2003
RESULTS
2003 Compensation Report for Mid-Atlantic Governments
Part 1 - Salary Administration
JANUARY 2004
prepared by
Eric Jacobson, Sarah McCloskey, and Charles Whitmore
Institute for Public Administration
College of Human Services, Education & Public Policy
University of Delaware
www.ipa.udel.edu
Background
The purpose of this report is to share the results from the first of two sections of the 2003
Governmental Compensation Survey. For nearly 20 years, the Institute for Public
Administration (IPA)1 has conducted this salary survey for numerous state and local
governments in the Mid-Atlantic region. This study identifies trends in salary and compensation
practices of government employers in the region. The information presented in this report is
based on responses from the salary administration section (Part 1) of the survey. The salary
administration section includes questions about general salary adjustments and tactics used to
reduce compensation spending. The second section of the compensation survey (Part 2 addressed in a separate report) presents a detailed analysis of average salary levels for 81 state
and 41 local positions included in the 2003 survey.
Methodology
To conduct the 2003 study, the IPA sent electronic links of this year’s survey via email to
twenty state and local governments and the University of Delaware. Respondents received the
links on October 1, 2003, and were asked to complete and return the survey by October 24, 2003.
A total of eight states and eleven local governments in the Mid-Atlantic region completed the
survey. We have included the University of Delaware in the group of local governments for
calculations and summaries. For a complete list of the 2003 survey participants see Table 1.
Results
The salary administration section of the compensation survey contains two main themes.
The first focuses on salary increases and alternative forms of employee compensation.
Participants were asked to identify general or cost of living (COLA) salary increases that were
1
The IPA is a research organization within the College of Human Services, Education & Public Policy at the
University of Delaware (www.ipa.udel.edu).
2
granted or planned for employees since July 1, 2002. Next, participants identified any yearly
increases that were either granted or approved for the future (2004 - 2007). If an increase was
granted, respondents identified the type of increase (general, negotiated, merit, or COLA), date
granted, and the average percent or flat dollar amount of the increase. In addition, if an increase
was granted, employers identified whether or not their organization adjusted their formal pay
ranges (minimum, midpoint, and maximum rate) to reflect the salary increase. Finally,
employers identified any type of alternative bonus granted to employees in lieu of a pay increase.
The results from this part of the salary administration section identified nine governments
(two state and seven local) that granted increases during the last survey year (10/2/02 – 10/1/03).
The mean increase was 2.9% and the median increase 3.0%. More broadly, over the past two
years a total of twelve governments (four state and eight local) granted increases. The mean of
these increases was 3.0% and the median again 3.0% (Table 2). In addition, eight governments
(three state and five local) approved increases to be granted in the future. The dates of these
increases range from 2004 to 2007, with a mean of 3.3% and median of 3.0% (Table 3).
Of the ten state and local governments that provided no type of increase for their
employees, just three offered other types of bonus in lieu of a salary increase. The first
alternative was a one-time bonus of $550. Another government upgraded their police department
retirement program. The third organization offered their employees with a choice of three
options: 10 days of leave; a 2.5% bonus; or 5 days of leave and a 1.3% bonus (Table 3).
The second theme of the salary administration section focuses on reductions in
compensation spending, recognizing that many state and local governments face financial
pressures due to the recent lagging economy. Employers were asked to identify whether they
currently use or plan to use tactics to cut compensation spending and deal with tighter budgets.
Respondents chose from a list of common strategies to cut spending and identified the date each
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tactic went into effect. If any such strategies were used, the employer approximated how many
employees were impacted.
A total of twelve organizations employed tactics to reduce spending, including each of
the eight Mid-Atlantic state governments and four of the eleven local governments. Despite
utilizing strategies to cut spending, six of the twelve governments chose to grant salary increases
to their employees over the past two years. The other six organizations that adopted tactics to
reduce spending did not provide any salary increases over the past two years (Table 4). The
tactics most frequently employed to reduce spending include: increased employee share or copay for health insurance, hiring freezes, lay-offs, wage freezes, limited travel reimbursement, and
reduction in training funds (Table 5).
Discussion
After coping for three years with a weak national economy and fiscal crises in state and
local governments, the economy appears to be turning around. This recovery could be good
news for government employees who suffered pay cuts, layoffs, and tax increases during recent
years. Many states reacted to budget deficits by cutting spending and increasing taxes. In fact,
for the first time since mid-2001, tax revenues rose slightly in most states in the second half of
2003. However, according to a recent New York Times article, “State budgets will continue to
be stressed by slow job growth and rapidly rising health care costs.” 2 These rising costs may
continue to create budget shortfalls, creating pressure for compensation managers to cut
spending. In a recent article, the Wall Street Journal stated, “The average cost of employer
health plans rose 10% per employee in 2003.”3 Combined with a 14% cost increase in 2002, and
the “anticipation that their health-care costs in 2004 will surge again, this time by 13%,”
2
3
Broder, John. “Despite Rebound, States’ Budgets are Still Reeling.” New York Times. 1/5/04
Furhmans, Vanessa. “Shifting Burden Helps Employers Cut Health Costs.” Wall Street Journal. 12/8/03
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employers are shifting a large share of the burden to their employees.4 The national trends for
state and local employees are a reflection of governments’ struggles with economic downturns,
decreased revenues, and increased demands for spending.
