Lake Wobegon, N.C.?

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Do all North Carolina state government employees deserve a pay raise? Are they, as Garrison Keillor famously said of the children of his “hometown” of Lake Wobegon, all above average?

RALEIGH (May 12, 2015) – Governor Pat McCrory’s proposed budget for 2015-2017 contains no across-the-board pay raises for state employees. Should it?

These raises are essentially a cost-of-living adjustment for state employees to protect them from inflation. But we must also recognize that state government is, and ought to be, part of the larger labor market. Therefore, state salaries must respond to changes in compensation in the market if the state is going to be able to attract a talented and dedicated workforce. If state salaries cannot keep up with what the market is paying, major problems can impede the delivery of essential services.

However, is an across-the-board raise the best way to do that? State employees represent a vast range of occupations, from the worker who feeds the lions at the zoo to file clerks, and includes everyone from highway patrol troopers to doctors and lawyers. Does every one of those employees deserve a market-based raise? Almost certainly not.

Here is where we get to the crux of the problem. For years, the Democrat-led leadership Jones Street and the governor in residence on Blount Street viewed state employees as an essential bloc of Democratic votes rather than taxpayer-funded public servants. It became more important to homogenize the group and placate everyone than to do the hard work of separating good employees from bad and high-value positions from run-of-the-mill jobs.

McCrory seems poised to tackle this problem head-on. His budget calls for targeted raises for some employees in order to get those positions’ compensation up near the market rate. His budget targets younger teachers, state troopers, and prison guards, among others.

“The new paradigm is directing our moneys toward where we’re having the highest attrition, where the greatest need is based upon the market performance, and also based upon leadership [in] teaching,” McCrory said.

That is the right kind of thinking for now, but it’s more of a short-term triage solution for specific areas of state government. The longer-term, general fix must combine three elements: first, a meaningful way to evaluate employee performance; second, changes in the state employment laws to make it easier to promote good employees and demote or fire the bad; and third, a workable merit-based pay system so that high-performing employees can see significant raises, good employees can see some level of increase, and “seat-warmers” will see no raise – or be shown the door.

Jones and Blount streets have taken some baby steps in these directions, but there is much more ground to cover. McCrory is phasing in a new performance management system that aims to differentiate the great and the good from the poor-performing and the bad. And in 2013, a bill that would have made significant strides toward those goals ended up passing in a watered-down version. (Our sources tell us that the dilution mainly was due to the influence of certain members from districts with a high proportion of state government employees.)

The bill ended a kind of non-teacher tenure called “career status” for exempt employees, but the final version kept it in place for the 98 percent of the state workforce who are non-exempt. And it barely touched the state’s grievance process, the policy most in need of reform.

An extended grievance process, always the hallmark of any tight union shop, has produced an unwritten policy of neglectful mismanagement in the agencies. It is far easier for managers to leave a poor-performing employee alone and find another way to get work done than to attempt to manage effectively. This is true because managing effectively means being met with months and months of grievance hearings for any disciplinary action taken against an employee. It is just not worth it, especially considering that good managers can’t be rewarded for good management, just as good employees can’t be rewarded for good work.

That brings us to the third needed reform: a merit-based pay system. As a state Office of State Human Resources report put it, the state must change from a one-size-fits-all system to a “performance culture that assigns more value to high-performing employees in key roles.” The report recommends “seriously examining options to progress employees within their salary range based on their market worth and contributions, and utilizing compensation tools other than across-the-board base pay increases for recognizing and rewarding excellent performance.” Hear, hear.

The state seems to be moving in the right direction. But until state leaders get farther down the road in implementing meaningful performance management, curtailing the extended grievance process, and instituting market- and merit-based raises, it may make sense to include small cost-of-living adjustments for state employees. The goal, however, should remain a true merit-based system where the state pays for performance, not longevity.