Analysis Item 2: Judicial Department Compensation Plan Changes

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1 Analysis Item 2: Judicial Department Compensation Plan Changes Analyst: Steven Bender Request: Acknowledge receipt of a report on compensation plan changes for the biennium. Recommendation: Acknowledge receipt of the report. Analysis: The Oregon Judicial Department (OJD) is reporting on compensation plan changes for the biennium, prior to implementing the changes, as required under ORS (1). The Chief Justice of the Supreme Court, as administrative head of the Oregon Judicial Department, is authorized to establish the personnel plan for OJD employees. Compensation levels for statutory judges, however, are established in statute. The biennium compensation plan for OJD employees includes the following changes from the prior biennium. These changes match the compensation plan changes for executive branch employees relating to annual performance pay increases and insurance identified in Section A of the Department of Administrative Service (DAS) report on executive branch compensation plan changes (Item 26 on the committee agenda), and the 1% cost-of-living increase, effective on June 15, 2018, adopted for Executive Service, Unclassified Excluded and Management Service employees, as identified in Section H of the DAS report. Note that the OJD employee compensation plan changes do not include the elimination of the 6% PERS Pick-Up and associated 6.95% salary increase for PERS eligible employees included in the executive branch and Public Defense Services Commission compensation plans. OJD compensation plan changes include: Merit increases are provided to eligible employees. (Funding for this component of the compensation plan, totaling $6.14 million General Fund and $6.44 million total funds, has already been included in the OJD legislatively adopted budget. Funding for merit increases was generally not included in executive branch agency budgets, however.) A 1% cost-of-living salary increase is awarded, effective June 15, This adjustment is the same as the cost-of-living increase provided to the executive branch s Executive Service, Unclassified Excluded and Management Service employees. The plan continues the 99% contribution rate for health care insurance premium costs for employees who choose a lower-cost medical plan, and the 95% contribution rate for employees choosing higher-cost medical plans. The General Fund impact of the cost-of-living adjustment will total approximately $1.16 million in the biennium, and approximately $2.1 million in the biennium. The Other Funds impact of these increases will total approximately $88,000 in and $169,000 in In addition, OJD is reviewing eliminating the 6% PERS Pick-Up and awarding an associated 6.95% salary increase for PERS eligible employees, as is included in executive branch compensation plans. Including this provision for the Judicial Department would support requirements for reasonable Legislative Fiscal Office Interim Joint Committee on Ways and Means November 2017

2 conformity to the general salary structure of the state. This action would generate additional costs to the Department s budget, however, and a decision on this action has not yet been made. OJD would need to present an additional compensation plan change report, if such an action was to be implemented. OJD also provided information on the General Fund impact of a cost-of-living adjustment to judges salaries. Legislation enacted in the 2015 session, now codified as ORS , adjusts statutory judicial salaries to match any positive cost-of-living adjustments granted to executive branch Management Service employees. Previously, the statutory judicial salaries were not adjusted for cost-of-living adjustments. The ORS provision will increase judicial salaries by 1%, effective June 15, The resulting statutory salary levels for judges are displayed in the following table: Statutory Judge Salaries Effective 6/15/18 Chief Justice $133,556 $138,556 $141,672 $150,572 $152,076 Supreme Court Justices $130,688 $135,688 $138,744 $147,560 $149,040 Court of Appeals Chief Judge $130,688 $135,688 $138,744 $147,560 $149,040 Court of Appeals Judges $127,820 $132,820 $135,804 $144,536 $145,980 Tax Court Judge $123,164 $128,164 $131,052 $139,652 $141,048 Circuit Court Judges $119,468 $124,468 $127,272 $135,776 $137,136 The General Fund impact of the cost-of-living adjustment for judges totals approximately $368,000 in the biennium, and $706,000 in Judges salaries will not be further adjusted for the 6.95% salary increase granted to Management Service employees on February 1, This 2019 salary increase in the Management Service compensation plan is being awarded in combination with the elimination of the employer 6% PERS pick-up. It is not included as a cost-of-living adjustment, and therefore the judicial salary adjustments required by ORS do not apply. The Legislative Fiscal Office recommends acknowledging receipt of the report. Legislative Fiscal Office Interim Joint Committee on Ways and Means November 2017

3 2 Oregon Judicial Department Lisper Request: Report on the Oregon Judicial Department (OJD) compensation plan changes for agency staff and elected judicial positions for the biennium. Recommendation: The Judicial Branch is not under executive budgetary authority. Discussion: OJD is reporting on compensation plan changes for employees and judges, effective June 15, Under ORS 8.105(1), OJD is to report compensation plan changes to the Legislative Assembly. Under ORS , the salary plan for exempt services employees must be within reasonable conformity with the general salary structure of the state. OJD is reporting the following adjustments to employees and judges compensation plan: Increase salary rates by 1.0 percent, effective June 15, 2018, payable on July 1, Continue the same health care premium plan benefits adopted in the prior biennium, which matches the Executive Branch employees. OJD will contribute 99 percent of insurance premiums costs for employees electing a low-cost medical plan for the 2018 plan year and 95 percent for those choosing a higher cost plan. The first year benefits mirror the Executive Branch benefits for management service, executive service and unrepresented staff as announced by the Governor on October 3, The cost of benefits and cost of living adjustment (COLA) for OJD employees is estimated at $1.2 million General Fund and $87,800 Other Funds for the biennium and $2.1 million General Fund and $168,600 for the biennium. The cost of benefits and COLA for judges is estimated at $367,560 General Fund for the biennium and $705,710 General Fund for the biennium. For the second year of benefits, OJD is considering Governor Brown s PERS proposal for Executive Branch employees. The agency is reviewing the mandates of reasonable conformity as indicated under ORS Governor Brown s proposal will no longer pick-up the employee 6.0 percent contribution to PERS, for management service and unpresented employees within the Executive Branch, effective February 1, To offset this change, all compensation salary rates for PERS participating members will increase by 6.95 percent beginning February 1, 2019 and 6.0 percent of that increase will be the employee s pre-tax contribution to their PERS benefit program. Department of Administrative Services 2-i November 15, 2017

