State government is grappling with historic employee retention problems, fueling a push for higher salaries as state lawmakers prepare for final negotiations over the annual state budget.
More than one out of every three people who went to work for state government agencies last year — 36.7% to be exact — left before spending a full year in their role, according to the Office of State Human Resources.
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Applications to work for those agencies were down 43% in 2022 compared to 2019.
Gov. Roy Cooper’s human resources office figures that all the turnover cost taxpayers close to $500 million last year.
“We believe it is a conservative tally,” OSHR spokeswoman Jill Lucas said in an email.
The Cooper administration sent this sort of information to state lawmakers last month as part of a push for robust employee raises. The House of Representatives proposed a budget suggesting 7.5% raises over the next two years, plus extra money to boost pay in some of the state’s hardest-to-fill jobs. The Senate’s proposal is expected early this week.
Leaders in the two chambers will work out final figures to send the governor, a process likely to take a few weeks.
The state employees’ association blasted the House budget when it came out, pointing to multibillion-dollar reserves the state has after years of revenue surpluses. Now it’s pointing to estimated turnover costs as another available source of money for state employees.
“You don’t have to find it,” said Ardis Watkins, executive director of the State Employees Association of North Carolina. “It’s there. You’re just burning those dollar bills.”
Republican Senate leaders say it’s not that simple. They’ve promised raises, but without specifics.
“Hiring people and training people has a cost,” Senate President Pro Tem Phil Berger said. “And so if the people that you hire leave very early in their tenure, then there’s a cost there that you just don’t recoup. The real question for me is whether increasing the salary will improve that situation.”
Vacancies also generate savings. Senate budget writer Ralph Hise said that, for years, the state used unspent salary money from vacant prison jobs to help cover inmate medical costs.
“So it’s a little more complex than to say ‘within this two-year period you could find money to put more into salaries,’” said Hise, R-Mitchell.
The administration’s turnover cost calculations are based on industry standards, Lucas said, pointing to studies that pegged those costs from tens of thousands of dollars for every employee lost to two times an employee’s salary. The state human resources office took the total number of employees who left state government in 2022 — 9,601 — and multiplied it by their average salary — $51,342 — for an estimated impact of $493 million.
Roughly $142 million of those costs came from employees who retired, with $351 million from other employees who left. OSHR didn’t break that down by years of service, but it said separately that people are “most likely to leave state employment during their first year on the job.”
That’s particularly true in the state’s Department of Health and Human Services, which struggles to recruit nurses and other workers for state hospitals, and the state’s prison system. Both had first-year turnover rates last year approaching 50%, according to OSHR. In a growing state, with health care workers are in high demand, many can pull down bigger salaries in hospitals outside the state system.
The state is also worried about a looming retirement wave. About 8.5% of state agency employees are eligible right now to retire with full benefits, OSHR said. Roughly 26% will be eligible within five years.
OSHR itself led in this category, with 39% of its employees eligible to retire in the next five years. In a handout for lawmakers, the office listed “delays by overworked hiring managers and overworked agency HR staff” as a major factor in other hiring delays, particularly considering the shrinking pool of applicants.
Watkins said it’s a double whammy.
“We’ve got applications already down,” she said. “And then, of the applications you do get, because you’re not competitive [on salary] in H.R. as well, you’re not able to process them in time to be able to get those folks before they take something else.”
In addition to raises, the Cooper administration has asked the legislature for a number of structural changes to address these issues, including permission to continually post jobs instead of waiting on sign offs, the flexibility to hire at the end of job interviews contingent on background checks and a pooled application process that would let people who apply for one job be considered for multiple open jobs.
Berger, R-Rockingham, and other General Assembly leaders have made it clear that state employees should expect raises, and Berger said employee starting pay in particular needs a boost.
It’s unlikely those raises will bridge the gap between public and private sector salaries, though, and OSHR says state employee pay lagged behind the overall labor market by 14.8% the last 10 years and behind inflation by 9.1%.
Watkins said attractive state benefits used to make up for that, but that advantage has eroded. For example: state employees hired before 2021 get to keep their health insurance when they retire after 20 years service, but the General Assembly dropped that benefit for new hires.
“We’ve definitely seen things like that have an impact,” Watkins said.