COUNTY OF ALBEMARLE

 

EXECUTIVE SUMMARY

 

 

AGENDA TITLE:

Compensation and Medical Insurance Report

 

SUBJECT/PROPOSAL/REQUEST:

Request approval for the County Executive and Superintendent to develop proposed budgets based on the recommended salary scales, merit pool increase amount and projected medical insurance costs, subject to available funding.

 

STAFF CONTACT(S):

Tucker, White, Castner, Zimmermann, Suyes, Gerome

 

LEGAL REVIEW:   Yes

 

AGENDA DATE:

October 14, 2004

 

ACTION:     X                            INFORMATION: 

 

CONSENT AGENDA:

  ACTION:   X                           INFORMATION: 

 

 

ATTACHMENTS:        Yes

 

 

REVIEWED BY:

 

 

 

BACKGROUND:

In November 2000, the School Board and Board of Supervisors approved a Total Compensation Strategy to target employee salaries at 100% of market median and benefits slightly above the market at 105%.    The adopted market approved by the Boards is shown at enclosure #1.  

 

To maintain competitive compensation based on the adopted strategy, two separate, but related actions are required. 

 

·         First, ensure a competitive salary scale so that the County is able to attract and recruit new employees. 

·         Second, ensure current employees are rewarded for performance by maintaining internal equity in their pay range and also maintaining market competitiveness for similar skills.

 

To adhere to the Boards' adopted strategy, the following processes are implemented each year:

 

1)       Annually survey the adopted market to determine the salary scale adjustment implemented in those localities/schools for the current fiscal year.

2)       Annually survey the adopted market to determine the average total salary increase granted employees in those localities/schools for the current fiscal year.

3)       In addition, on a tri-annual basis, the process includes surveying our adopted market not only on scale adjustments, but gathering information on ranges and actual average salaries of a number of benchmark positions. This allows for a more in-depth analysis of our salaries and can identify positions that may need further review.  The benchmark survey occurred last year.

4)       The data from steps 1) ,2) and 3) is used to determine if the budget actions implemented in the current year have achieved competitive positioning.

5)       The data from steps 1) ,2) and 3 is analyzed to ascertain where the salary scales (both classified and teacher) for Albemarle County stand relative to the market and arrive at recommendations for next year’s salary increases.

6)       Obtain data on what other organizations are projecting for salary increases for the next fiscal year through a compensation database (WorldatWork. Eastern Region).  This data is used to project the merit pool increase and develop the teacher scale, including step increase.

Last November, the Joint Boards recognized issues impacting the ability of the School Division and Local Government to attract and retain a highly qualified workforce.  These issues included:

 

·         Difficulty recruiting and retaining highly qualified teachers- The impact of No Child Left Behind which mandates “highly qualified” teachers and the increasingly aggressive market for teachers makes attracting and retaining teachers a challenge.  A review of the 131 School Divisions indicated that Albemarle County teacher salaries dropped in competitiveness as the ranking among other school divisions fell at every step, with the exception of our minimum and step 5.  In addition, the Albemarle Teacher scale is in the second quartile at all steps, with the exception of minimum and step 5, relative to other school divisions in Virginia.

 

To address these issues, in March 2004, the Joint Boards adopted compensation strategies for different positions as follows:

 

1)       Teachers- Target market position in adopted market at top quartile.

2)       Positions that we recruit outside our adopted market-identify competitive market as the identified localities within our adopted market that we typically recruit against for those positions.  This subset of our adopted market should address cost of living issues and target competitive market position.  These localities represent areas that are in Metropolitan Statistical Areas (MSA’s), both above and below Albemarle and currently include: Hanover County, Loudoun County, City of Charlottesville, Prince William County, Spotsylvania County, Chesterfield County, City of Chesapeake, City of James City County, and City of Roanoke.  

 

This report details the analysis that supports the recommendations to achieve the adopted strategies for FY05-06 and for the Boards to consider in giving budget guidance to the County Executive and Superintendent.  These projections are presented to the Boards for their consideration in providing direction for FY05-06 budget preparation.  It is noted that all final funding is subject to, and based upon, available revenues and Board direction.

 

 

STRATEGIC PLAN:

Goal 4.1  Provide effective, responsive and courteous service to our customers

Goal 4.1.3  By June 2005, the County will be recognized as a quality place of employment with a workforce of employees who continuously provide high quality, customer-focused service to its citizens.

 

 

DISCUSSION:

Section 1:  Board Adopted Process for Compensation Strategy:  Market Analysis and Projections 

The following information is provided to both Boards to consider in providing guidance for the development of the FY05-06 budget.

 

Step 1:  FY04-05.  Survey the market to determine if the scale adjustment implemented for classified/administrator and teacher pay scales achieved the strategy.

 

Classified / Administrator Scale Adjustments-Target median of adopted market

The Albemarle County scale was adjusted by  2% in FY04-05 based on data that showed our scale was below market.  In reviewing the salary scale data, our adopted market median scale adjustment was ~ 2% (See enclosure # 2), so our current scale remains below market (-0.9%).  A competitive scale is important in attracting new hires.  For classified employees, the scale adjustment impacts new hires and any employees with pay rates below the new minimums.

