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New pay system compounds LA govt inefficiency

Another alleged reform hits the books, but nothing really changes with Louisiana’s civil service system that continues to perform inefficiently.

Last month, at the behest of Gov. John Bel Edwards along with narrow backing by Legislature, Louisiana’s State Civil Service Commission ratified a new pay plan. Proponents assert it will save the state money by reducing turnover, although no evidence exists to demonstrate this.

It has two components: a salary scale adjustment and alterations to compensation related to performance reviews. The adjustment at the beginning of next year elevates all salaries two percent up to their classification’s maximum, then for lower-paid classifications bumps those scales up further. The alteration for a year abolishes the performance adjustment component – four percent paid out to all but a handful of classified employees if appropriated – then comes repackaged as a “market adjustment” with a sliding scale where only lower-paid civil servants can get a four percent increase and higher-paid ones settle for three or two percent increases, plus provides for a very few the possibility of receiving a one-time bonus. Only the tiny number of poorest performers would receive no raises.

In other words, the state has committed to regular cost-of-living raises instead of the patchwork system that allowed these for some employees but not others. The performance adjustments technically derived annual raises on the basis of merit, but because almost all employees received at least adequate evaluations, these acted as cost-of-living increases – as long as funding existed. For agencies that took in a good proportion of revenues from user fees and other self-generated sources of income, in recent years they could pay for these. Others could not.

The hit-or-miss approach actually proved beneficial for state finances. As typically total compensation for state and local government jobs pay 10-15 percent higher than those with comparable tasks in the private sector, a period of minor upwards movement on classified employee wages (which did increase 24 percent in the decade from fiscal year 2007, or one-and-a-half times the inflation rate, because of these raises and other awards from personnel actions like promotions) may have narrowed this gap.

Regardless, the problem of overcompensation remains; the typical full-time equivalent state classified employee (exclusive of the State Police) made $44,907 in FY 2016 while the average Louisianan (including government employees) earned just $41,260 in May, 2016. (Unclassified employees, not subject to these changes, made over $65,000 annually.) In part, this stems from the unusually low proportion of total ratings that would make an employee ineligible for a raise.

The latest data from the Department of State Civil Service publicly available, which unfortunately only go through FY 2015, shows barely more than one percent of classified employees rated in the category making them ineligible for raises while nearly 97 percent rated into categories making them eligible (the remainder did not get evaluated). While perhaps a Paretian distribution (long tail) better describes performance than a normal distribution (even tails), the distribution seen historically in Louisiana puts the “power curve” on steroids.

Simply, it’s difficult to believe that so few civil servants perform poorly, especially as at the global level involuntary discharges for cause in the private sector happen at a rate more than twice that in state and local government. A more realistic appraisal mechanism would save taxpayers millions annually through not paying out underserved raises that compound year over year. That issue the new pay scale does nothing to address; it seems gamed mainly to reduce merit increases for higher earners and redistributes these rewards to the lowest.

Thus, the problem remains and the changes could have made it worse by feeding more money into a system that wastes too much. Better would have been to change the system’s real shortcoming before essentially guaranteeing raises that smacks more of a payoff to a voter base than operates as sound public policy.

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