In the past four months, nearly 5,300 NCDOT employees have received double-digit raises as high as 65 percent under a state budget provision that state lawmakers say the department has misinterpreted.
That special provision in the 2018 budget gave the North Carolina Department of Transportation flexibility to boost employee salaries that a study found were no longer competitive. But three budget writers say NCDOT leaders wrongly assumed the provision meant they could spend $152 million on the upgrades over two years. The lawmakers say they only intended to make roughly $35 million available.
Three budget chairmen – former Rep. Nelson Dollar, Rep. Linda Johnson and Sen. Brent Jackson – said the NCDOT was supposed to take only 2 percent of payroll expenses, which are roughly $700 million, as opposed to 2 percent of the roughly $3.75 billion equaling the state appropriation for highway funds.
So far, NCDOT has spent nearly $30 million on pay hikes for 7,000 employees. The annual cost of the increases given so far is $55 million. The increases began at the end of last year, pay data regularly collected by The News & Observer shows.
Now, lawmakers might dial back the spending.
While the majority of the double-digit raises are in the 10 to 29 percent range, more than 500 of them are higher, NCDOT pay data shows:
▪ Real-property agents saw raises of as much as 63 percent, as some went from roughly $32,500 to nearly $53,000.
▪ Seven ferry operations managers’ pay soared by more than half from the low $40,000 range to nearly $64,000.
▪ Two entry-level engineers making just over $49,000 began pulling down $71,000 salaries, a 45 percent increase.
More than 200 employees saw pay increases of $20,000 or more, while more than 2,000 workers saw their pay climb at least $10,000.
Those increases are on top of the 2 percent pay raise lawmakers gave to most state employees in last year’s budget.
Dollar, a former state representative who was a chief budget writer last year, called NCDOT’s pay-raise spending “unconscionable.” Dollar now works as a senior policy adviser to House Speaker Tim Moore.
“They took the good-faith provision that was provided by the General Assembly to address what everyone acknowledges was a need and they just decided on their own that they were going to apply that provision to the entirety,” said Dollar, a Cary Republican, in a phone interview. “Instead of spending $15 to $20 million they were going to spend around $75 million, and provide raises far, far exceeding anything that I have ever seen in state government.”
NCDOT officials stand by their interpretation of the provision. In a slide presentation to lawmakers earlier this month, Chief Operating Officer Bobby Lewis highlighted what he saw as the keyword laying out the provision’s intent: two percent of the total Highway and Highway Trust funds appropriation may be used “for” the payroll expenses of the department.
“That’s the only time I’ve had to meet with the whole group (of budget writers), and when I left I thought everything was fine,” Lewis said in a telephone interview.
He said in recent days, however, he’s learned that some of the budget writers are raising the issue.
Dollar and two other budget chairs interviewed by the N&O say the provision was intended to draw the 2 percent from payroll expenses. It reads: “For the 2018-2019 fiscal year and the 2019-2020 fiscal year, the sum equal to two percent of the total Highway Fund and Highway Trust Fund appropriation for the applicable fiscal year for the payroll expenses of the Department may be used for …”
Compared to market rates
The provision welled out of discussions in transportation committee meetings in the year leading up to the 2018 budget legislation, as NCDOT officials talked about how difficult it was to attract job candidates and retain employees because the pay had slipped far below the market.
One of the leaders of that committee, Rep. John Torbett, a Gaston County Republican who also leads the House appropriations subcommittee on transportation, said he supports NCDOT’s interpretation of the provision, but he is willing to revisit it.
“They wanted to go 2 percent of the budget as I understood,” he said in an interview. “To my knowledge currently it’s working.”
He said the pay increases were desperately needed to stem employee losses that were affecting transportation projects.
“We were losing valuable and key personnel inside DOT to the private sector,” Torbett said.
The NCDOT’s pay study, conducted by Mercer, a New York City-based consulting company, found that 89 percent of all positions reviewed were below the market rate at an average of 15 percent, with engineering and trade positions such as equipment operators among the least competitive. This was translating into a vacancy rate of about 20 percent, with roughly a quarter of the workforce nearing retirement.
In the NCDOT division that includes Wake, Durham and Johnston counties, the vacancy rate had reached 34 percent, or one in three positions, said Greer Beaty, a department spokeswoman.
Two years ago when the department sought applicants for 30 positions in a program for newly graduated engineers, there were 60 applicants, said Lewis, who has worked at NCDOT for 23 years. This year, those same 30 slots drew 300 applicants, he said.
“So we are able to pull good, qualified — the best potential applicants — so we can put them as part of our work force,” Lewis said.
The pay increases do not extend to four agencies within NCDOT that weren’t part of the study – the Division of Motor Vehicles, Global TransPark Authority, Ports Authority and Turnpike Authority.
Dollar, who had served as a budget chairman for six years, said Torbett would not have made the decision on what to give NCDOT. All pay decisions, Dollar said, are made by the budget chairmen with input from appropriations subcommittees.
Shift from transportation needs
He said the NCDOT’s handling of the provision creates a fairness issue for other state employees. As the state’s economy has climbed out of the Great Recession, lawmakers have brought up pay for teachers, troopers and corrections officers, but not as dramatically as what NCDOT is doing.
Those pay increases would also mean less money for transportation infrastructure, Dollar said. While the provision did not increase total NCDOT funding, under the department’s interpretation it shifts roughly $115 million from other needs.
Dollar said the NCDOT should have gotten clarification on the provision before moving forward. Dollar had worked as a human resources director for the Commerce Department from 1989 to 1992, and said he couldn’t recall another instance of state lawmakers providing that much pay flexibility in a departmental budget.
Legislative leaders didn’t give anyone much time to scrutinize the state budget before passing it. The Republicans ruled the House and Senate with supermajorities last year, and instead of each chamber producing its own version of a budget, the leaders rolled out a single budget bill in the form of a conference report that did not allow for amendments.
Longtime observers said they had never seen a budget done this way, and the lack of transparency drew heavy criticism. The 266-page bill passed largely along partisan lines, and survived Gov. Roy Cooper’s veto.
Rep. Johnson, a Kannapolis Republican, said follow-up reporting lawmakers had required on the provision caught the higher level of spending before all the money had been allocated.
“I’m aware of it and the committee is aware of it, and the solution is on its way,” Johnson said.
Sen. Jackson, a Sampson County Republican, said lawmakers will have to act soon before millions more are spent. He doubted anyone would go after raises that have already been handed out. The NCDOT is in the midst of a pay study for its DMV employees that could lead to more pay raises, and could provide more to other NCDOT employees to retain them.
“Our first priority, it’s really retention and recruitment,” Beaty said. “We’ve got to retain the intellectual capital of the organization.”