Analysis of the 2006-07 Budget Bill
Legislative Analyst's Office
The Department of Personnel Administration (DPA) represents the Governor in negotiations with state employee bargaining units concerning terms and conditions of employment. The DPA’s other duties include: (1) managing certain state employee benefit programs, (2) administering parts of the classification and pay system for employees, and (3) providing legal services to departments on employment and personnel matters.
The budget proposes total expenditures of $91 million in 2006-07, up more than $5 million (or 6.4 percent) from 2005-06. In the proposed budget, the principal funding sources are:
$34 million from the General Fund for departmental operations and health care subsidies for certain state employees and retirees living in rural areas.
$27 million from the Flexelect Benefit Fund, principally for benefit payments to employees that set aside money for medical and dependent care.
$16 million in reimbursements from other departments (including more than one-half of DPA’s overall budget increase, primarily due to increases for legal services).
$12 million from the Deferred Compensation Plan Fund for administration expenses related to the plan.
We recommend that the Legislature reject the administration’s request for $1 million from the General Fund to pay consultants to develop a plan for reforming the state’s employee classification system. If the administration wants to implement such reforms, it should propose a comprehensive plan to the Legislature instead of spending money to study piecemeal, incremental changes. (Reduce Item 8380-001-0001 by $1 million.)
The proposal requests a one-time augmentation of $1 million from the General Fund so that DPA can hire consultants to provide recommendations for maintaining or changing the state’s civil service classification system. The administration says that these funds would be spent over two years for the “assessment phase” of the consultants’ work in developing a long-term plan.
State Classification System. The state civil service system now includes about 4,500 separate job classifications, nearly 90 percent of which are for specialty positions suited for a particular department. State employees are hired, paid, and retained based on their compatibility with the specific duties mentioned in the job classification. Because there are so many classifications, many of which apply to a small number of employees, the system limits managerial flexibility and can lead to disputes between employees and departments.
Personnel Reform Has Been Studied Already. The Little Hoover Commission, the administration’s California Performance Review, our office, and others have released many reports on the need for comprehensive personnel reform, including classification reform. For instance, in a Little Hoover Commission report published in June 2005, the commission described the state’s personnel practices as “calcified.” In past reports, we have criticized the focus of state personnel policy on process, rather than results, and have called the classification system “stultifying” in its complexity and rigidity. While the classification system is an important component of the state’s civil service system, these reports also identify a wide range of other problems, including cumbersome hiring practices, the overlapping authority of DPA and State Personnel Board (SPB), weak efforts to promote state job opportunities, the prevalence of recruitment processes open only to current employees, and poor recruitment and training of managers.
Unclear Products. The administration’s request is vague in terms of what the state would receive from the $1 million in consulting costs. It is unclear what products the consultants would produce. It is also uncertain how any plan would be implemented and whether the plan would be approved by SPB, which is responsible for classification changes.
Comprehensive Reforms Need to Be Considered by the Legislature. We continue to believe that bold, comprehensive reform of state personnel policies is necessary. This is particularly the case given the state’s aging workforce. The state’s civil service system will need to attract a new generation of public servants in the coming years. Improving public services and allowing state government to adapt to change should be the most important principles for reform in this area. Rather than spending another two years studying specific components of civil service reform, such as an overhaul of the classification system, we believe time and money would be better spent if the administration presented a comprehensive proposal for legislative consideration. Such a proposal would include all of the components, including classification reform, needed to make the state’s civil service system more productive and efficient. After the administration and the Legislature agree on the principles and major components of a comprehensive reform effort, the hiring of consultants to help plan for implementation of the package might be more appropriate. We, therefore, recommend rejecting the proposal to hire consultants for a piecemeal study of classification reform.
We recommend rejecting the department’s request for $140,000 from the General Fund to pay for a single exempt employee who would assist departments in implementing workforce and succession plans. A single individual would be an ineffective response to the issue. (Reduce Item 8380-001-0001 by $140,000.)
This proposal requests an ongoing augmentation from the General Fund of $140,000 to hire one exempt employee to act as a state “workforce planning” administrator. The individual (annual salary of $107,000) would coordinate and manage services for departments to plan for the retirements of their staffs. We estimate that 35 percent to 45 percent of current state employees will retire in the next ten years. An even higher proportion of state managers are expected to retire over the same time period.
A Single Position Cannot Address a Huge Problem. State departments and agencies will cope with up to 100,000 employees retiring within the next ten years. Hiring a single individual to provide consulting and assistance services to departments would be an ineffective response to this issue. Consequently, we recommend that the request be rejected. The administration may wish to consider a more comprehensive approach to this issue.
We recommend rejecting the joint Department of Personnel Administration and State Personnel Board request for $200,000 from the General Fund in 2006-07 and $100,000 per year thereafter to improve the state’s human resources Web site. The project is not well developed, and required planning documents have not been submitted. (Reduce Item 8380-001-0001 by $100,000.)
Existing Web Sites. Currently, just as California’s personnel management system is split between DPA and SPB, the two agencies have separate Web sites. According to the administration, the two sites impede the efforts of job seekers because they both contain unique information needed by applicants and are not coordinated. The DPA reports that it has 0.5 staff positions and $50,000 devoted to management of its Web site. The SPB reports that it has 2.5 staff positions and more than $260,000 in resources devoted to its Web site.
Proposal for New Web Site. The administration requests $100,000 from the General Fund for DPA in 2006-07 and $50,000 per year on an ongoing basis to design and maintain a single state human resources Web site. The SPB requests an identical amount of budget authority for this joint project. Both departments say their staff members have limited expertise in the types of Web design needed to implement this project. The agencies have convened focus groups, and the proposal includes some general ideas of changes that could be made to the sites. For instance, the departments express the need to redesign existing pages in a more user-friendly format, to show total compensation packages for positions, and to allow searches for state jobs using common terminology. In general, we agree with these goals.
Required Planning Documents Not Submitted. The DPA and SPB have not submitted feasibility study reports (FSRs) for this project. Under state policy, FSRs are required for this project. Preparation of FSRs would have required the departments to address potentially complicated technical issues with the proposal for a new Web site. For instance, new functions of a Web site identified by DPA and SPB-such as giving departmental personnel easier access to information than they have today-create potential logistical complexities and increase the risk of additional costs. In addition, an FSR would require the departments to consider broader issues surrounding the promotion of this Web site to job seekers. Because of the importance of FSRs for project planning and budgeting, the Legislature stated its intent in the 2005-06 Budget Act (Control Section 11.05) not to approve funding for information technology projects without an approved FSR.
Recommend Rejecting Proposal. Consistent with legislative policy concerning information technology projects, we recommend that DPA and SPB’s joint request for funding be rejected. Should the administration wish to resubmit a similar proposal in the future, it should submit it with an approved FSR and other information addressing the concerns raised above.