State Employee Compensation Joint Committee on Appropriations - PowerPoint PPT Presentation

January 18, 2017 State Employee Compensation Joint Committee on Appropriations Laurie R. Gill, Commissioner Bureau of Human Resources 1

Workforce Demographics 0.5% 3.0% Years of Service 7.7% Employee Age 16.0% 5 or less 21 and Younger 6.3% 6 to 10 22 - 29 22.5% 8.1% 38.0% 11 to 15 30 - 39 23.4% 40 - 54 16 to 20 9.4% 20 to 25 55 - 64 34.5% 26 to 30 65 and Older 13.7% 30 + 16.7% 0.4% Generation AVERAGES Age 43.9 MATURE 30.6% 34.6% BABY BOOMER Age at Hire 32.6 GEN X Years of Service 11.8 MILLENIAL Years to Retirement Eligibility 19.1 34.5% Annualized Pay $46,693 All information represents only Executive Branch employees and does not include Board of Regents or elected officials’ employees, 2 other than the Office of the Governor.

Workforce Numbers by County 4 13 3 32 6 279 6 54 5 28 14 14 28 5 10 145 0 360 5 38 9 1 4 3 6 47 89 2,489 102 9 82 30 8 7 2 0 28 5 3 633 8 10 49 67 12 9 150 2 10 1,169 9 14 5 7 4 85 33 16 0 73 10 32 683 116 26 211 All information represents only Executive Branch employees and does not include Board of Regents or elected officials’ employees, other than the Office of the Governor. 3

Workforce Density by County Number of employees: More than 500 101 – 500 31 – 100 11 – 30 10 or Fewer All information represents only Executive Branch employees and does not include Board of Regents or elected officials’ employees, other than the Office of the Governor. 4

Turnover & Unemployment 16.0% 14.4% 13.9% 13.5% 13.5% 13.5% 14.0% 13.3% 12.4% 12.2% 12.0% 10.8% 10.5% 10.0% No Pay Increases 8.0% 6.0% 5.0% 4.9% 4.7% 4.3% 3.8% 3.4% 4.0% 3.2% 3.1% 2.8% 2.7% 2.0% Recession 0.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 State Unemployment State Employee Turnover All information represents only Executive Branch employees and does not include Board of Regents or elected officials’ employees, other than the Office of the Governor. 5

Compensation Philosophy Components • Guidelines for structure designs • Method of establishing compensation • Pay delivery mechanisms o Market & pay for performance • Definitions of labor market & level of competitiveness • Statements of plan management, accountability & affordability 6

Salary Structure Adjustments • Structure is a hierarchy of pay ranges • Increase market values based on market data • Independent of appropriated annual pay increases 7

Salary Structure Adjustments 8

Salary Structure Adjustments • Structure is a hierarchy of pay ranges • Increase market values based on market data • Independent of appropriated annual pay increases 9

What is a Pay Range? Minimum Maximum Market Value Typically 50 th Typically 80% of Percentile of 120% of market value market data market value 10

Standard Pay Adjustments When funding is available: Movement toward Market Value • Increases base pay toward, but not above market value • Based on market data • General, medical, & law enforcement receive same increase • Career band increases are specific to the occupation Pay for Performance • Increases base pay up to maximum of range • Based on employee’s performance ratings 11

Artificial Minimums • Most pay ranges have artificially low minimums • Funding was not available for full implementation • BHR is committed to increasing artificial minimums to market minimums • Raising minimums will increase our competitiveness in labor market 12

Pay Range Example (with artificial minimum) Artificial Minimum Minimum Market Value Maximum 80% 100% 120% 72% 13

Total Remuneration Study Examine competitiveness of all elements of compensation: • Salary structures • Base pay • Leave benefits • Retirement • Health, dental, vision & life insurance 14

FY18 Governor’s Budget Recommendations • Market adjustment: 1% • Adjust artificial minimums to 90% of true market minimums • 4% increase in cost to the state for Employee Health Insurance 15

FY18 Governor’s Budget Recommendations General Fund Market Adjustment of 1% $3,650,333 Pay for Performance/Move Toward Market $0 Adjust General Pay Structure Minimums $779,087 Health Insurance $1,820,609 Total Cost of Recommendation $6,250,029 Remaining FY17 Compensation Pool ($144,090) Total Increase for Compensation Plan $6,105,939 16

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Health Plan Overview • Self-funded plan • Employer assumes the risk • No premiums paid to an insurance company • Self-funding avoids built-in profit margin • Allows for greater flexibility in plan design 18

Health Plan Challenges • Contracting with vendors • Claims volatility • Risk mitigation 19

Health Plan Design Two plan options • $1,800 high-deductible plan • $750 low-deductible plan Financial incentives for member engagement • Three wellness qualifications: o Health screening o Online health assessment o Earn 100 wellness points 20

FY18 Plan Design Changes Low Deductible plan • Increase annual prescription drug deductible from $50 to $100 • Reduce cost of 90-day supply of maintenance meds from 3 times the 30-day supply cost to 2.5 times the 30-day supply cost High Deductible plan • Implement a preventive drug formulary to provide maintenance meds at a lower cost 21

FY17 Average Enrollment • 13,068 employees, pre-65 retirees & COBRA members • 13,448 spouses and dependents • 377 employees (3%) opt-out Opt-outs must provide proof of creditable coverage in alternative group health plan. 22

Health Plan Members by County 14 34 11 46 13 42 82 1,431 114 63 128 53 62 36 46 388 9 596 195 38 49 16 59 79 494 429 3,069 41 4,472 257 163 798 61 0 44 2,161 12 90 644 24 57 81 2,840 36 79 69 269 31 100 168 35 839 52 39 81 194 24 241 31 46 131 294 443 Data as of December 2016 for Actives, pre-65 Retirees, and COBRA members including employees, spouses, and dependents. The South Dakota State Employee Health Plan covers employees in the executive branch, elected offices and Board of Regents. 23

Full Accrual Basis Financial Statement $8,662 Base Recommended ($2,251) One-time Increase Reduction $342 Employer Rate $6,411 $8,387 $8,729 Estimated Estimated FY 2016 FY 2017 FY 2018 Revenue Contributions to Plan Employer Paid $83,247,703 $108,654,184 $112,445,779 COBRA, and Employee Paid for Dependents $14,029,744 $10,583,689 $11,393,800 Interest Revenue $691,523 $600,000 $500,000 Refund of Prior Years Expenses* $5,110,696 $3,200,000 $3,200,000 Total Revenue $103,079,666 $123,037,873 $127,539,579 Expenses Claims $102,552,150 $104,284,414 $116,587,349 Employer Life Claims $7,500 $7,500 $7,500 Administration $16,140,526 $16,793,731 $14,481,415 Total Expenses $118,700,176 $121,085,645 $131,076,264 Reserve Obligation $11,910,674 $10,262,551 $11,573,146 Current Year Over/(Underrecovery) ($27,531,184) ($8,310,323) ($15,109,831) Prior Year Over/(Underrecovery) $28,773,806 $13,153,296 $15,105,524 Cumulative Over/(Underrecovery)** $1,242,622 $4,842,973 ($4,307) IBNP-Incurred But Not Paid included in claims amount $11,910,674 $10,262,551 $11,573,146 *Includes subrogation, adjustment of prior year claims and pharmacy rebates. **Cumulative Over/(Underrecovery) is the analysis of the revenues and expenses since the beginning of the program. 24

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