Budget

Budget Cuts Test State Personnel Policies

By: Christine Vestal - August 27, 2009 12:00 am

Forced to dramatically cut payrolls, some states are finding low-cost ways to boost employee morale, even as they struggle to maintain basic human resource functions such as training, recruiting, hiring and regular performance reviews.

Utah moved to a four-day work week, getting rave reviews from workers and savings on utility bills; Maryland added an extra day to two holiday weekends and got a similar efficiency lift. Virginia expanded its telecommuting program, rewarding beleaguered employees and easing congestion on the state’s highways.

Innovative cost-cutting measures such as these appeal to just about everyone. But pouring time and scarce resources into broad workforce development programs is not as easy to justify.

In 2009, more than 800,000 state employees were affected by budget cuts – mostly through unpaid days off, or furloughs. Hundreds of workers were laid off and thousands of positions were left unfilled, putting additional stress on those left behind. For the fiscal year that began July 1, states already have announced payroll cuts affecting at least a million workers and the numbers are expected to spiral even higher.

STATES TURN TO EMPLOYEE FURLOUGHS

Only two months into fiscal year 2010, at least 19 states have called for furloughs for about a million state employees, including teachers and workers at public universities. Some states are implementing statewide furloughs, while others allow agencies to use them as needed.

STATES WITH FURLOUGHS
Arizona 15,100 employees since 2009		Individual departments have responded to budget cuts with furloughs. The state Department of Transportation, for example, has furloughed 4,500 employees while the Department of Economic Security and Revenue has furloughed more than 8,200.
California 394,400 employees .575 billion savings From 11to 36 days over a year		California is furloughing about 210,000 employees three times a month until July 2010; ultimately those furloughs will save about $1.3 billion. The California Board of Regents voted to furlough 144,000 employees 11 to 26 days a year, and the California State University system will furlough at least 40,400 employees two days a month, which could save an additional $275 million.
Colorado million savings 4 days over a year		Colorado’s plan for four furlough days set around the holidays will save $16 million.
Connecticut 50,000 employees million savings 7 days over two years		The state’s 50,000 public employees agreed to take seven furlough days over the next two years in exchange for no layoffs during that time. The days will be scheduled around holidays and are expected to save Connecticut about $700 million.
Delaware 31,500 employees .5 million savings 5 days over a year		Each state agency determines when furloughs for Delaware’s 31,500 public employees will take place. The five days of furloughs will save the state $28.5 million.
Georgia 115,000 eployees 3 to 12 days over a year		In July, Gov. Sonny Perdue (R) called for all state employees to be furloughed at least three days, but no more than 12, before the end of the year. The state Board of Regents decided to furlough its 40,000 employees six to 12 days over fiscal year 2010, which will save $42 million. Perdue also called for the state’s 128,000 teachers to be furloughed, which saves $33 million a day. That decision is left up to individual districts, but most have indicated they will furlough teachers. It has been more than 20 years since the state’s teachers had to take furloughs.
Hawaii 942 employees 24 to 36 days over a year		Gov. Linda Lingle (R) had planned to impose three furloughs per month onto Hawaii’s 15,000 state employees to save $688 million, but the union representing them successfully sued for those furloughs to be on hiatus while the governor and union negotiate. Lingle is warning of mass layoffs; in the meantime, she has imposed two furloughs a month on 42 executive branch employees and three a month, starting Sept. 1, on 900 nonunion employees.
Idaho More than 5,000 employees .6 million savings 4 to 10 days over a year		At least two of the state’s largest departments are using furloughs. The 3,100 employees of the Health and Welfare Department will be furloughed four days in the next fiscal year. Combining the furloughs with layoffs and not filling vacant positions will save $9.5 million. The Department of Corrections will save $2 million next year by furloughing its 1,650 employees from four days, for prison security workers, to 10 days for everyone else. Both departments used furloughs in the 2009 fiscal year.
Maryland 70,630 employees .1 million savings 3 to 10 days over a year		The 2010 fiscal year didn’t initially start with furloughs, but faced with a budget shortfall of more than $700 million, Maryland Gov. Martin O’Malley (D) called for furloughs on the 70,000 employees of the executive branch, with more days to fall on higher earners. The legislative branch quickly agreed to impose the same furloughs on its 630 employees.
Massachusetts 5,000 employees .5 million savings 3 to 5 days over a year		Gov. Deval Patrick (D) imposed furloughs of up to five days on 5,000 executive staff employees in the 2009 fiscal year, saving about $4.5 million.
Maine 7,000 employees million savings 20 days over two years		About 7,000 state employees will have 20 unpaid “shutdown days” over the next two years, which will save about $10 million. The plan also freezes merit and longevity pay.
Nevada At least 17,041 employees million savings 12 days over a year		Starting July 1, Nevada’s state employees will take off one unpaid day each month. Originally, Gov. Jim Gibbons (R) wanted a 6 percent pay cut for employees, but lawmakers instead instituted the furloughs, which cut salaries by 4.6 percent. Savings of $333 million are expected.
New Hampshire 11,500 employees million savings 18 days over 2 years		The budget shortfall required Gov. John Lynch (D) to make $25 million in savings through personnel. Lynch negotiated an 18-day furlough plan with the State Employee’s Association that would take place over the next two years.
New Jersey 60,000 employees million savings 10 days over one years		Gov. Jon Corzine (D) reached an agreement with the state’s largest union to furlough employees for nine to 10 days in the next fiscal year in exchange for no layoffs during 2010. If other unions agree, the furloughs will save the state more than $300 million.
Ohio At least 51,000 employees .2 million savings 20 days over two years		Ohio’s two largest state employees’ unions, which together represent almost 40,000 workers, agreed to a wage freeze and 10 “cost-savings days” during each of the next two fiscal years, which will save $173.2 million. It was the first time in state history that the governor asked for furloughs. The furloughs will also be imposed on 11,000 nonunion employees who work for the executive office. Some other departments, such as the Attorney General’s and Treasurer’s offices, will also require employees to take days off.
Oklahoma 470 employees .2 million savings 12 days over a year		The 470 employees at the Oklahoma Corporation Commission will be furloughed for 12 days in the 2010 fiscal year, saving about $1.2 million.
Oregon 2,000 employees 6 days over a year		Gov. Ted Kulongoski (D) negotiated with the employee’s largest union – made up of 21,500 people – a 20-day furlough over the next two years. The move still has to be ratified by the union’s members, but it could be a model for similar agreements with smaller unions. The furloughs would also apply to 7,400 nonunion members.
South Carolina 28,900 employees .5 million savings 20 days over two years		South Carolina’s agencies are allowed to furlough employees up to 10 days each fiscal year if their budgets require it. So far, more than 24,000 employees have taken furloughs this fiscal year, and agencies have saved more than $30 million.
Wisconsin 69,000 employees million savings 16 days over two years		About 69,000 Wisconsin state employees will take eight unpaid days off over each of the next two years. The furloughs should save about $121 million.
POSSIBLE FURLOUGHS
Illinois		Illinois Gov. Pat Quinn (D) is meeting with the state employees’ unions to discuss his plan to furlough state workers 12 days over the year. Quinn said 2,600 workers face layoffs if furloughs aren’t implemented.
Washington		After revenue projections fell by almost $500 million in June, Gov. Christine Gregoire (D) ordered agencies to cut payrolls another 2 percent. Her letter to agency directors said the cut “may necessitate furloughs, reductions in force, or reductions in overtime.”

