FY ‘02 Update & FY ’03 Request

1. FY ‘02 Update & FY ’03 Request Presentation on the Personnel Divisions to the Administration and Regulation Appropriations Subcommittee March 12, 2002 Overview/table of organization – personnel management divisions 1 Highlights of accomplishments 2 Risks and resources managed in ‘01 4 Impact of cuts 5 ‘03 budget request 14 Significant upcoming issues 16 Mollie K. Anderson, Director Serving those who serve Iowa

2. table of organization for the DEPARTMENT OF PERSONNEL Thomas J. Vilsack, Governor Sally J. Pederson, Lt. Governor Director’s Office 4 FTEs/3 filled Current span of control: 1 to 13.55 Personnel Management Divisions 82 FTEs authorized/64 filled Iowa Public Employees’ Retirement System (IPERS) Vision: Increase the ability of state employees to serve Iowans Mission: Provide leadership by being a partner with agencies and employees to attract, develop, and retain the diverse workforce necessary to provide quality products and services to Iowans Risk and Benefits Management Retirement Benefits Customer Service Labor Relations Operations Operations Investments Legal and Communications Some shared resources * SF 497, which changes IPERS governance by increasing the autonomy of the division and putting it under the direction of a chief executive officer, becomes effective July 1, 2002. Department of Personnel March 2002 1

3. highlights of recent accomplishments personnel management divisions augmenting customer-focused services • Implemented and conducted an audit of service agreements with agencies. Service agreements are used to individualize services. Agencies responding to the survey rated the department in all areas related to the agreements as 3 and above on a scale of 1 to 4 (1 = strongly disagree; 4 = strongly agree). • Managed the layoff process, outplacement program, and employee recall, including providing in-depth information to employees. For example, IDOP conducted 17 informational sessions at various Department of Human Services locations throughout the state. Sessions with the Department of Transportation are planned for April and May. • Consolidated billings for 9 different programs into a single agency communication. • Supported new Homeland Security/workplace safety activities. • Developed a retirement calculator to help agencies conduct workforce planning staffing decision guide. • Held the first Human Resource Conference for state government. • Developed the Certified Managers Program, a nationally recognized professional development and certification program for public managers. • Partnered with General Services, Inspections and Appeals, and Economic Development to sponsor seminars in Des Moines and Cedar Rapids for Targeted Small Businesses. • Acquired grant funds to install computer and software in IDOP reception area to assist applicants with visual impairments • Conducted job fairs, including one with Goodwill Industries, and began posting internships on IDOP Web site so interns can apply directly to departments. • Enhanced on-line and in-person information and training on benefits, performance evaluation, managing technology, and other human resource management topics. • Implemented new performance evaluation process and conducted 58 training sessions for 684 supervisors and managers • Conducted exit surveys for state employees to provide better information for retention. • Transitioned to new Deferred Compensation providers after conducting a provider selection that included financial evaluation of funds. Department of Personnel March 2002 2

4. highlights ofaccomplishmentscontinued managing costs • Successfully negotiated with AFSCME a 4-month wage concession in exchange for the early out program. Savings were estimated at approximately $10.5 million (with $6 million from the General Fund) for just the salary delay for AFSCME and noncontract employees. • Developed and administered the Early Out and Buy Out programs. • Achieved voluntary settlement of 2 of 3 collective bargaining agreements during difficult economic times. Successful at arbitration with a third union. •  Developed a grievance and arbitration database for better selection of arbitrators and improved consistency of responses to grievances. • Reduced proposed increase in health insurance rates for plan year 2000 from 45% to 22% for our largest carrier and further reduced plan year 2001 proposal to 8%. • Incorporated management of the SPOC health insurance contract into the State’s area of responsibility. • Incorporated plan design changes through the collective bargaining process, including elimination of carry over deductibles in most programs, introduced the Comprehensive Major Medical plan as a new concept, and incorporated the use of drug cards as a cost savings tool. • Constructed and implemented new workers' compensation support system, introduced a new business concept for workers' compensation claims administration by a third-party administrator, and transitioned staff in relation to new WC business model. • Worked with the Departments of Revenue and Finance, General Services, and Management to create an 11-point plan to improve state contracting for services. • Developed a staffing decision guide to help agencies determine when it is more economical and effective to hire staff or contract for services. continuing a commitment to efficiency • Reorganized the Department, reducing the number of divisions from 5 to 4. • Developed an automated, on-line application system , which reduced staff processing time and the turn-around time for providing information to agencies. • Planned for a transition of the department's information technology support to ITD. • Implemented a new quarterly reporting process to centrally collect from agencies information on affirmative action, equal opportunity employment, and diversity programs in order to meet the mandates of HF 579. • Implemented a new deferred compensation computer system based on an extensive Business Process Review. Department of Personnel March 2002 3

