Council Moves To Use ‘Emergency’ Reserves To Address Lagging Citywide Compensation

LEE’S SUMMIT, MO — The Lee’s Summit City Council appears poised to dip into the city’s emergency fund to overcome a wide pay gap for public employees.

Council members on Thursday adopted a “compensation philosophy” that the city should keep up with market values for employee pay.

They instructed staff to draft an ordinance to be voted on next month that would pull money from the city’s general fund reserve balance to increase employee salaries to at least match market averages identified in a recent compensation and benefits study.

That study, released last month, determined that the city pays its non-union employees on average 10 percent below the average of 12 other governmental and private organizations surveyed. The pay for the city’s police officers, fire fighters and other unionized employees is also lagging, although the amount varies by position.

The study also found that this wage gap has affected employee morale and made it harder to attract and retain good employees.

If approved, the proposed fix would cost almost $5 million in the first year. The city set aside $2 million in the current budget to address wage disparities, $370,000 of which was used in September to provide cost of living adjustments to employees not covered by collective bargaining agreements. That leaves about $1.6 million available to increase city salaries with the rest coming from the reserve fund balance.

Using the reserve fund to pay for employee salaries would require a change in city policy as the council currently isn’t allowed to use the fund balance for ongoing and routine operating expenditures. The fund is designed to help the city better prepare for financial emergencies and is required to hold enough money to cover the regular operating expenses of two average months.

Council members on Thursday rejected a more limited fix proposed by City Manager Steve Arbo and other city administrators. That plan would have adjusted pay scales higher and used the remaining $1.6 million in the budget to raise only the salaries of employees at the bottom of their particular pay scales to keep up.

“The management team said that we will be better off adopting the (pay) structure, acknowledging that there are things that still need to be improved,” Arbo said.

But some council members said that after years of complaints about employee pay, they wanted a more substantial solution now. In particular, they said they wanted a plan that dealt with “compression,” or the phenomenon where adjusting pay scales reduces the difference in pay between employees of different seniority.

They said they favored a plan that would increase almost all salaries so employees would remain in the same relative position even after their pay scales were increased.

“Over and over and over again, compensation has been looked at and it has been a Band-Aid,” said Councilman Craig Faith, who asked staff to consider using the fund balance. “I don’t think that that is what is going to be appealing and what is going to stop some of the bleeding in some of the departments that we have and the lack of ability we have to recruit in some of the departments.”

Complicating the situation is that the city is in the midst of negotiations with its represented employees and can’t unilaterally increase those salaries. Council members approved language making the additional revenue set aside for wages increases only “proposed” for the represented employees.

Even if the council approves the salary changes, the members will still have to come up with a way to maintain the higher pay scales in future years, which could require raising additional revenue or cutting other areas of the budget. In addition, the city general estimates annual merit-based raises of around 2 percent.

Jack Feldman, a city management analyst, explained to council members that the city’s current five-year model already estimates the city facing budget deficits beginning in 2022 at current and estimated spending and revenue levels.

Police Sgt. Rick Inglima, president of Fraternal Order of Police Lodge 50, advised the council to ignore those estimates, noting that the city’s finances have generally done better than expected in the final years of previous five-year plans, and “we need to invest in our people.”

“We understand being frugal, but the ‘doom and gloom’ scenarios are not healthy for a city, they’re not healthy policy, and after a while, they turn into the little boy who cried wolf, because they just don’t come to fruition,” Inglima said.

Arbo said the city has no incentive to hold back dollars that could go to employee salaries but that conservative budgeting has helped Lee’s Summit better weather past economic downturns without having to cut services or lay off significant numbers of employees.

“We’re not trying to overestimate; we’re actually trying to give realistic views,” he said.

From The Kansas City Star

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