Wednesday, September 21, 2016

New overtime rule will have significant impact on Georgia’s budget

Georgia’s decision to join a 21-state lawsuit to stave off the U.S. Department of Labor’s new overtime rule is more than a matter of political philosophy.

If the new rule goes into effect as planned on December 1, a significant number of the current 137,000 state employees will become eligible for overtime as the threshold for exemption from overtime pay moves up from the current $455 to $913 per week.

In a study conducted in the first quarter of 2016, the average weekly wage for a state employee in Georgia stood at $868. Even with the 3 percent pay raise granted effective July 1 raising the average wage to $894, the average state employee's weekly wage would still fall $19 below the planned new weekly wage threshold meaning that thousands of state employees would become newly eligible for overtime pay.

Taking the data from the first quarter and adding 3 percent to the average rates, only eight counties – Carroll, Chatham, Clarke, Fulton, Heard, Lamar, Peach, and Richmond – show average wages for state employees exceeding the new exemption threshold of $913.

In contrast, in 135 counties the average state employee’s salary fell below the exemption threshold. Sixteen counties did not report wages for state employees separately.

Impact on state budget

The level of impact on Georgia’s budget depends on how the state reacts to the new rule.

In the statement announcing the lawsuit, Georgia Attorney General Sam Olens stated that

“The rule will force many state and local governments to substantially increase their employment costs. Some governments may be forced to eliminate some services and even lay off employees.”

The state could minimize impact by tightening up rules on overtime but this might impact state services, especially in times of emergencies such as ice storms or other natural disasters where state workers are expected to put in extra hours.

Georgia could also raise its personnel budget to cover increased overtime costs, but with other costs rising, such as Medicaid, this will make balancing the 2018 budget more difficult.

Georgia state employees relatively low paid compared to other industries

Part of the reason the state is so impacted by the new rule is that state employment is a relatively low paid form of work compared to a number of other important industries in Georgia.

For example, while state employees averaged $868 per week in the first quarter of 2016, the average weekly wages for construction workers was $1,009. Workers employed in the insurance industry in the state averaged $1,694 and those employed in the real estate industry averaged $1,110 per week.

Among the industries paying on average less than state employment were arts and entertainment ($602), retail ($565), hotels ($473), and food and drinking establishments ($313). Average pay excludes tips, which explains the relatively low pay in the food and drinking industry where many workers’ pay is subsidized by customer tipping.

Averaging $739 per week, local government workers in the state make slightly less than state employees.

If Georgia does not win the lawsuit and the new rule goes into effect December 1, the state will have to reconsider its current approach to human resources and make changes to ensure that personnel costs do not go up substantially to avoid a budget problem next year.

You can read the actual lawsuit that was filed in the U.S. District Court here.

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