Let me be so bold to say it straight out: “public finance officials deserve a pay raise.” If this issue is not addressed, a public service crisis could be looming.
In today’s public world, the demands in serving the public are becoming ever more onerous. With fewer allocated resources and greater public expectations, it’s a wonder we have individuals willing to serve in these positions.
Almost without exception, we see annual budgets go up but the salaries of elected and appointed finance professionals stay the same. Is that just a concern over the public’s reaction to pay raises? Or something else? When you consider that public finance professionals manage millions to billions of dollars, it’s astonishing how poorly they’re compensated.
Their level of responsibility is enormous. Day in, day out, finance professionals are handing audits; budgets; mandated local, state and federal reporting; attending public hearings; answering FOI requests; and taking complaint calls from all quarters. They’re expected to respond to greater social media interaction and be on call 24/7 during emergencies. The list goes on and on.
While those who serve the public are not in their positions for the money, they do deserve to be recognized for their work. They deserve competitive compensation. If they don’t get it, the private marketplace will almost surely lure them away or they will just retire early.
Few people realize that, on a national basis, the average pay for a public finance professional is at the bottom 10% of the professional pay scale. Personally, I find this unacceptable. It’s no surprise that millennials are unwilling to fill such roles now. If this trend continues over the next decade, it will create a crisis.
Clearly, we will need these younger people going forward. More than half of today’s public finance officials are over the age of 50 and more than half of that group are 60+.*
Here are my suggestions in addressing this issue:
1.) Community, business, and finance leaders need to take a public stand and lead, review, and adopt fair compensation levels. To remove any level of politics from the process, this should not be conducted by elected officials.
2.) Have an independent consultant evaluate local, state, and national compensation levels along with competitive salary ranges. In Upstate New York, I have recommended the services of the Burke Group, (Compensation Consulting Division), who helped evaluate leadership compensation for an area college and at a public authority. The results were well received, independent, and adopted with facts and numbers behind the findings and recommendations.
3.) Have states set standardized, competitive compensation guidelines and levels along with minimum standards to abide by. These should be based on entity size, population, and budget formulae and CPI increases should be automatic. This will allow for your entity to yield better candidates for the position that is being offered.
4.) Work to build up our “bench strength,” with a real push to attract and pay new talent. This is necessary if we’re to avoid a shortfall in filling positions being left by retirements. The need for signing bonuses and competitive scholarship opportunities through various finance associations may be necessary, along with a long-term commitment. Keep in mind that the average length of time a millennial will stay in a position will likely be two to three years if there is not a path to growth and greater responsibilities. If compensation levels are not addressed, the pool of talent to pick from will be slim, coupled to lower skill levels. That will lead to a crisis for public entities like yours.
5.) Where will the money come from to provide these higher wages? New sources of revenue and savings from an improving economy and efficiencies in new technologies, along with new income being generated by higher interest rates, should go a long way.
This is not an easy topic to discuss publicly, but there is no option if we are to protect public interests, accountability, and funds.
At threeplusone, we can help you address this issue. First, by taking a stand, which this blog’s purpose serves. Second, in reviewing the issue, the ability to generate the funds necessary to pay public officials more can come from the additional interest income on all cash as a result of our liquidity analysis and data. Our proprietary liquidity models have proven over and over that, if all cash is put to work, the increase in revenue a public entity can be from tens to hundreds of thousands of dollars, perhaps even millions. In doing so, no additional stress on a public budget would be required in fulfilling such a request.
Entities should make their constituents aware of the problems in attracting—and retaining—talented financial professionals to public service careers. Properly communicating their initiatives to competitively pay public finance officials should be a successful path to avoid an unnecessary crisis, while protecting the public trust and its funds.
* ”Governing, By the Numbers,” (Public Sector Has Some of Oldest Workers Set to Retire) August 2013. Bureau of Labor Statistics/Survey2018.