Since its formation, the City of Elk Grove has been an anomaly among local governments in paying its employees by merit rather than giving them set salary increases each year.
The system may have helped Elk Grove keep its finances in the black while other cities ran deficits. But some council members and employees say it wreaked havoc on employee morale.
All that is set to change under the fiscal year 2011-2012 budget approved by the city council at their meeting Wednesday. The budget sets aside money for five percent annual raises for employees that receive satisfactory performance evaluations, boosting by $2 million the amount of the city's general fund that goes toward worker compensation.
Before unanimously adopting the balanced $148.8 million budget, council members took pains to praise the sacrifices made by city staff in previous budget years, including furloughs and stagnant compensation.
"Every single person that works for this city has been part of keeping our city lean and mean," said Councilmember Gary Davis.
The step pay plan is just one of a multitude of line items in the budget, which also sets aside $16 million for capital improvements to the city's roads and infrastructure and creates seven new positions on the city staff.
But it is the biggest factor in setting the city up for a deficit during the next five years if revenues don't improve, City Manager Laura Gill told the council in her budget presentation May 25.
The salary plan stems from a 2009 union contract the city signed with the Elk Grove Police Officers Association, which represents the 's sworn officers and many of its support staff. The city subsequently chose to extend the system to the rest of its 200-plus employees.
"The system we have in place right now is out of whack," Councilmember James Cooper said in an interview before the vote. "You have folks making very different salaries essentially doing the same job."
Cooper said the merit pay system, which gives individual supervisors discretion over raises, has sometimes shortchanged capable employees.
"Depending on who your supervisor is, someone might be very good and thorough about writing evaluations and someone else may not," he said. "This takes the human part out of it."
EGPOA president Det. Dan Koontz said salary steps, standard in union contracts, will also help the city plan in advance how much it must set aside for employee pay each year.
Under the new plan, starting July 1, employees will be placed in a salary bracket based on their job classification. They will then become eligible for raises each year on the anniversaries of their dates of hire.
While there was no discussion Wednesday about how to cope with a possible future deficit, at least one council member hinted that the city could renegotiate the salary plan if its economic outlook doesn't brighten.
"It's kind of a bittersweet moment," said Councilmember Pat Hume. "A little extra compensation for a job well done, with the caveat that it may be the only compensation with respect to two years from now if things don't improve."