5. risks and resourcesmanaged by the personnel divisions in fiscal year ’01 $1.037 billion annual payroll expenditures 20,359 full-time, 288 part-time, and 1,297 temporary Executive Branch employees $240 million deferred compensation assets 16,352 enrolled $169.5 million employee health insurance premium 28,754 enrolled $11.2 million workers’ compensation over 4,000 new claims each year over 60,000 state employees covered 86 positions authorized but only 67 on staff $9.9 million annual employee dental insurance premium 28,554 enrolled $3.7 million long-term disability premium 23,000 enrolled $2.9 million flexible spending accounts in calendar year 2000 $1.4 million employee life insurance premium 23,000 enrolled Department of Personnel March 2002 4

6. impact of cuts on authorized and filled positions (personnel divisions) 95 90 85 80 Permanent Positions 75 70 65 60 7/11/00 9/4/01 3/5/02 92 87 86 Authorized 83 72 67 Filled Positions are permanent full-time, statutory, and exempt full-time. Numbers are from the Table of Authorized Positions for the identified dates. Department of Personnel March 2002 5

7. how cuts affect our work The Department of Personnel’s General Fund appropriations have been cut over 20% (approximately $1 million) since Fiscal Year ‘01. • cuts hit IDOP twice • fewer staff to do the work • workload increases as a result of layoffs and organizational redesign used by departments to manage their own cuts • result of cuts • increased legal risks to state • increased financial risks to state fewer staff + increased workload = increased risk Department of Personnel March 2002 6

8. fewer staff, increased workload, increased risk means… lack of personnel increases the state’s legal and financial risk • Unable to conduct Fair Labor Standards Act audits. • Fewer personnel officers to assist agencies in meeting labor policies and laws. • Each remaining personnel officer must assist an average of five agencies. • Insufficient administrative support to perform financial audits and accounting. each 1% in employee compensation equals over $10 million Compensation is set during contract negotiations. Sufficient staff is essential to the success of negotiations. based on today’s budget, every 1% increase in health insurance premiums results in $1.7 million in additional program costs Additional duties have had to be shifted to employees who manage the insurance costs and contracts due to cuts in other areas of the department. reduction in wellnessactivities can hurt productivity Just one day of sick leave for every employee equals the productivity of 75 employees. the deferred compensation program adds $240 million in resources managed by IDOP Program participation has almost doubled since 1999, with a significant portion of the growth occurring in the past year. workers’ compensation and long-term disability take valuable resources Loss control is the key to reducing costs and increasing employee productivity. These goals will be difficult to achieve without sufficient resources. Department of Personnel March 2002 7

9. our workload increases when agencies’ budgets are cut grievances 1000 836 722 682 582 500 553 FY '97 FY '98 FY '99 FY '00 FY '01 • In fiscal year ‘02, there were 510 grievances (as of March 8, 2002.) Because additional temporary or permanent layoffs may affect the frequency of filings during the remainder of the year, this number should not be used to project a total for ‘02. • Data prior to ‘02 include a small number of prohibited practice complaints and cases at law. These are now tracked separately. Department of Personnel March 2002 8

10. workload increases continued layoffplans (approved plans with layoffs occurring by Dec. 31, 2001) Every agency that needs to layoff employees must file a layoff plan for review by the Department of Personnel for compliance with the applicable union contract and state and federal labor laws. A separate layoff plan must be filed according to which union contract covers the affected positions. Separate plans are also filed for noncontract employees. In addition to the demand on labor relations staff, personnel officers spent on average twelve hours more each week this January compared to last January addressing labor relations issues. 100 57 50 17 16 15 00 10 9 FY '97 FY '98 FY '99 FY '00 FY '01 FY '02 (first 6 months only) layoffs (FTEs) in approved plans 750 (704 individual positions were affected.) 674.25 500 Counts include only those layoffs with an employment termination within the reporting period. 250 39.75 20.25 15 00 15 6.5 9 FY '97 FY '98 FY '99 FY '00 FY '01 FY '02 (to 03/05/02)