The National Association of State Budget Officers (NASBO)5 published a report in
December 2003 that contained many similarities to the IPA findings. After conducting a survey
of national state governments, NASBO cites increases in Medicaid and other health care costs as
a major strain on state budgets. Over the past three years, all fifty states implemented policies to
reduce spending on Medicaid. Additionally, only 22 states granted salary increases for
employees. The NASBO research also identified many states that adopted tactics to reduce
compensation spending. According to the report, “32 states used across the board cuts, 25 states
drew from rainy day funds, 16 states laid off employees, 13 states reorganized programs, and 29
states utilized a variety of other methods.”
The trends identified in our study of employers in the Mid-Atlantic region mirror national
compensation spending trends identified by NASBO. State government employees appeared to
fare significantly worse during 2003 than their local government counterparts. Only 25% of the
eight Mid-Atlantic states surveyed granted increases in 2003, compared to 64% of local
governments. Similarly, 55% of local governments surveyed by the IPA have already approved
future increases (between 2004 and 2007), compared to only 25% of state governments.
Moreover, 100% of the Mid-Atlantic states surveyed introduced tactics to reduce compensation
spending, while only 36% of local governments chose to implement similar measures. Some of
the most frequent tactics adopted by governments to reduce spending include: increasing
4
Ibid
National Association of State Budget Officers: The Fiscal Survey of States: December 2003.
www.nasbo.org/Publications/fiscalsurvey/fs-spring2003.pdf
5
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employees’ co-payments for health insurance, hiring freezes, lay-offs, postponement of wage
increases, and early retirement incentives.
Two factors help explain why compensation spending is more restricted in state budgets
than local budgets. First, state government revenues tend to be more sensitive to economic
fluctuations. When the economy is weak, incomes decrease, thus reducing government tax
revenues. Second, when the economy is weak, there are more demands placed on state social
service agencies. State budgets, therefore, are more affected than local governments’ as a result
of double-digit health care cost inflation and rising social service demands.
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Data Tables:
Table 1:
State Governments:
Delaware
Maryland
Massachusetts
New Jersey
New York
North Carolina
Pennsylvania
Virginia
Local Governments:
City of Newark, DE
City of Wilmington, DE
Kent County, DE
New Castle County, DE
Sussex County, DE
University of Delaware, DE
Cecil County, MD
Kent County, MD
Salisbury, MD
Chester County, PA
Delaware County, PA
Table 2: Salary Increases
Number of organizations that granted increases during the last survey year (10/2/02 - 10/1/03):
Total: 9 of 19 (47.4 %)
State: 2 of 8 (25.0 %)
Local: 7 of 11 (63.6 %)
Mean: 2.9 % increase
Median: 3.0 % increase
Number of organizations that granted increases during the last 2 years:
Total: 12 of 19 (63.2 %)
State: 4 of 8 (50.0 %)
Local: 8 of 11 (72.7 %)
Mean: 3.0 % increase
Median: 3.0 % increase
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Table 3: Future Increases and Alternative Compensation
Number of organizations that approved increases in the future (2004 - 2007):
Total: 8 of 10 (80.0 %)
State: 2 of 8 (25.0 %)
Local: 6 of 11 (54.5 %)
Mean: 3.3 % increase
Median: 3.0 % increase
Number of organizations that offered alternative types of bonus in lieu of increases:
Total: 3 of 19 (15.8 %)
- One time bonus of $550
- Police Department upgraded retirement program
- Three options: 10 days of leave; a 2.5% bonus; or 5 days of leave and a 1.3 % bonus
Table 4: Tactics to Reduce Compensation Spending
Number of organizations that employed tactics to reduce spending:
Total: 12 of 19 (63.2 %)
State: 8 of 8 (100.0 %)
Local: 4 of 11 (36.4 %)
Of those who granted increases over the past 2 years, the number that employed tactics to
reduce spending:
Total: 6 of 12 (50.0 %)
Of those who did not grant increases over the past 2 years, the number that employed tactics
to reduce spending:
Total: 6 of 7 (85.7 %)
Table 5: Most Frequent Tactics used to Reduce Compensation Spending
Increased employee share or co-pay for health insurance: 8 of 12
Hiring freezes: 6 of 12
Lay-offs: 5 of 12
Wage freezes: 5 of 12
Limited travel reimbursement: 4 of 12
Reduction in training funds: 4 of 12
Postponement of wage increase: 3 of 12
Early retirement incentives: 3 of 12
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Institute for Public Administration
College of Human Services, Education & Public Policy
University of Delaware
180 Graham Hall
Newark, DE 19716-7380
phone: 302-831-8971 e-mail: ipa@udel.edu
fax: 302-831-3488
www.ipa.udel.edu
The Institute for Public Administration (IPA) links the research and resources of the University of Delaware with the management,
information, and leadership needs of schools and local, state, and regional governments in the Delaware Valley. IPA provides
assistance to agencies and local governments through direct staff assistance and research projects as well as training programs
and policy forums. IPA’s wide range of program areas includes civic education, conflict resolution, health-care policy, land-use
planning, local, state and international government, school leadership, water resources, and women’s leadership. IPA’s main office
is on the University’s Newark campus in 180 Graham Hall. Jerome Lewis is the director of the Institute and can be reached at 302831-8971.
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