Sources: Stateline.org reporting

Despite these pressures, the Pew Center on the States is urging state policymakers to find creative ways to ramp up proven personnel practices so that shrinking state workforces have the support they need to continue to deliver quality government services.

In a new set of recommendations, People Forward: Human Capital Trends and Innovations ,” Pew’s Government Performance Project analyzed data from a 2008, 50-state survey (Grading the States 2008) to highlight successful human resource practices the group says will help states strategically manage their workforces during this recession. (Like the performance project, Stateline.org is part of the Pew Center on the States.)

The new report’s advice: State human resource professionals – even as they manage the biggest employee downsizing in a generation – should continue to aggressively recruit new talent, stem voluntary departures and develop and hire people with the skills needed to achieve the state’s future goals.

If that challenge is not enough, personnel agencies can expect to accomplish all this with much smaller staffs. According to National Association of State Budget Officers director Scott Pattison, the lion’s share of upcoming payroll cuts will be in back-office agencies such as accounting and personnel.

In 2008, states such as Utah and Virginia were ahead of the curve, receiving high marks from Pew for their ability to retain employees, conduct meaningful performance reviews, train and develop their employees and plan for future staffing needs. Others, such as Indiana and Maryland, were on the cusp of developing new statewide staffing plans and management training programs.

Now, as states enter a second year of budget deficits, personnel officers are testing these programs.

“Absolutely no one in the personnel department had any experience with this kind of thing, because nothing like this had happened in more than 15 years,” said Maryland’s deputy personnel director Catherine Hackman. Even so, Hackman says she and others were amazed at the favorable reaction to the furloughs. A hotline established to take comments on the cuts showed few negative reactions, she said. “Most workers were thankful they had a job and citizens generally approved.”