11. workload increases continued outplacement and recall programs for laid-off employees •  Fiscal year ’02 to date: • 1) 269 people on recall because of layoff • 2) 116 additional people on recall for class held because they bumped or took a reduction in hours • 3) Total people on recall to date: 385 • 4) Total currently on outplacement: 1 (Employee is on outplacement at the time of the report because the date of layoff had not yet occurred. People are moved from outplacement to recall on the date of layoff.) •  In the first group of 269, ALL submitted outplacement forms to be processed before their actual date of layoff. A total of 2,017 job class requests were reviewed and processed. •  This group of 269 then applied for a total of 1,802 job classes to be processed on their recall forms. • Recall/outplacement requests continue to arrive daily. These consist of new applications, requests to add or remove job titles, counties, or make other changes to their records. • This work was added to the existing workload of managing applications for 14,327 job titles. 10

12. workload increases continued new responsibility: early out/buy out (SF 551) program development and administration number of participants…………………………………………... 594 average age…………………………………………………………. 60 average years of service…………………………………………… 29 total years of service…………………………………………… 17,016 average annual salary……………………………………… $50,394 total annual salary……………………………………….. $29,933,757 A report on the program including savings and pay out costs will be available 03/15/02. collective bargaining status of participants collective bargaining eligible 364 61.27% supervisory 161 27.1% collective bargaining exempt 44 7.4% not organized 25 4.2% 11

13. employees contributing to deferred compensation 10900 12000 10649 10000 6719 8000 5584 6000 4000 2000 0 1999 2000 2001 2002 calendar year workload increases continued 12

14. other reductions made as result of cuts •  Workforce planning assistance to agencies was reduced at a time when the need for planning increased due to layoffs and the Early Out Program. •  Professional and legal publications, professional development, training and travel have virtually been eliminated, making it impossible for staff to stay current. •  All non-mandated publications, brochures, and communications, including a formal annual report, were stopped. •  The printed employee newsletter on benefits and other employee information was eliminated and reduced to a quarterly electronic version. If state employees do not have e-mail or Internet access, departments must distribute the information. •  There is not currently a proactive wellness program even though the benefits of keeping people well are clear. •  Attendance at Career Fairs (costs for registration fees, travel) was eliminated. This could also reduce intern applications. •  Advertising in print publications, such as “Super Sunday” ads, “Moving In” publication, and the “DSM Partnership” publication was eliminated. •  There are fewer staff available to assist agency management and personnel assistants in human resource issues ranging from layoffs to payroll audits. • A reduction in the number of personnel officers required those remaining to take on additional agencies. Personnel officers are, on average, responsible for five agencies. • We are currently planning to implement an additional cut of over $78,000 required by SF 2304. 13

15. fiscal year ’03 budget request: implementing SF 497 • Blue Book Reference:Page 274, package 4 • Was the request included in Governor’s budget? Partially. $100,000 was deducted from the savings in the Department of Administrative Services • Summary of request: To fund implementation of IPERS governances changes included in SF 497 • $114,837 General Fund appropriation • $ 0 Agency Billings • $ 0 Other sources • 0 FTEs No additional positions are being requested Why we made the request SF 497, passed by the 2001 Iowa General Assembly, established IPERS as an autonomous division of the Iowa Department of Personnel and authorized the creation of an executive director for IPERS, eliminating the oversight role of the Personnel Director. The changes take effect 07/01/02. We reported last year a financial impact on the personnel divisions due to the requirements in SF 497. This request provides funding to fully implement the legislative mandate. How IDOP will use the funds The funds will be used to pay the full salary, benefits, and related costs previously shared with IPERS for the director and director’s assistant, as well as one previously shared support position. Beginning in FY 2003, IPERS funds will no longer be available and these personnel will concentrate solely on responsibilities of the personnel divisions. This will allow the director to focus on long-range planning and management of the significant risk for programs under the auspices of the personnel divisions. Positive impact as a result of funding the request Operations and programs within the personnel divisions can continue at previously funded levels. Negative impact if the request is not funded $114,837 would need to be cut from the operations and administration functions of the personnel divisions. Additional layoffs and a reduction in services are certain, resulting in the elimination of a staff for the Human Resource Information Systems and an inability to support essential internal office functions. Program and process changes as a result of this funding SF 497 allows the Director of Personnel to focus on the operations of the personnel divisions and managing the risk of the multimillion dollar programs for which the department is responsible. Required statutory changes or other related actions This request provides funding to fully implement the policy changes made last year by the Legislature. No other changes are needed. 14

