D. Commissioner's Plan 0000000 5

V. A Major Unresolved Issue 00*0000000 .......... 11

A. STUDY PURPOSE AND OVERVIEW

The purpose of this study was to investigate and provide recommendations concerning how performance based increases to employees may be provided on a statewide basis.

A number of state agencies and employee bargaining units and plans were surveyed to determine how and when increases were given to state employees for the period of FY '96 to FY '99. In addition, an analysis was conducted to determine the cost for step increases based upon a July 1st review date, as compared to an anniversary review date.

From results of the survey and analysis efforts, a feasibility analysis was conducted of budget options looking at ways to capture funds for the purposes of future merit increases for agency employees. Recommendations have been prepared as a result of this analysis, and are contained in this report, along with the survey results.

B. HISTORY

The current system for employees of the Minnesota Board of Public Defense to obtain performance based increases, has been based on a combination of factors, to include the following.

1.) The determination of whether performance based increases are given, and in what

amount, are at the discretion of the Judicial District Chief or other supervisor of the

employee, based upon available funding.

2.) No standard funding has been available for performance based increases by the

Legislature.

3.) Available funding has been limited for performance based increases due to

factors such as low attrition rates among employees.

4.) Performance based increases have historically been given on July 1st of a given year.

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As a result of these factors, increases to employees have been sporadic among and within Judicial Districts. Examples of this disparity in the current system of performance increases are illustrated by the results of a survey taken in May 1999, of merit increases provided among the Judicial Districts for the period of fiscal years 1996- 1999 (see appendix).

For example, in FY'96, a total of 72 employees were given a merit increase from among all employees in eight Judicial Districts (Districts 1,3,5,6,7,8,9, 10). Two Judicial Districts provided no merit increases. Figures for this period were not available for the Appellate Office.

In FY '97, a total of 61 employees were given a merit increase from among all employees in eight Judicial Districts (Districts 1,3,5,6117,8,9, 10), and the Appellate Office. One Judicial District provided no merit increases.

In FY'98, a total of 53 employees were given a merit increase from among all employees in eight Judicial Districts (Districts 1,3,5,6,7,8,9, 10), and the Appellate Office. Three Judicial Districts provided no merit increases.

Finally, in FY '99, a total of 149 employees were given a merit increase from among all employees in eight Judicial Districts (Districts 1,3,5,6,7,8,9, 10), and the Appellate Office. One Judicial District provided no merit increases.

Based upon these disparities, we need to investigate and provide recommendations to implement a system of statewide performance increases, so that employees of similar experience are eligible for similar performance based increases.

C. MERIT VS. STEP OR AUTOMATIC INCREASES

A distinction needs to be made for the purposes of clarification, between merit and step increases. Step increases are automatic progressions through a salary range based upon the number of years an employee has been employed in that position, and usually determined by a negotiated contract between employer and employee groups. Merit increases at the state level are performance based increases as contained in the Commissioner's Plan and Managerial Plan, and are solely based upon performance of the individual employee.

In the state bargaining units surveyed, step increases are given to employees rather than merit increases. An issue that is to be addressed later in the report, is whether employees

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of the Minnesota Board of Public Defense should be given automatic step increases, or performance based merit increases.

D. OTHER BENEFITS PROVIDED

While the focus of this study is on performance based increases to employees statewide, it is noted that in addition to annual cost of living increases for the period of FY '96 to FY '99, employees also received other increased benefits, such as health insurance and retirement. In recent years, part time employees have received both overhead expense and health insurance benefits.

The following state agencies and employee bargaining units and plans were surveyed to determine how and when scheduled increases were given to state employees for the period of FY '96. to FY '99.

A. AFSCME

(American Federation of State, County, and Municipal Employees)

AFSCME represents the largest union membership of state employees.

On average, 2.5% or less one step increases were given to AFSCME represented employees, each year on their respective anniversary dates, so long as they were not already at the top of their salary range.

I .) AFSCME represented employees do not receive "merit" increases, rather, they are eligible to receive regular scheduled "step" increases, as outlined above.

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B. MAPE

(Minnesota Association of Professional Employees)

Step Increases for FY '96- '99:

On average, 3.5% or less increases were given to MAPE represented employees, each year usually on their respective anniversary dates, so long as they were not already at the top of their salary range. If promoted, this increase date generally changes from anniversary date to promotion date.

In FY '98, a step was added to all employee ranges represented by MAPE, as follows.

Prior to FY '98:

1st 6 Steps - Increase received on anniversary date. '

7th Step (Midpoint) - Increase received every other year on anniversary date.