Today, she says, her staff is busy preparing for the next round of cuts – taking online courses in such topics as performance evaluation, leave management, union negotiation and employee incentives. Under plans just announced by Democratic Gov. Martin O’Malley, state employees will be forced to take as many as 10 days of unpaid leave over the year ahead, and more than 200 will be laid off.

Virginia, which excelled at workforce planning, employee retention, training and development and employee performance reviews before the recession, is facing a 15 percent cut on top of a previous 22 percent cut in its human resources budget.

“We’re up against a wall,” said personnel director Sara Wilson. “There’s not going to be a lot of low-hanging fruit. We’ve already been down that road.”

There’s no question government services will suffer, Wilson said, but her office is looking for savings that will allow them to continue most of their workforce development programs. For example, she saved millions on an employee wellness program by bringing it in-house and assigning it to a group of employees who work from their homes.

Wilson, whose agency provides all state training programs, also cut costs by providing most courses online and partnering with state colleges and universities to maintain high-level management and leadership classes. An employee suggestion line was moved to the governor’s office and combined with constituent services to free up one of her staffers.

As for strategic workforce planning, Wilson says the time-consuming process is well worth the effort. “It started out as a new idea, but now it’s top of mind for every manager in the commonwealth. I’m glad we’ve had some emphasis on this in the past, because managers have that experience as we go through this process.”

In the face of unrelenting gloom, Indiana personnel director Daniel Hacker says the recession offers a few bright spots. The state’s poor private-sector job market – worse than the national average – has lowered voluntary turnover and made state government the employer of choice. Financial worries have also stanched a retirement boom that had threatened to drain the state of much of its institutional knowledge.

Looking forward, Indiana plans to maintain its rigorous performance reviews, despite a statewide salary freeze. “People really want acknowledgment for outstanding performance,” Hacker said. “If there’s bonus pay attached, that’s even better.”

Indiana’s salary freeze provides an added incentive for employees to strive for promotions and exemplary service, because that’s the only way they’ll see a pay increase, Hacker added.

WORKFORCE INVESTMENT IN HARD TIMES

Despite shrinking budgets, the Pew Center on the States recommends states maintain the following management programs to bolster morale and boost productivity.

Workforce Planning – Keep an inventory of the knowledge, skills and competencies of every agency’s workforce and document future staffing needs.

Hiring – Take advantage of the historically large pool of skilled workers by using effective screening technologies to recruit for current and soon-to-be open positions.

Performance Management – Ensure that performance appraisals – preferably automated – are kept up-to-date so managers can make critical staffing decisions. Recognize high achievers, even if only in non-monetary ways.

Mobility – Promote and transfer employees whenever possible to avoid losing top performers to the private sector.

Communication – Engage workers in efforts to improve efficiency and maintain honest and direct communication about downsizing and other budgetary concerns.

Morale – Where possible, expand morale-boosting practices such as occasional social gatherings, flexible work schedules and telecommuting options.

Training – Pursue low-cost alternatives to classroom training, such as mentoring and job rotation, online courses and university and college partnerships.

Source: Abstracted from “People Forward: Human Capital Trends and Innovations,” by the Government Performance Project, a division of the Pew Center on the States.

In Utah, the state grabbed national headlines for its switch to a four-day work week, but less noticed was the absence of statewide furloughs and layoffs. Despite a nearly 4 percent staffing cut, the state managed to avoid disruptive across-the-board payroll reductions by allowing agencies to come up with their own downsizing plans tailored to their needs and funding sources. For example, people in agencies funded by the federal government were spared, in favor of cuts that helped plug the state deficit.

“Rather than using a sledgehammer, we took a surgical approach,” said Utah personnel director Jeff Herring.

Still, as states’ financial woes worsen, personnel cuts will get deeper and experts say most states will not likely return to pre-recession workforce levels in the foreseeable future. As a result, some are concerned that productivity-enhancing human resource practices will fall by the wayside and government services will suffer.

According to Pattison, states may cut their overall payrolls by about 7 percent this fiscal year, but schools, corrections and health care will be largely spared. To make up the difference, administrative agencies could see cuts of 20 percent or more, he said. “Frankly it comes down to what’s more politically justifiable.”

With more looming budget pressures ahead, Pew’s Government Performance Project director Neal Johnson, said, “We hope that by highlighting human resource practices that have held states in good stead over the years, the new analysis will give personnel officers the ammunition they need to convince governors, legislators and the public that despite the financial crisis, workforce development is more important now than ever.”

Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our website. AP and Getty images may not be republished. Please see our republishing guidelines for use of any other photos and graphics.