Recommendations of the Texas Comptroller

Develop a Statewide Planning Process to Address State Workforce Challenges

Summary

Texas state agencies face considerable challenges in recruiting and retaining qualified employees. State agencies should adopt a more sophisticated method of planning for their workforce needs. Moreover, state laws restricting agencies’ use of a major talent pool—state retirees—should be modified to expand their employment options.

Background

Up to 10 percent of the state’s workforce will be eligible for retirement within the next five years, and they will walk away with vast amounts of the state’s intellectual capital if efforts are not made to transfer their expertise to their successors. Human resources experts indicate that such losses of institutional memory may be “among the biggest damaging influences on productivity and competitiveness in companies today.”[1]

Texas’ workforce challenges are already severe and are likely to become more so over the next decade:

• State government’s turnover rates—the percentage of the workforce annually leaving state employment—have edged steadily upward in recent years, from 11.8 percent in fiscal 1993 to 17.6 percent in fiscal 1999. The Texas State Auditor’s Office estimates the total cost of employee turnover in fiscal 1999 at between $127 million and $254 million.[2] These costs stem from having to post new positions, train newly-hired staff and conduct other activities such as hiring temporary employees.
  For some critical state positions, turnover rates are especially high, due to the difficult nature of the work, its perceived undesirability, or the high demand for similar skills in the private sector. Prison guards, protective services caseworkers, mental health and mental retardation workers, and licensed vocational nurses all experience unusually high turnover rates. The State Office of Risk Management recently reported to the House Appropriations Subcommittee on Criminal Justice that it experienced a 41 percent turnover rate among its claims adjusters in fiscal 1999, due primarily to the high demand for such expertise in the private sector.[3]
• In the late 1990s, an alarming number of information technology workers left state government for private employment. This drain on critical technical resources is occurring at a time when computer and data processing services is the nation’s fastest-growing industry in terms of employment.[4]
• The average Texas state employee is 41, while the average US worker was 33 in 1999.[5] The Comptroller’s office estimates that, within the next three years alone, 27 percent of its workforce will be eligible for retirement. Of the state’s 153,800 classified positions, nearly 16,000 will be eligible to retire between 2001 and 2005.[6]
• The labor market in Texas and nationwide remains tight, with unemployment at its lowest since the mid-1970s.[7]

Many public officials believe that Texas will continue to face high turnover, until state salaries become competitive with private sector positions. While salaries play an important role in recruiting and retaining employees, the State Auditor’s Office reports that only 7 percent of departing state workers cite salary as a factor in their departure.[8]

Total Workforce Planning

Texas agencies generally request money for additional staffing through the state’s appropriations process, based on expected increases in work volume. Unfortunately, such planning does not always serve state agencies well because it assumes that funding and candidates with the necessary skills will always be available. Moreover, fiscal decision-makers are becoming increasingly reluctant to accept that agencies need to add staff on the basis of projected increases in workload alone. Instead, agencies are expected to find ways to perform their functions differently, to increase the productivity of their existing workforce—in effect, to do more with less.

Some agencies are outsourcing functions due to cost concerns or continuing difficulties in filling certain positions. Outsourcing engenders a need for different types of workers. For example, a move from delivering social services directly to purchasing such services calls for a shift away from service workers to those capable of negotiating and contracting, monitoring, and managing the delivery of services by private vendors.

In some cases, agencies simply cannot recruit an adequate number of personnel possessing the skills they have relied upon in the past. The pressure of personnel shortages often forces agencies to find alternative ways to meet their statutory mission.

The State of Minnesota has developed a process that agencies can use to conduct a strategic staffing analysis. The process calls for organizations to address staffing in the context of strategic and operational plans and includes “all managed movement into, around, and out of an organization (e.g., recruitment, hiring, promotion, transfer, redeployment, attrition, retention, etc.).”[9] Strategic staffing analysis considers not simply the workers that will be needed but their availability in the labor market, and the training or other activities needed to employ them effectively and efficiently.