 

Step 2:  FY04-05.   Survey the market to determine if the total salary increase for classified pay implemented achieved the strategy.

 

Classified Total Salary Increases -Target median of adopted market

Based on data showing that our salaries were slightly above market (0.3%) and the projected increase was 3.3%, our salary increase for the FY 04-05 merit pool was 3%. The median salary increase amount for our adopted market in FY 04-05 was ~4.00 %.  Enclosure #2

 

Total Salary Increases for Positions recruited nationally/regionally-Target median of subset of adopted market

           

Preliminary data illustrates that gains have been made in the two year phase-in for increases.  Detailed analysis will be provided when implementation is completed next year to determine if the adopted strategy is being met.  Evaluation of our ability to attract and retain highly qualified candidates will be ongoing.

 

Teacher Scale Adjustments-Target top quartile (75th percentile) of adopted market

For teachers, the scale adjustment impacts actual salaries.  The market survey conducted showed our FY04-05 teacher pay scale overall did not reach our goals.  Since only phase one of a two phase plan was implemented, this was anticipated.   Enclosure #3

 

 

Step 3:  Projections for FY05-06.   Based on current market position and scale/salary projections, determine the changes necessary to achieve the Board approved strategy using the WorldatWork, Eastern Region data. 

 

Classified / Administrator Scale Adjustments

Based on the salary scale data of our adopted market, which shows we are overall slightly below market (0.9%), and the Worldatwork projection of a 2.1% increase, a scale adjustment of 3% is proposed.   Again, the scale adjustment impacts new hires and any employees with pay rates below the new minimums.

 

Classified / Administrator Salary Increase (merit pool)

Based on the survey data showing that the median increase for our adopted market was 4 % and our increase was 3%, our salaries for FY04-05 are slightly below market (0.7%).  The WorldatWork survey for the Eastern Region (including Virginia) is projecting a salary increase of 3.7 % in the Education/Public Administration sectors.  Therefore, a 4.4% merit pool is recommended.

 

Positions recruited nationally/regionally

Continue second phase of implementation for positions which have been identified as recruited for nationally and regionally.  The increases are calculated based on the midpoint as follows:

 

·         Two or more paygrade reclassifications-employees received 5% of midpoint effective, July 1, 2004 and will receive 5% of midpoint, effective July 1, 2005. This amount will be the required amount (10%) stated in policy.

·         One paygrade reclassifications- employees received 3.75% of midpoint effective, July 1, 2004 and will receive 3.75% of midpoint, effective July 1, 2005.  This amount will be the required amount (7.5%) stated in policy.

 

Teacher Scale and Teacher Average Salary Increase

The teacher scale is based on the projected total increase obtained from WorldatWork. This survey projects a 3.7 % salary increase.  Any increase would include the step increase.   This 3.7% would need to be in addition to our phase two implementation.

 

Continue longevity increases.  Staff will prepare specific recommendations on the actual teacher pay scale, to include longevity increases.

 

Section 2:  Benefits Strategy:  Market Analysis and Projections for Medical Insurance Premiums

 

FY 04-05 Plan Year

At the March 17, 2004 meeting, the Boards approved the 2004-2005 medical insurance premiums and annual budgeted Board contribution of $5,232.  The objectives of the Health Care Executive Committee in developing recommendations regarding the medical plan were as follows:

 

·         maintain our current benefit design;

·         continue to offer affordable options;

·         build up the reserves to approximately 15% of total plan costs;

·         encourage movement of members from the high plan to the other options as our high option plan has a rich plan design and may not be offered by insurers in the future, and

·         maintain our competitive position for benefits.

 

In view of the continued increase in the cost of health care throughout the country, we continued to offer three different medical plans. Offering three plans recognizes the realities of the changes in medical insurance costs and gives employees an opportunity to choose between different plans and different premiums. 

 

FY05-06 Plan Year Projection

Information provided by Mr. Tom Mackay, our consultant with PalmerCay, indicates medical trends will continue at 15% and is projecting this for 2005-2006.  This is consistent with escalating medical costs that other employers are facing nationally.  One factor contributing to the medical care cost increase is the prescription drug costs, which continue to rise at a higher rate (13-16%).  As we have just started the new plan year, staff will continue to monitor claims experience and develop recommendations for both plan design and premiums as part of the County Executive's and Superintendent's budget proposals.

 

 

RECOMMENDATIONS:

Budget Development Projections for FY 05-06 based on adopted methodology:

These projections are presented to the Boards for their consideration in providing direction to both the County Executive and Superintendent for FY05-06 budget preparation.  It is noted that all final funding is subject to, and based upon, available state and local revenue.

 

1)       3% increase in the Classified Salary Scale.

2)       4.4 % merit pool for classified staff.

3)       Continue second phase of implementing increases for positions recruited for nationally and regionally.

4)       Continue funding for the second phase of Teacher increases to reach top quartile (including 3.7%) to be distributed along the scale.

5)       Continuation of a longevity increase for teachers.

6)   Anticipate a 15% increase in medical plan costs but defer decision until budget development in December/January.

 

 

 

ATTACHMENTS

Enclosure #1

Enclosure #2

Enclosure #3

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