Across Texas government, bonuses to state employees have grown

^{*Correction appended.}

You won’t find the word “bonus” in the financial statements of the state of Texas. But an increasing percentage of the Republican-run state’s 149,000 full-time employees have been deemed worthy of merit payments intended to reward outstanding service. Those payments have more than doubled, from $22 million in 2007 to an annual average of $52 million since 2012, according to records obtained by RealClearInvestigations. 

In the wake of the Great Recession, legislators and employee unions accept bonuses as a cheaper alternative to pay raises, which lock in larger bases for salaries and benefits, including pensions.

“Bonuses are given in lieu of across-the-board raises, because those upset department budgets,” said Tyler Sheldon, head of government relations for the Texas State Employees Union, which represents 11,000 employees. “This is a tricky way to get around that.”

Yet the bonuses have flowed like oil in Texas even as the state also gives steady raises to employees; a total of 7 percent across fiscal years in 2006-2007, 4 percent over 2008 and 2.5 percent in 2016. 

Some say the bonuses are an unintended – or inevitable – consequence of trying to apply competitive market principles to government.

“A lot of these things are put in place by Republicans who want to run government like a business and incentivize people for performance,” said Adam Andrzejewski, CEO of Open the Books, a Chicago-based watchdog group. “But what happens is that everyone happens to get a bonus because it’s government.”

Each of the state’s 170 agencies sets its own bonus system, and the percentage of employees receiving a bonus fluctuates by year and agency.

In 2013, roughly 12 percent of workers received a bonus. In 2016, the figure was about 16 percent.

And in some ways Texas is not alone. In states and cities around the U.S., employees strike deals for bonus payments as part of their compensation. City workers in Philadelphia last year struck a deal requiring the city to pay each worker a $2,000 bonus.  North Carolina’s GOP legislature has provided almost all state workers with “merit-based” bonuses in recent years.

But the bonuses in Philadelphia and North Carolina are small, one-time payments, unlike the generous outlays in Texas. There they can extend to five figures, and some workers get them annually. In some cases, workers get two payments a year.

In the past six years, Texas has paid $317 million in bonus payments and hiring bonuses, as well as bonus payments to health and human service department workers from a federal stipend for “high performance bonus” payments to workers.

The payments come under a state law covering recruitment and retention with little more than simple language allowing the practice.

RealClearInvestigations emailed or called each of the 15 members of the powerful state Senate Committee on Finance for comment on the practice, which the panel could stop if enough members conclude it is unwarranted spending.

The lone respondent was Republican state Sen. Kelly Hancock of North Richland Hills, who said he needs to learn more about the growth of the bonus payouts. “This is something where we want to stay out front of it,” Hancock said. ”There must be a reason for it.”

State departments that meet performance standards qualify for an exemption from reporting requirements, and that facilitates the bonuses.

Some employees, including those with six-figure salaries, routinely receive four-figure bonuses. Jena Abel, an attorney with the state Board of Nurse Examiners, was hired in 2008 and has received three bonuses since 2011, including a $6,541 payment in August. Mark Majek, operations director with the state Board of Nursing, received a bonus of $9,000, also in August.

He explained that the payments are made to individuals who meet specified achievement goals. “They are paid by both an agency policy – each agency has a policy – as well as according to state law that allows it,” said Majek, who has been with the state for 30 years and earns $150,007 a year. “Sometimes there is an across-the-board raise, and otherwise, the only way to raise salaries is [bonus] pay.”

The Texas Department of Transportation in 2014 handed out 10,266 bonuses totaling $20.5 million, including several five-figure payments. The agency has 12,064 employees – not the largest employee total in the state – and since 2012 has paid $37.9 million in bonuses to its workers.

The department's figures indicate in each of the past five years, a third of workers in the agency got a bonus. 

The agency did not respond to a request for an interview.

Included in the bonus payouts since 2012 is $30.2 million for prison guard recruits in the state’s remote regions, where the employee base in limited.

The stipend doesn’t seem to have made much of a difference in retaining guards. Last year, 26,000 officers, or 28 percent, left the ranks for other jobs compared with 23 percent the previous year.

“Clearly the retention bonus is not working, but they pay it anyway,” said Lance Lowery, a spokesman for the Texas correctional employees union, which would rather see base wages increase to lock in bigger future pay raises and benefits.

State agencies in Texas are allowed by statute to use a percentage of unused money at the end of each fiscal year for payments often cloaked as “incentives” or “merit pay.” But bonus is not a word that is used in most public documents, often making the money difficult to detect.

“Merit pay sounds so much better,” said Michael Granof, an accounting and public affairs professor at the University of Texas at Austin. “If you look at most municipal financial reports, they don’t even break out salaries.”

Public bonus payments can certainly be abused for corrupt purposes. In recent years they have helped land officials in legal trouble and provoked public outrage:

* In Pennsylvania, several lawmakers and their staffers were convicted on charges related to corruption between 2010 and 2012. Several served prison time for their role in the outlay of nearly $2 million in bonuses to staffers who worked on their campaigns.

* In Columbia, Missouri, a plan to give $1,000 bonuses to each city employee was deemed illegal by the city auditor. But the city manager there said the payments were a “one-time salary enhancement,” not bonuses.

* In California, National Guard enlistees were paid more than $233 million in bonuses and student loan repayments to achieve enlistment goals from 2004 to 2015. A ranking sergeant who had control of the bonus money with virtually no oversight was sentenced to 30 months in prison for her role in the scam.

* In Massachusetts, a new investigation into similar payments to state National Guard units nationwide is being conducted by the state. A New England NBC affiliate reports that Congress was aware of the payments to recruits and enlistees yet did nothing.

In recent years, Texas has operated with a budget shortfall projected to reach $8 billion by 2019 – undermining its reputation for fiscal health in more robust times.

“Texas is nowhere near what you would think in light of the tailwinds of the oil boom,” said Bill Bergman, director of research at Truth in Accounting, a Chicago-based national economic watchdog operation. Dropping oil prices have unexpectedly put the state in a bad spot, he said, and “paying bonuses to state employees based on the [state’s] ability to make money in good times is reflective of an overconfidence at the state level.”

Yet some on the state payroll seem immune from bonus hand-wringing. As chief investment officer of the Teacher Retirement System of Texas, Britt Harris, once chief executive of powerhouse investment firm Bridgewater Associates, received $349,827 in bonus payments in 2016 on top of his annual salary of $551,250. His bonus, like bonuses in several other investment departments, is dictated by returns on investments; in other words, it’s pay for performance. 

Harris left the fund in June to become CEO of the University of Texas Investment Management Company, another public-sector investment group.

Disclosure: The University of Texas at Austin has been a financial supporter of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.

Correction: An earlier version of this article misstated the fiscal year in which state employees received a 2.5 percent raise. It was 2016, not 2017.