1st 8 Steps - Increase received on anniversary date.

9th Step - Increase received every other year on anniversary date.

1.) Some exceptions were made to the above average step increases for ITS employees, who were guaranteed annual increases typically, plus eligible for additional increases on a discretionary basis by the employer, ie. expanded ranges and more than one step increase per FY period.

C. MMA

(Minnesota Middle Management Association)

On average, 3.5% or less increases were given to MMA represented employees, each year usually on their respective anniversary dates, so long as they were not already at the top of their salary range. If promoted, this increase date generally changes from anniversary date to promotion date.

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In FY '98, a step was added to all employee ranges represented by MAPE, as follows.

1st 6 Steps - Increase received on anniversary date.

7th Step (Midpoint) - Increase received every other year on anniversary date,

1st 8 Steps - Increase received on anniversary date.

9th Step - Increase received every other year on anniversary date.

1.) Employees could receive both a negotiated increase and a step increase within the same timeframe.

D. COMMISIONER'S PLAN

Employee groups represented include all classified and unclassified employees, except unclassified employees in the legislative and judicial branches, who are not covered by a collective bargaining agreement and not otherwise provided for in M.S. 43A or other law, The plan established by the Commissioner of Employee relations, determines the terms and conditions for employment of employees covered.

For the period of FY '96 through FY '99, increases for employees under this plan were generally given at the beginning of each FY, and based upon performance ratings of satisfactory to outstanding, ranging from 2% - 4% increases.

E. MANAGERIAL PLAN

Employee groups represented include individual positions or groups of positions in the classified and unclassified services in the executive branch. The Commissioner of Employee relations identifies individual positions or groups of positions in the classified and unclassified service in the executive branch as being managerial. The Commissioner prepares a plan for total compensation and terms and conditions of employment for employees of those positions identified as being managerial, and whose salaries and

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benefits are not otherwise provided for in law or under other plans established in M.S. 43A. Incumbents of managerial positions must be excluded from any bargaining units under M.S. 179A.

The management compensation plan must provide methods and levels of compensation for managers that will be generally comparable to those applicable to managers in other public and private employment. The plan must ensure that compensation within assigned salary ranges is related to the level of performance.

For the period of FY '96 through FY '99, increases for employees under this plan were generally given at the beginning of each FY, and were based upon performance ratings of satisfactory to outstanding, ranging from 2% - 4% increases.

F. MN SUPREME COURT

Survey results from this agency indicates merit increases were given generally ranging from 0% - 3% from the period of FY '96 through FY '99. Increases were given on the employee anniversary date.

G. MN BOARD OF PUBLIC DEFENSE

As indicated in Part I of this report, increases among employees of the MN Board of Public Defense have been sporadic due to the lack of available funding, despite evaluations which may have warranted increases.

1.) MN Board Of Public Defense Employees Under The Commissioner's Plan

Employee groups represented include employees of the Board of Public Defense Administrative Services Office, non-union full and part-time Assistant State Public Defenders and their non-union support staff, non-union full and part-time Assistant District Public Defenders who are state employees and their non-union support staff, among others.

Generally under this plan, employees were given a 2% to 4% increase based upon performance, for fiscal years 1996 -1999. These increases were in addition to C.O.L.A.'s of 2.5% received for the same period.

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2.) MN Board Of Public Defense Employees Under The Managerial Plan

Employee groups represented include the Chief Administrator, The Government Relations Manager, and the Budget Director of the Board of Public Defense, the State Public Defender, the Deputy State Public Defender, and District Chief Public Defenders in the First, Third, Fifth, Sixth, Seventh, Eighth, Ninth, and Tenth Judicial Districts, among others.

Generally under this plan, employees were given a 2% to 4% 'increase based upon performance, for fiscal years 1996-1999. These increases were in addition to C.O.L.A.'s of 2.5% received for the same period.

The following discussion outlines issues related to salary advancement for employees of the Minnesota Board of Public Defense.

A- UNEVEN EMPLOYEE ATTRITION

1.) Budget Impacts

One standard method used to pay for performance based employee increases is where there is employee attrition. Positions are held vacant, or the hiring is delayed, making the funds available for other needs such as performance based increases.

In the past, the Board has experienced a lack of attrition, comparative to other state agencies. In recent years, the attrition rate has increased slightly in our agency. The way our district public defense is currently set up, with ten judicial. district budgets, savings from attrition in one district does not aide needs in other districts. In addition, attrition rates among districts have not been even. This has led to differing rates in salary savings, and in turn, available funding for merit increases.

