Friday, November 13, 2015

Planning for Proposed Changes to the FSLA Salary Level Test

Holidays are happy for some, depressing for others.  Proposed wage and salary changes may have the same effect, depending on whether you are receiving the increase or responsible to pay the increase. While no elected official wants to be perceived as Uncle Scrooge, government employers face a daunting challenge in meeting coming personnel cost increases. 

As previously reported, the United States Department of Labor issued proposed regulations in July of this year proposing to increase the salary level test for overtime exempt employees, executive, administrative and professional employees from $23,660.00 per year to $47,892.00 per year. Additionally, the proposed rules will provide a mechanism where the minimum salary level of $47,892.00 is adjusted annually to keep pace with inflation or overall wage increases. Many smaller jurisdictions employ managerial employees at salary amounts less than the proposed minimum amount of $47,892.00. Governmental employers will need to determine how the proposed change will impact local budgets, either by necessitating an increase in salaries paid or an increase in the amount of overtime paid to formerly exempt managerial, administrative and professional employees.

While this rule has not been finalized, the proposed rule is supported by the president and it is very likely to take effect prior to the end of the current fiscal year for most units of local government. This may necessitate an amended budget or an amended appropriation in order to provide for these increased personnel costs or other actions to minimize the potential increase in personnel costs. 

Local governmental units may also be impacted by the campaign to raise the federal minimum wage from $7.25 per hour to $15.00 per hour. There may also be attempts to raise the state minimum wage from $8.25 per hour to some higher amount in response to the National Fight for Fifteen Campaign. 

These efforts to raise compensation to workers may place local governmental employers in a difficult situation during a time when the state is facing its own fiscal difficulties. The issue is further complicated in those areas subject to property tax extension limitations since the consumer price index for the current tax levy was only eight tenths of one percent and the apparent increase in the consumer price index this year for next year’s levy is near zero.  This means that revenues from property taxes in PTELL counties will be nearly flat for two years, unless the local government has added new EAV by annexation, termination of TIF districts, or obtained voter approval to increase the limitation amounts.

Hopefully Springfield will provide local governments with some relief to help deal with coming increases in the cost of governmental operations.