FISCAL NOTE

Date Requested: February 17, 2016
Time Requested: 05:11 PM
Agency: Legislative Auditor
CBD Number: Version: Bill Number: Resolution Number:
2761 Introduced SB617
CBD Subject: State Personnel


FUND(S):



Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The bill requires state employees to be paid on a semi-monthly basis. Currently, the Governor's Office, Auditor's Office, Treasurer's Office, Department of Agriculture, ERP Board, Department of Transportation, Division of Natural Resources, and Department of Administration all pay its employees on a bi-weekly basis. Those agencies switched to bi-weekly pay on May 16, 2015. All other state agencies continue to pay employees on a semi-monthly basis. The switch to bi-weekly pay and the intent to switch all state employees has several unintended, unfunded consequences: 1. An immediate $22.5 million unfunded liability for CPRB. 2. $47.1 million in increased salaries for salaried employees over a 10 year period. 3. Pay raises for 24,607 salaried state employees. Hourly employees did not receive the unintended pay raise. This totals $69,600,000. The Project Director of the ERP Board - the entity that oversees wvOasis - estimates that stopping the conversion to bi-weekly pay, and returning the agencies that have already converted would cost between $7,980,000 to $10,161,216. These estimates are solely provided by the ERP Board and have not been verified by me or anyone else from the Legislative Auditor's Office. Even with including the cost to return the first wave of employees to a semi-monthly pay, the Legislative Auditor's Office estimates that this bill will ultimately save the State between $61,620,000 to $59,438,784.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 10,161,216 0 0
Personal Services 967,680 0 0
Current Expenses 9,193,536 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


The Project Director of the ERP Board estimates that the State would incur one time costs between $7,980,000 and $10,161,216 to convert the wvOasis to semi-monthly pay. The Legislative Auditor's Office can not verify or explain these estimates. Following the conversion, there should not be any additional costs to the State. Conversely, the State will see immediate savings in the unfunded liability for the Consolidated Public Retirement Board. State employees retirement is based on pay during 36 month periods. Under a bi-weekly pay, some employees will have 79 pay periods during a 36 month period, thus will increase their retirement benefits. Actuarial analysis from CPRB estimates that this was an immediate unfunded liability of $22,500,000. Returning to semi-monthly pay would eliminate the $22,500,000 liability for retirees. Additionally, bi-weekly pay caused an increase in salaries for employees over a 10 year period for similar reasons as outlined in the paragraph above. This amount is estimated to be $47,100,000. That amount would be eliminated immediately upon full implementation. Overall, this bill in the long term would save the State between $59,438,784 and $61,620,000.



Memorandum


The table in the Fiscal Note has some limitations in that it only allows for showing expenses and revenues for Fiscal Year 2016, Fiscal Year 2017, and the full Fiscal Year upon implementation. The savings that result from this bill are long term savings in the $60 million range and can not technically be classified as revenue nor would the savings be captured in the Fiscal Years in the table. There are one time costs estimated by the ERP Board Project Director of up to $10,161,216. The Legislative Auditor's Office estimates that long-term savings by passing this legislation would be between $59,438,784 and $61,620,000 using the cost estimates of the ERP Board.



    Person submitting Fiscal Note: Denny Rhodes
    Email Address: denny.rhodes@wvlegislature.gov