High turnover is becoming a "crisis" that costs the Missouri Department of Transportation more than $30 million a year, department Director Patrick McKenna said during a budget presentation Thursday.
McKenna and MoDOT Chief Financial Officer Brenda Morris proposed several ideas to help hire new employees and convince them to stay as they presented their budget request to the House Budget Committee, including pay raises and a novel plan to let employees take a higher salary in exchange for lower benefits.
MoDOT turned over 13.27 percent of its employees in 2019, McKenna said. The department lost more than 550 employees in 2018, more than 600 in 2019, and it expects to lose more than 700 this year.
That turnover costs the department $30 million-$35 million a year in total, McKenna said.
Anything that reduces that figure is a good investment, he said.
"We understand this is not just MoDOT, it's other agencies as well, but we see these rates, for us, as a crisis," McKenna said. "We will not be able to perform the way we perform today in the future."
MoDOT's employees, including engineers, maintenance workers, CDL drivers and heavy equipment operators, are highly skilled and in high demand, McKenna said. There are hard costs that come with turnover, like paying off leave balances. However, a lot of the cost is in losing the skills and knowledge of experienced employees and the cost of training their replacements.
Finding replacements is becoming a challenge, too. Last year was the worst year MoDOT has ever had recruiting from Missouri schools, McKenna said. Of all the offers they made to civil engineering graduates, only 22 percent accepted.
"If we don't have skilled engineers and trained professionals in these seats, the work that we do will suffer, the service we provide will suffer," he said.
Raising pay is a big component of keeping employees around. McKenna said nearly 15 percent of MoDOT employees could be eligible for Supplemental Nutrition Assistance Program benefits, with 774 employees earning less than $2,665 per month. A little more than 13 percent of MoDOT employees work multiple jobs, and that doesn't include farm labor, which many MoDOT employees do, McKenna said.
McKenna reports to the Missouri Highway and Transportation Commission, and its members, largely volunteers from private industry, have told him he needs to get turnover under control, he said. Some of them see a simple solution: taking money out of the construction program to give raises to employees, he added.
The problem is construction is where MoDOT gets the most bang for its buck with federal funds, which are available to match many construction projects but not to match most employee pay, he said.
The department and Gov. Mike Parson were on the same page for a few ideas from a consultant's report on how MoDOT can lower turnover, including:
$1.7 million for a one-step pay increase for less tenured employees starting in 2020.
$2.8 million for a three-year plan to raise pay for jobs that are least competitive with the market and have the highest rates of turnover.
$500,000 to raise pay for emergency weather responders, such as snow plow drivers and employees who respond to flooding.
They also agreed on requesting $4.9 million to continue a 3 percent cost of living adjustment that went into effect last year for all state employees but was only funded for half a year.
One area the governor didn't agree was MoDOT's request of $1.5 million for a pilot program to let new employees take a higher salary in exchange for reduced benefits. The program wouldn't cost taxpayers anything; it would just move money set aside for benefits into salaries, he said.
The program is meant to address MoDOT's struggles recruiting new college graduates, McKenna said. Many of them are choosing private-sector jobs with higher pay and less benefits, he said. Giving them more cash up front helps them pay down student loan debt, and it's a trade-off young graduates could be more willing to take if they're still on their parents' health insurance plan, McKenna said.
"Let's face it, we have a civil engineer getting out of school with $40,000 or $50,000 in student loan debt; they cannot repay those student loans with their retirement or health plans," he said.
McKenna said he understands why Parson wouldn't include it in his budget. It's an "outside the box" concept, and the department expected it would take a few budget cycles to convince lawmakers. It would also require changes to state law to cut mandated ties between pay and benefits, he said.
Some lawmakers on the budget committee showed support for the idea, with state Rep. Peter Merideth, D-St. Louis, calling it an "innovative incentive program that might actually work."
Some offered criticism, including state Rep. Kip Kendrick, D-Columbia, who said he wondered if the program could undermine the state's pension system. McKenna said they haven't discussed the plan with pension officials, but those who aren't paying into the system wouldn't be able to draw out.
State Rep. Don Mayhew, R-Crocker, said he could see some people taking advantage of the program, taking the salary until they pay off some debt then moving to the private sector to take a 401(k). Engineers are in high demand and are paid significantly more in the private sector, so the plan might just kick the can four years down the road, he said.
"In the business we're in right now, four years we'll take," McKenna said. "We're in a triage mode."
This article was edited at 10:20 a.m. Friday, Jan. 24, 2020, to correct the spelling of Brenda Morris' name.