16. fiscal year ’03 budget request: labor relations • Blue Book Reference:Page 274, package 5 • Was the request included in Governor’s budget? No. • Summary of request: To fund a negotiator for collective bargaining contracts • $ 165,120.20 General Fund appropriation • $ 0 Agency Billings • $ 0 Other sources • 0 FTEs No additional FTE are being requested Why we made the request As a result of budget cuts, collective bargaining revenues collected from agencies must be used to fund ongoing labor relations responsibilities in the Department of Personnel. The department is unable to eliminate required labor relations responsibilities such as grievances, arbitrations, and reviewing layoff plans. Executive Branch employee salary increases and other compensation issues are determined through contract negotiations. How IDOP will use the funds Funds will be used in ’03 for a negotiator for the FY ‘03-‘05 contract period for the state's collective bargaining with the unions representing state employees, to print and distribute the contracts, for additional employee costs due to additional hours required for negotiations, and related negotiation expenses. Bargaining begins Fall 2002. Section 19A.1 of the Code of Iowa requires the Iowa Department of Personnel to lead the state's responsibility in the negotiation and administration of collective bargaining agreements. Positive impact as a result of funding the request There are multiple benefits to using a professional, outside negotiator, which has become standard practice in the public sector. Labor law and public sector negotiations have become so complicated that it takes someone who negotiates full-time to maintain the specialized knowledge and skill required for maximum effectiveness. Since every 1% increase in compensation equals approximately $10 million, both the savings, as well as the costs of mistakes, are significant. This approach also preserves the labor-management relationship that can be poisoned during negotiations. Management can then focus on contract administration. In addition, we will be able to continue with the current legal and labor relations staff who must keep up with increased demands for required activities. The workload has increased sharply and is projected to continue increasing as a result of layoffs and an increase in grievances. Each layoff plan filed by an agency is reviewed for compliance with applicable federal and state labor laws and union contracts. Mistakes that are made by agencies are caught and corrected, saving time and money by averting potential litigation and settlements. Legal and labor relations staff advise on issues involving the application of labor laws and provide other assistance. Negative impact if the request is not funded Since negotiations are required, money would need to be taken from other sources that have already received significant cuts if this is not funded. These cuts will leave the department without a way to provide support for accounting, purchasing, and other essential operations. Program and process changes as a result of this funding No change. Allows contract negotiations, labor and legal advice, and labor-management teambuilding to continue. Required statutory changes or other related actions None. 15

17. $180 10.5% $160 1.1% 13.7% $140 1.4% 5.8% 9.2% $120 4.7% -.2% 12.4% $100 Expenses in Millions of Dollars $80 $60 $40 $20 $0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Plan Year significant upcoming issues 1. temporary/permanent layoffs 2. funding early out installments 3. consolidation into a department of administrative services 4. inability to support essential internal administrative functions 5. centralized/decentralized human resource management in the agencies 6.health insurance 16.9% • Percentages indicate cost increase from preceding year. • Costs are somewhat understated as the amount non-central payroll systems expend to managed care organizations is not included. • Costs through 1995 are not actual but estimated in an effort to show fiscal year data on a calendar year basis. 7.a changing face of government 16

18. No state service can be delivered without employees. Getting the right person, in the right job, at the right time has never been more important. The productivity of all remaining employees is critical to our ability to serve Iowans. employees are the face of government full-time employees by fiscal year 21,000 20,359 20,500 20,246 20,000 19,617 19,500 • Executive Branch employee numbers do not include Fair Authority, Community-Based Corrections, or Board of Regents employees. • FY ‘02 count reflects employees on payroll as of 02/14/02. 19,114 18,958 19,000 18,646 18,640 18,442 18,506 18,500 18,000 17,500 17,000 FY 94 FY 95 FY 96 FY 97 FY 98 FY 99 FY 00 FY 01 FY 02 17