2.) Representation Impacts

Related to this issue, is the need to continue to provide quality representation for our clients. The need for timely client contact, and the covering of calendars often makes it

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difficult to hold positions open. In many cases, we fill in with a temporary or independent contractor.

In addition, districts may experience intra- district attrition. In some locations within a district, we may have difficulty retaining public defenders. Where there are vacancies, given the rural nature of many of the counties within our districts, it may indicate that we face the lack of representation in those geographic areas, or require more travel and heavier caseloads for those that cover these cases.

B. SMALL BUDGETS

A few of the judicial district budgets are relatively small. Where there is attrition, there are generally not enough savings to pay for unfunded salary increases under the current system.

C TRANSFER OF FUNDS AMONG DISTRICTS

The Board of Public Defense has twelve unit budgets divided between ten Judicial Districts, the Appellate Office, and Administrative Services Office. Transfer of funds among these units is difficult because of state budgetary regulations. However, with the creation of a statewide bargaining unit, increased fiscal centralization appears necessary.

D. ONE-TIME EXPENDITURES

Currently, districts fund much of their one-time expenditures out of salary savings. Establishing an ongoing merit or step increase plan largely financed by salary savings would diminish that opportunity. In addition, moving to a centralized approach would also diminish the discretion of Chief Public Defenders in implementing one-time expenditure opportunities for their district. Under the current system, costs funded out of salary savings are generally not based upon any objective, planned criteria, but on whether or not there is employee turnover.

E. HOW TO PAY FOR THE COST OF SALARY INCREASES

Currently, approximately 90% or more of a district public defense budget is consumed by several fixed costs such as personnel, rent, communications, and employee travel

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expense. This leaves very little remaining discretionary budget for District Chief Public Defenders to allocate for unfunded salary and benefit increases. The result is a very limited ability to fund these increases outside of salary savings.

F ANNIVERSARY DATE v. JULY 1ST REVIEW DATE

Generally, we have found that performance based increases in other agencies are given on the first full pay period after an employee's anniversary date. This not only reduces the biennial cost of any salary increase, but also spreads the job of performance evaluations throughout the year, as opposed to all evaluations undertaken at the same time.

Based upon the surveys and analysis conducted, the following recommendations, have been prepared outlining how performance based increases to employees may be provided on a statewide basis.

There is always a tension between what salary adjustments can be made, and what an agency can reasonably afford. Based on current staffing, and some preliminary data on anniversary dates, a 2% merit or step increase would cost $252,000 in FY 2000 and $465,000 in FY 2001. An additional merit/step granted for FY 2001 would cost an additional $262, 000 in FY 200 1. For the biennium, a 2% merit/step increase would cost approximately $717,000.

Based on past fiscal years, a reasonable amount of carryforward from the first year of the biennium to the second year of the biennium will need to be projected. Actual carryforward amounts in the past several fiscal years were as follows.

FY 1996- $555,746. This was the first full year of juvenile and misdemeanor services in Judicial Districts 1,5,7,9, and 10. Due to some delays in hiring and conservative hiring by District Chiefs, there was a significant carryforward.

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FY 1997- $301,000. $170,000 of the $301,000 came from the 7th Judicial District due to some conservative hiring practices.

FY 1998- $130,000.

FY 1999- $100,000.

1.) Merit v. Step Increases

It is recommended that the system of merit increases be retained, but modified. The Board should establish a 2% merit increase (of total district salary budget). Within this 2%, Chief Public Defenders would be given the discretion of granting merit increases to employees based on evaluations of 1%- 4%. This would also include any promotions to new classes, provided that the promotion did not result in more than a 4% increase for the individual. This would provide the Chief Public Defender with some discretion in rewarding extraordinary efforts by employees.

2.) Vacant Positions

It is recommended that vacant positions not be filled on a temporary or temporary contractual basis, and that the Administrative Services Office approves the rehiring of vacant positions. Vacant positions would not be filled until the budget for this district was able to accommodate all personnel commitments for the year.

3.) Transfer of Funds Between Districts During the Fiscal Year

In order to accommodate extraordinary circumstances regarding vacancies in remote areas of the state, or other situations, it is recommended that the Administrative Services Office be given the ability to move personnel funding across districts during the fiscal year in order to accommodate these situations, or to accommodate year end issues related to personnel budget deficits.

4.) Anniversary v. July 1st Review Date

It is recommended that performance evaluations and corresponding merit increases be done on employee anniversary dates, and merit increases be effective with the beginning of the first full pay period after an employee's anniversary date.

