THE MISSISSIPPI LEGISLATURE

Introduction

Mississippi's Variable Compensation Plan provides the framework for the state government compensation system. In response to a joint legislative request, the PEER Committee reviewed the State Personnel Board's administration of the salary survey and realignment recommendation components of the Variable Compensation Plan.

Overview

Are the State Personnel Board's labor market surveys, as currently administered, a valid resource for decisionmaking?

The State Personnel Board (SPB) fails to administer the surveys in a manner that sufficiently guarantees an accurate picture of the prevailing wages among employers who compete for state employees. In summary:

• SPB defines all employers who compete for all classes of state employees as:
  • - the four contiguous state governments,
  • - arbitrarily selected Mississippi private sector employers, and
  • - selected local government employers, rather than identifying and sampling from the group of all employers who actually compete for state employees;
• SPB surveys the same select group of employers annually, which allows this small group to drive SPB's realignment recommendations, rather than randomly selecting survey participants from all employers whose positions make up the potential labor market for state employees;
• SPB collects data on salaries only, rather than total compensation, which includes fringe benefits costs to the employer (e.g., holidays, personal and sick leave, social security, retirement);
• SPB has not provided an empirically defensible basis for selecting job classes to be surveyed or for realigning classes that are not surveyed;
• SPB eliminates extremely high and low salary responses on an arbitrary basis rather than using a scientific approach to eliminate extreme values;
• SPB bases realignment recommendations on simple averages of the salaries employers report, rather than using a method that accounts for the number of positions to which each reported salary applies (SPB's method has potential for biasing realignment recommendations in favor of salaries paid by employers with few employees); and,
• SPB provides positive realignment recommendations only (salary range increases), even when survey results show the need for negative realignment (salary range decreases).

Each of these areas of imprecision contributes to potential loss of precision in SPB's labor market surveys and reduces the confidence that decisionmakers can place in the results. During the last three fiscal years (FY 1994 through FY 1996), the Legislature has relied upon SPB's recommendations to appropriate over $56.7 million for realignment of state occupational classes.

The lack of a valid compensation survey leaves the Joint Legislative Budget Committee and House and Senate Appropriations committees without an accurate picture of how much should be appropriated to keep salaries competitive with those paid by employers in the relevant labor market.

Are the salaries of state employees in lower-skilled jobs higher than salaries paid by other employers with comparable positions?

PEER compared state salaries to salaries paid by other Mississippi employers for lower-skilled occupations (defined by PEER as those for which Mississippi employers outside state government pay less than $17,285 annually) with wages of employees in the same occupations in the private sector industries and in federal and local governments in Mississippi. This comparison showed that state employees in lower-skilled positions generally are paid slightly more than employees in the same occupations outside of state government. However, no government agency has collected the fringe benefit data needed to complete this comparison.

Recommendations

1. During the 1996 Regular Session, the SPB should use available information to refine its realignment recommendations for FY 1997. To arrive at these refinements, SPB should perform a detailed analysis of MESC's salary survey reports to identify job classes that are most in need of realignment and should find more valid links between job classes for which SPB surveyed salaries and job classes that were not surveyed. SPB should report revised realignment recommendations to the Legislature for use in the FY 1997 appropriation process.
2. The Legislature should consider amending MISS. CODE ANN. §25-9-147 to require SPB to set standards for the Variable Compensation Plan (see page 21 of report for specifics of the recommendation).
3. The State Personnel Board should provide a written report of findings regarding the Variable Compensation Plan to the Legislature by February 1, 1997. This report should address each of the following questions:
   • What method should the state use to guide its employee compensation system? Should the state continue to use the Variable Compensation Plan as the basis for determining employee compensation?
   • How should the method be applied to the state's compensation system? Should the state survey employers within the relevant labor market to determine prevailing wages for job classes? Should the state use labor market data collected by other entities (e.g., MESC)?
   • Who should administer the employee compensation system? What parts could or should be handled by entities other than the State Personnel Board (e.g., Joint Legislative Budget Committee, Mississippi Employment Security Commission, a university research unit, or a private contractor)? What are the costs and benefits of each alternative?

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