4 OREGON JUDICIAL DEPARTMENT Office of the State Court Administrator October 16, 2017 (SENT BY ) The Honorable Senator Richard Devlin, Co-Chair The Honorable Representative Nancy Nathanson, Co-Chair Interim Joint Committee on Ways and Means 900 Court Street NE H-178 State Capitol Salem, OR Re: November 2017 OJD Compensation Plan Changes Report for the Biennium Dear Co-Chairpersons: Nature of Request The Oregon Judicial Department (OJD) requests that you acknowledge receipt of this report on prospective OJD compensation plan changes for staff for the biennium. This report is made pursuant to ORS (1) which directs OJD to submit any changes to its compensation plan to the Legislative Assembly or one of its interim budget entities. This report also includes information on prospective changes to judicial compensation to be implemented as provided by ORS OJD Compensation Plan Actions - Staff The Chief Justice of the Oregon Supreme Court is the administrative head of the Oregon Judicial Department, the state-funded unified court system. ORS directs the Chief Justice to establish and maintain a personnel plan for OJD employees. The statewide OJD personnel plan includes the classification and compensation structure for OJD employees who are in the exempt service. Under ORS , the salary plan for exempt service employees must be in reasonable conformity with the general salary structure of the state. In the months since the 2017 legislative session adjourned, the Governor announced her compensation plan changes for unrepresented and management service employees in the executive branch. Kingsley W. Click, State Court Administrator Supreme Court Building 1163 State Street Salem, Oregon FAX Oregon Relay Service - 711

5 The Honorable Senator Richard Devlin, Co-Chair The Honorable Representative Nancy Nathanson, Co-Chair Page 2 October 16, 2017 The Chief Justice has elected to follow the Governor s timing and percentage for employees in the unrepresented and management service to maintain reasonable conformity for the cost-ofliving (COLA) aspect of the plan; therefore, he has approved a 1.0 percent Cost-of-Living Adjustment (COLA) for OJD employees effective June 15, 2018, payable July 1, The anticipated increase in cost associated with the staff 1.0 percent COLA is summarized below. It is anticipated that funding may be addressed through the legislative emergency board reservation for state employee compensation plan changes. Biennium General Fund Impact Other Funds Impact Biennium $1.16 million $87, Biennium $2.10 million $168,600 OJD will also continue the same health care premium plan benefits adopted in the prior biennium which matches the executive branch for the 2018 plan year for its unrepresented and management employees. Under such plan, OJD will contribute 99 percent of insurance premium costs for employees who choose a lower-cost medical plan for the 2018 plan, and 95 percent for those who choose a higher-cost plan. Compensation Actions Judges ORS does not apply to reporting of the salaries of elected judicial positions, as they are not employees subject to the Chief Justice s state OJD Employee Compensation plan. However, OJD is reporting prospective Judicial Compensation changes made pursuant to ORS , which provides: (1) Annual salaries of judges of the Supreme Court, the Court of Appeals, circuit courts and the Oregon Tax Court established under ORS , , and shall be adjusted to reflect the same percentage amount of any positive cost of living adjustment granted to employees in the management service in the executive department. (2) The adjustment described in subsection (1) of this section shall occur at the same time that salaries of employees in the management service in the executive department are adjusted. (3) As used in this section: (a) Executive department has the meaning given that term in ORS (b) Management service means the management service as provided in ORS On October 3, 2017, Governor Brown announced a 1.0 percent COLA for management service staff, effective June 15, 2018 (payable July 1, 2018); therefore, by law, the annual salaries for judges will be increased by the same percentage amount (1.0 percent), effective on the same date. The anticipated increase in cost associated with the judicial COLA is summarized below. Biennium General Fund Impact Biennium $367, Biennium $705,710

6 The Honorable Senator Richard Devlin, Co-Chair The Honorable Representative Nancy Nathanson, Co-Chair Page 3 October 16, 2017 PERS Pick-up (Pending Review): Governor Brown also announced that the state (executive branch) will no longer pick-up the employee 6% contribution to PERS and that, instead, management service and unrepresented employees in the executive branch will begin making the 6% contribution via a payroll deduction beginning February 1, Under this plan, employee contributions will be treated as pre-tax contributions pursuant to Internal Revenue Service Section 414(h)(2). As an offset to this change, all compensation plan salary rates for PERS participating members (of the affected employees) will increase by 6.95% beginning February 1, The Oregon Judicial Department is considering this proposal in reviewing the mandates of reasonable conformity. This possible future action is not presently funded in the OJD budget, and the Department would have to return to the Legislature in the future or include as part of the biennial budget build to proceed with such a change if required. Action Requested The Oregon Judicial Department requests acknowledgment of this report of the changes announced as provided in ORS (1) and ORS Legislation Affected None Sincerely, Kingsley W. Click State Court Administrator KC:ma/17eKC015ma ec: Chief Justice Thomas A. Balmer David Moon, OJD