salary increase.

3. Requires the salary level of each employee to be increased as follows:

a) 2.5 percent of salary to be designated as performance pay.

b) a lump-sum amount of $1,650.

Performance Pay

4. Requires, by December 31, 2006, each governmental unit to establish or revise a list of reasonable performance measures that are designed to result in cost reduction, increased productivity and improved quality of the delivery of services or products.  Specifies criteria for the performance measures.

5. Provides the governmental units the option to apply the performance measures to the entire governmental unit or to subsets within the governmental unit. 

6. Requires the performance pay to apply to all employees of the unit or subset within the unit if the measures are met or exceeded.

7. Requires, beginning January 1, 2007, the governmental unit to review the unit’s performance monthly or quarterly and determine if the performance measures were met and beginning May 1, 2007, the performance pay will be at risk. 

8. Specifies that the applicable employees are entitled to receive the performance pay no later than the end of each month or quarter, if the measures are met or exceeded.  If the measures are not met, the applicable employees are not entitled to the performance pay.

9. Allows the Legislature to authorize a percentage increase for performance pay in the budget for each employee in the government unit if the government unit meets or exceeds prescribed performance measures.

10. Requires any performance pay to be separately stated on each employee’s paycheck receipt. 

11. Requires each governmental unit to annually report the results of each review of the unit’s performance to the Joint Legislative Budget Committee and the Governor’s Office of Strategic Planning and Budgeting. 

12. Requires each governmental unit to forward the established performance measures to the Performance Based Incentives Program Oversight Committee (PIP Committee) and notify the PIP Committee of the results of achieving the measures. 

13. Requires the PIP Committee to review the measures for reasonableness and monitor the effectiveness of the governmental units in meeting these measures.

14. Requires each governmental unit to conduct a survey of its employees to evaluate the workplace.  Specifies requirements of the survey. 

15. Requires the governmental unit to compile the data and forward the results to the PIP Committee and make copies available to the public upon request.

16. Exempts employees of the Legislature, the Governor’s Office, Arizona Board of Regents and university employees and the Judiciary unless the Chief Justice elects to participate in the performance pay program created by this act.

Miscellaneous

17. Exempts state officers and employees from the state merit system and the State Personnel Board appeals process who are appointed or employed after December 31, 2006. 

18. Contains legislative intent regarding the pay raise.

19. Defines “governmental unit.”

20. Becomes effective on signature of the Governor, if the emergency clause is enacted.  If the emergency clause is not enacted, the salary increase for FY 2005-2006 is not implemented and the salary increase for FY 2006-2007 becomes effective on the general effective date, retroactive for July 1, 2006. 

Amendments Adopted by Committee

1. Increases the FY 2005-2006 state General Fund appropriation to $46 million and the other funds appropriation to $14 million for the pay raise to begin on February 25, 2006, and increases the FY 2006-2007 state General fund appropriation to $130 million and the other funds appropriation to $39 million for the pay raise.  This amount represents a 6.3 percent increase for the average state salary.

2. Replaces the lump-sum amount of $750 and the 1.7 percent of salary increase with a lump-sum amount of $1,650.

3. Clarifies that the 2.5 performance pay also applies to the employees who are exempt from the performance pay program.

4. Makes technical changes.

Senate Action

APPROP         1/19/06     DPA     7-4-0-0

Prepared by Senate Research

January 19, 2006

NS/jas