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As indicated under the issues discussion portion of this study, any funding of performance based or step increases, cost of living adjustments, or increases in fringe benefits not funded by the Legislature will need to be funded through savings. With 85% to 90% of a district budget allocated toward personnel costs, it is inevitable that the savings must come from salary savings. The result would be fewer public defenders and/or support staff handling increased caseloads.

A related issue, are the uneven caseloads both within a judicial district, and among districts, under the current system. By holding a position vacant, this may result in increased caseloads, adversely affecting those districts whose caseloads are currently above average caseloads per FTE attorney. This may exaggerate the differences in caseloads among districts, and similarly within a district, where caseloads may be higher within certain areas.

If we take a centralized approach to budgeting for personnel, without addressing caseloads, we may solve the problem of uneven attrition, but we raise the specter of transferring salary savings from a district that is above the statewide average in caseloads per FTE, to districts that are below. This would compound the disparity among districts relative to caseloads.

In those districts having caseloads below the statewide average for cases per FTE attorney, vacant positions and the associated funding could be transferred to districts that are above the statewide average for cases per FTE attorney. This would help ensure that holding positions vacant to pay for salary increases will not increase the disparity in caseloads between districts. This however, remains an issue that requires further study in order to be resolved.

1. C.O.L.A.'S For Each Bargaining Unit, Plan, And For The Minnesota Board Of Public Defense.

(A.) AFSCME (American Federation of State, County, and Municipal Employees)

FY'96 - 2.5%, effective July 1, 1995, across the board for all AFSCME represented

employees.

FY'97 - 2.5%, effective July 1, 1996, across the board for all AFSCME represented

employees.

FY'98 - 3.0%, effective July 1, 1997, across the board for all AFSCME represented

employees.

FY'99 - 3.0%, effective July 1, 1998, across the board for all AFSCME represented

employees.

General Notes :

1.) No one represented by AFSCME got less than the above negotiated increases, some employees may have received more.

(B.) MAPE (Minnesota Association of Professional Employees)

FY 196 - 2.26%, effective July 1, 1995, across the board for all MAPE represented

employees.

FY'97 - 3.0%, effective July 1, 1996, across the board for all MAPE represented

employees.

FY'98 - 3.0%, effective July 1, 1997, across the board for all MAPE represented

employees.

FY'99 - 3.0%, effective January 6, 1999, across the board for all MAPE represented

employees.

(C.) MMA (Minnesota Middle Management Association)

FY'96 - 2.25%, effective July 1, 1995, across the board for all MMA represented

employees.

FY'97 - 3.0%, effective July 1, 1996, across the board for all MMA represented

employees.

FY '98 - 3.0%, effective July 1, 1997, across the board for all MMA represented

employees.

FY'99 - 3.0%, effective November, 1998, across the board for all NEVA represented

employees.

(D.) COMMISIONER'S PLAN

Overall average increases given as follows:

FY'96 - 2.5%, effective July 1, 1995

FY'97 - 2.5%, effective July 1, 1996

FY '98 - 3.0%, effective July 1, 1997

FY '99 - 3. 0%, effective July 1, 1998

(E.) MANAGERIAL PLAN

Overall average increases given as follows:

FY'96 - 2.5%, effective July 1, 1995

FY'97 - 2.5%, effective July 1, 1996

FY'98 - 3.0%, effective July 1, 1997

FY'99 - 3.0%, effective July 1, 1998

(F.) MN BOARD OF PUBLIC DEFENSE

FY'96 - 2.5%, effective July 1, 1995

FY'97 - 2.5%, effective July 1, 1996

FY '98 - 2.5%, effective July 1, 1997

FY'99 - 2.5%, effective July 1, 1998

(G.) MN SUPREME COURT

FY'96 - 2.5%, effective July 1, 1995

FY'97 - 2.5%, effective July 1, 1996

FY'98 - 2.5%, effective July 1, 1997

FY'99 - 2.5%, effective July 1, 1998

FY'96 13 employees

FY '97 23

FY'98 3

FY '99 2

FY '96 10

FY '97 1

FY'98 0

FY '99 12

FY '96 15

FY '97 16

FY '98 24

FY'99 33

FY'96 6

FY'97 3

FY'98 2

FY'99 4

FY'96 0

FY'97 0

FY'98 0

FY'99 1/2step - all employees

FY'96 0

FY'97 4

FY'98 2

FY'99 1

FY '96 13

FY'97 2

FY'98 2

FY'99 44

FY '96 15

FY'97 8

FY'98 0

FY'99 0

FY'96 Unknown

FY'97 4

FY'98 20

FY'99 3