1. TOTAL COMPENSATION WHAT EVERY ‘BUDGETEER’ NEEDS TO KNOW GFOAz Budget Forum October 21, 2011 Page 1

2. Agenda 2  HR Terms and Concepts Margie Ward, Employee Benefits Administrator City of Mesa  Personnel Budgeting Case Study Dawn Lang, Assistant Director for Finance City of Chandler  Questions / Panel Discussion

3. Total Rewards 3  Compensation + Rewards and Recognition + Benefits  Distribution of Limited Dollars

4. Compensation 4  Base Pay Range vs. grade  Variable Pay Overtime Shift Differential Call-back Stand-by  Incentive Pay  Longevity Pay

5. Base Pay Plans 5  Step  Traditionally used in labor agreements  Merit  Pay for performance environment  Pay pool distributed based on measurable goals  Cost of Living  Annual increase  Broadbanding  Consolidation of several traditional grades into each band

6. Budgeting for Compensation 6  Historical spend  By Employee  Full Time Equivalents (FTE’s)  Position Control  Each position has unique ID  Tracks position, not employee  Each position can have a budgeted cost  Can assign multiple employees to a position  Can assign one employee to multiple positions

7. Rewards and Recognition 7  Public acknowledgement  Training and development opportunities  Cash bonus  Gift cards  Time off  Special parking space

8. Benefits 8  Group Insurance  Leave  Pension  Deferred Compensation  Retiree health insurance

9. Funding Bases for Benefits  Fully funded  Least risk  Least flexibility  Least administration  Least cost effective  Self funded  Least risk  Least flexibility  Least administration  Least cost effective  Self administered  Least risk  Least flexibility  Least administration  Least cost effective 9 Outside AdministrationInternal Administration

10. Crafting WIN/WIN Benefits 10  Saving money for the City and enhancing benefits  The power of procurement  Value added benefits  Legal and financial EAP services  Incentivizing generic use  24/7 Nurse line  Voluntary benefits  Wellness programs  Discount programs

11. Cost Containment 11  Identify high cost areas  Make plan design changes  Maximize in-network use  Audit providers  Medical management  Comply with reinsurance (stop-loss) provisions

12. Case Study 12 Personnel Budgeting Maximize Benefits While Minimizing Costs “Looking Past the Challenges to Find the Opportunities”

13. Personnel Budgeting 13  Personnel Budget is Significant  70% of Total Ongoing General Fund Operating Budget  47% of Personnel is Sworn Public Safety  How do we Maintain or Minimize Cost Increases in Personnel?  Understand Each Type of Wage and Benefit  Determine Types with Controllable Costs  Collaborate with HR and Payroll to Effectively Budget

14. Wage Considerations 14  Increases to Ongoing Wages  COLA / Merit or Step Increases  Competition for Skilled Workforce  Union Contracts  Political Expectations  Maintain Equity Between Job Groups

15. Benefit Considerations 15  Increases to Ongoing Benefits  Retirement (ASRS, PSPRS & EORP)  Medical, Dental, Life  Worker’s Compensation  Short Term Disability  Retirement Health Savings  Deferred Compensation

16. Budget, HR, and Payroll Relationship 16  Meet & Confer Involvement  Costing and System Impacts  Transparency and Education  Understand MOU Agreements for Budget/Payroll  Budget and Forecast for Each Employee Group  Interpret MOU Changes  Detail Wage/Benefits by Employee Groups Annually

17. Budget, HR, and Payroll Relationship 17  Details Wage Items for Each Job Group or Union  Details Benefits for Each Job Group or Union  Budget Compiles, HR and Payroll Agree

18. Personnel Budgeting 18  Analyze Actual Payroll per Employee Group  Tighten up Budgets Where Appropriate Vacancy Budgeting Benefit Budgeting  Determine Benefits Where Savings can be Achieved  Health Care Benefit Became Focus Cost/Share Arrangement Minimize Rising Health Care Costs Sustain Over Time

19. Rising Costs of Health Care Benefits 19  Fully Funded Plan  At Mercy of Insurance Company  In Business to Make a Profit  Claim Data Compared Nationally  Cost / Share Arrangement  90% Employer - 10% Employee Premium Split  Chandler Employees Paid the Lowest Amount for the HMO Plan as Compared to Other Valley Cities

20. How to Address Rising Costs 20  Take Position of Consumer by Shifting to Self-Funded  Negotiate Specifically on City Data  2% State Tax no Longer Required  Reduce Employer Share of Health Benefit Costs  Create Plan to Meet Goals

21. Process to Implement Change 21  Include the Right People in the Process  Hired Medical Plan Experts and Actuary  Created Health Care Task Force  Start Early, Time Intensive  Education and Transparency  RFP for Health Care Provider and Plan Type  Recommendation to Council by Health Care Task Force

22. Medical Cost Savings Achieved 22  Sustainable Cost Measures  Self-Funded Medical Plan in January of 2011 Used Fund Balance to Fund Reserves and Subsidize Premium to Mitigate Impact to Employees  Transition to 80/20 by January of 2013  Health & Wellness Program Implemented  $3.5 Million in General Fund Ongoing Savings  Equal to: 4% Across-the Board Wage Reduction 10 Furlough Days per Year for Each Employee 43 Positions

23. Questions? 23 Open for Discussion