Associated Press, Published November 11 2013
Local government pay jumps as Minnesota cap easedST. PAUL — Salaries of the top-paid employees in Minnesota city and county government have risen sharply since the state peeled back a restriction that made it rare for local personnel to earn more than the governor.
An analysis of salary data by The Associated Press found scores of local officials — city managers, police chiefs, parks directors, county health agents among them — now drawing bigger paychecks than the governor. In some cases, pay for the same position shot up more than $40,000 in about eight years.
The trend could factor into upcoming state salary decisions. A study of competitiveness of state executive branch pay is underway and could result in raises as soon as next year.
To some, the local increases are a market correction for positions where artificially compressed wages made it hard to attract and keep good people. To others, it's an alarming rate of growth that doesn't square with local governments’ frequent complaints that they are barely scraping by.
“My fears have come true,” said state Sen. Barb Goodwin, a Columbia Heights Democrat who as a House member voted against the 2005 change that made it easier to boost local pay. Back then, she was among those who worried it would set off a salary scramble in which local governments had to jack up pay because their neighbors were.
“It's inevitable,” she added. “If you could raise your own salary, you're going to, right? Wouldn't you?”
The AP gathered salary notices that are required of the 126 cities and counties with more than 15,000 residents. The annual notices list the base salaries of the three highest-paid employees.
The data show 145 city and county employees earn more than the governor's annual wage of $120,303. But the number is certainly higher because some employees make more than the governor but didn't crack their entity's top three. And base pay doesn't always tell the whole story because car allowances and some other compensation don't have to be included in the notices.
Minnesota had a rigid cap on local government salaries until 2005. Before then, cities and counties usually needed a state waiver to pay anyone more than 95 percent of the governor's annual wage, which has been the same since 1998. Not many requests were made — 58 in the past 15 years, with nearly two-thirds of those granted. School superintendents aren't bound by the cap.
When the law changed, city and county leaders got authority to pay their employees up to 110 percent of the governor's salary without special state consent. The new salary cap was also put on an automatic escalator tied to inflation. It reached $160,639 this year. But entities that previously got a state waiver could go even higher, and some have.
Laura Kushner, human resources director at the League of Minnesota Cities, said her organization's limited surveys of pay for the most visible city positions don't reflect dramatic growth when spread over many years. But no one should be surprised by the pattern, she said.
“Think of it as a spring,” she said. “If you're holding something down in normal circumstances that would be pushing up when you take that off there's going to be some increase.”
Kushner said the previous cap made it hard for Minnesota cities to compete in a national market for top managers who have to do a “very tough, fishbowl kind of job.” Minnesota's cap was the only one of its kind and other places were willing to pay $180,000 or more for key officers, she said.
Other supporters of the law change said the limit amounted to needless micromanaging by the state.
“Our local officials also respond to voters. If they set these salaries too high, they know where they can go to complain,” Democratic Rep. Tina Liebling of Rochester told her House colleagues before the final 2005 vote. “I'm sure they're not going to pay them any more than they think they have to keep that employee or to get a good employee.”
Liebling's hometown is a prime example of a city that heartily embraced the new flexibility. In 2002, city officials requested state clearance to exceed the salary cap for its city administrator and public utilities manager, voicing concerns that veterans in both spots could bolt for better pay elsewhere. The city asked that both officials be allowed to make $130,000 per year. They got permission to pay $120,000 and $122,000 respectively.
Once the cap was eased, base pay for both positions grew fast and is now $165,780. That puts them among the highest-paid local officials in Minnesota.
“In my 11 years as mayor I've never heard public or elected officials have any heartburn over it,” said Rochester Mayor Ardell Brede. He lavished praise on City Administrator Stevan Kvenvold, who has been in the post since 1979: “He is highly respected throughout the state and has done a marvelous job.”
A similar salary spike happened in St. Louis Park, where the suburban city manager's job went from $116,600 under the old cap to $160,639 in 2013.
Among county governments, medical positions carry the biggest paychecks, several exceeding $200,000. Medical examiners, pathologists and psychiatrist positions have generally been excluded from the standard salary cap. Populous counties — Dakota, Olmsted, Ramsey, Stearns and others — set pay for top-earning administrators above $160,000.
The pay environment in cities and counties has other implications. State executive branch managers were not freed from the old salary limits until this year, and the Department of Minnesota Management and Budget is studying whether its pay structure is out of line with comparable public and private sector positions. That could result in catch-up raises as soon as next year.
Department Commissioner Jim Schowalter said he doesn't begrudge local governments paying what they deem necessary to lock in high-performing employees with specialized skills. But it's added to pressure within his ranks.
“We're losing talent to local units of government, to businesses and can't restock or attract adequate replacements,” Schowalter said.
This spring, the Legislature gave the administration authority to raise pay for commissioners and other agency managers. Some will be able to earn up to 133 percent of the governor's pay. Schowalter said his department is proceeding cautiously.
“It's not going to be fast and no one should think just because of this flexibility state salaries will lurch upward by large amounts,” he said.
There will soon be more room at the top of the pay ladder: The governor's salary, the baseline for a host of salaries, goes up 3 percent to $123,912 in January 2015 and another 3 percent to $127,629 the year after.