State Salary, Hiring Freezes Start to Thaw

States are feeling the heat to hike employee pay as the economy and tax revenues rebound from the recession.

After three years marked by hiring and salary freezes, many state workers will get modest raises in the new fiscal year that began July 1 — one of the signs that states’ bottom lines are looking better. Still, state personnel managers face growing pressure to lure qualified new employees and replenish a shrinking pool of aging workers in the face of higher-paying jobs in local governments or private companies.

So far, a dozen states are raising salaries for workers represented by the American Federation of State, County and Municipal Employees (AFSCME). The increases range from 1.5 percent in Maryland to 5 percent in Illinois and are the first pay hikes that many employees have seen since 2001, said Steve Kreisberg, who helps negotiate employee contracts for the 1.4 million-member union. The union also won raises for members in Connecticut, Iowa, Massachusetts, Nebraska, New Jersey, New Mexico, New York, Ohio, Pennsylvania and Washington.

Various union and non-union employees also are slated for pay hikes in California, Delaware, Georgia, Nevada, North Carolina, Tennessee and Texas, according to information from those states.

“A lot of state employees did not have raises over the last few years, and there was pent-up demand,” said Scott Pattison, executive director of the National Association of State Budget Officers.

State revenues have risen 11.5 percent compared to the same period last year — the strongest first quarter growth since 1991, according to a June report from the Nelson A. Rockefeller Institute of Government. While 26 states had to close budget gaps for the fiscal year that began on July 1, only three were left with deficits at the end of June, compared with 10 states last year and 31 states two years ago.

The fiscal gaps resulted from the recession that took hold after the technology bust and terrorist attacks in 2001, when many states halted basic cost-of-living adjustments and merit pay to help balance their budgets, said Sam Wilkins, human resources director for South Carolina and president of the National Association of State Personnel Executives. South Carolina is giving employees a 4 percent raise starting in July.

While their salaries were frozen, some state workers also had to pay more for health care and other benefits, according to Katherine Willoughby , a professor of public administration at Georgia State University.

On top of that, 28 states imposed hiring freezes in 2003 and 11 states laid off workers, according to a survey by the Government Performance Project (GPP), a project of The Pew Charitable Trusts. ( Stateline.org also is funded by the Trusts.) In 2004, 18 states froze hiring and seven states initiated layoffs.

Overall, the number of state government workers declined by .66 percent between 2002 and 2004, according to the U.S. Census Bureau.

The trends have left many state workforces with low morale as they face a potential turnover crisis, said Sally Coleman Selden, who teaches management at Lynchburg College in Virginia. In more than half the states, 20 percent of state workers could retire in the next five years, according to the GPP.

States may have a hard time keeping their current workers and replacing retirees if salaries do not continue to improve, said Wilkins of South Carolina. Personnel directors across the country report that they are competing for employees with higher-paying private sector jobs and municipal and county governments, where pay scales may be buoyed by strong property tax revenues, he said.