Strategic staffing analyses of this kind help improve the agency’s ability to recruit and develop the staff they need; improve their use of the existing workforce; adapt different business practices when traditional staffing approaches become unrealistic; and incorporate the use of partnerships, consultants, or shared services when staffing shortages require creative solutions.

The strategic staffing approach begins with a review of the organization’s key mission, goals, and objectives. With these factors in mind, the organization then must identify the staffing implications of critical business issues. These may include such factors as new statutory mandates, a significant increase in the number of clients eligible to receive a particular service, or increased turnover or performance problems among existing staff. Once the most critical issues are identified, the organization collects information about the supply and demand of the sort of workers it needs, as well as historical trend information on its past hires, the length of their employment, and any other information that could help guide decision-making.

Using such data, the organization can identify its critical staffing challenges and develop a plan of action to meet them. The analysis can spur changes ranging from modified requirements for individual positions to agencywide reorganizations or major outsourcing arrangements.

Succession Planning and Knowledge Transfer

One critical component of workforce planning involves the creation of a mechanism for replacing critical staff members who leave the organization. Known as succession planning, this process typically involves identifying and analyzing key positions; assessing possible candidates for each position; determining the extent to which the candidates already possess the needed skills; and ensuring that plans exist to make each candidate ready to assume the position in the future.

GE Lighting has undergone a rigorous approach for assessing its human resources needs and conducting succession planning. Twice a year, the organization examines its future need for talent based on its projected business needs and current workforce.[10] Candidates for future positions are identified and begin a training and knowledge transfer process to prepare them for future openings.

Such succession planning must be undertaken with a clear understanding—and signed agreements—that participation in training for different positions does not constitute a guarantee that the jobs will be offered, and that qualified candidates will be offered positions that open up based on individual merit.

Use of Retirees

Facing an aging workforce and continuing losses of seasoned employees, Texas state agencies must seek talent in areas that have been relatively untapped in the past. One of the most viable sources of such candidates is the state’s large pool of government retirees, who possess valuable institutional knowledge and typically do not need as much training as new hires. Moreover, retired workers save taxpayer dollars since they do not receive additional retirement benefits or insurance when rehired.

Under current law, individuals who leave a state agency cannot contract with that agency for one year. Workers can retire from an agency and be rehired by that agency after a month, but state law limits the salary they can be paid and the length of time that they can be reemployed while drawing their retirement benefits. At present, a retiree who works more than nine months in a single year loses his or her annuity payments for the last three months of the year, a significant disincentive. Similarly, current law caps rehired retirees’ salary to the amount they received for their last 12 months of pre-retirement employment or $60,000, whichever is less.[11]

Laws restricting the employment of retirees are designed to limit a practice disparagingly referred to as “double dipping,” whereby an individual draws both a retirement pension and a state salary. The benefits of this law, however, are unclear, and its disadvantage is that it unnecessarily restricts agencies from making hiring decisions and using their salary appropriations with their normal discretion.

Recommendations

A. Texas state agencies should conduct strategic staffing analyses and develop workforce plans to address critical staffing, training, and knowledge-transfer needs.

The Legislative Budget Board (LBB) oversees the agency strategic planning process and could provide a standard reporting approach to assist agencies in carrying out this requirement. The LBB could use staffing analyses to make informed budgetary decisions. Just as importantly, state agencies can use the data generated in strategic planning to develop specific operational solutions for enlisting a qualified workforce. Planning models used in other states could be used by agencies as examples. Much information that would be useful for workforce planning is already collected and reported in agency strategic plans and legislative appropriations requests. The planning process could be improved by examining current recruiting efforts and training and support needs, and determining what knowledge should be transferred before the departure of critical staff.

B. State law should be amended to eliminate the nine-month-per-year limitation on the length of time a retired employee may work for the state and still draw an annuity. Furthermore, legal provisions limiting a retired employee’s compensation to the lesser of $60,000 or the most recent 12 months’ salary should be removed from state law.

e-Texas is an initiative of Carole Keeton Rylander, Texas Comptroller of Public Accounts
Post Office Box 13528, Capitol Station
Austin, Texas

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