A legislative panel on Tuesday advanced Gov. Sarah Huckabee Sanders’ temporary plan to boost state employee salaries in fiscal year 2025 that starts July 1.

The Joint Budget Committee’s personnel subcommittee endorsed the amended version of Senate Bill 77 by Sen. Breanne Davis, R-Russellville.

Under the bill, a state employee under the Uniform Classification and Compensation Act may receive “a market adjustment” to his or her base salary that may not exceed 3% of the employee’s base salary, and the employee shall not receive more than one market adjustment. This part of the bill would become effective on or after July 1, 2024, and expire June 30, 2025.

The bill also would increase the minimum annual salary for state employees to $32,405 a year, raise the maximum salary range for all pay grades by 10% and authorize new incentives for future recruits and current employees who go above and beyond, either through a lump-sum payment or through extra hours of paid leave.

The amended version of SB 77 would allow state agencies to provide a special compensation award to a state employee to recognize the employee’s outstanding performance in completing a significant project or job assignment or completing a major milestone, or due to the assignment of temporary job responsibilities for a period not exceeding six months that are beyond the scope of work typically performed by the employee and have measurable results that enhance the mission and the goals of state agency.

A special compensation award may consist of a lump-sum bonus payment of up to $5,000 or up to 40 hours of incentive leave under the bill. A state employee may not receive more than $10,000 in lump-sum bonus payments in a biennium under the measure.

Under the bill, a state agency wishing to provide special compensation awards to employees would be required to prepare a written plan for administering special compensation awards and would be required to get the approval of the Office of Personnel Management and either the Joint Budget Committee or the Legislative Council. Then, a state agency may submit a request for special compensation awards to the Office of Personnel Management for approval.

State Rep. Dwight Tosh, R-Jonesboro, said he wants to make sure state employees are treated fairly and all have an opportunity to compete for special assignments.

Davis said state employees would have “a fair chance” at competing for special compensation awards under the bill.

With a tight job market in Arkansas, state Rep. Jim Wooten, R-Beebe, said the bill is aimed at making state government more competitive in the marketplace.

Under SB77, a state agency may offer a recruitment incentive in connection with an offer of employment to a prospective employee to assist with recruitment efforts. The recruitment incentive may consist of a bonus payment of up to $5,000 or up to 40 hours in incentive leave.

A person receiving a recruitment incentive would be required to commit to a required period of employment with the state agency under the legislation.

A state agency wishing to provide a recruitment incentive to prospective employees would be required to prepare a written plan for administering the recruitment incentives and get the approval of the Office of Personnel Management and either the Joint Budget Committee or the Legislative Council. Then, a state agency may submit a request for a recruitment incentive to the Office of Personnel Management for approval.

The total annual cost of the governor’s proposal would be $42.4 million from all sources of general revenue, including about $19.3 million in state general revenue, according to state officials. The plan is for state departments to finance the pay raises and incentives out of their existing budgets.

Last week, the Joint Budget Committee signed off on Sanders’ request to grant 2% merit pay raises to the secretaries of the state departments of commerce, education, human services, military and veteran affairs and the Governor’s Mansion administrator, exceeding their maximum-authorized salaries.

The governor has awarded 2% merit pay raises to all 15 Cabinet secretaries, and these agencies have the funds to cover the raises, Office of Personnel Management Director Kay Barnhill told state lawmakers.

Barnhill said other state employees will be eligible for a merit pay raise in July. State employees who meet or exceed expectations during their performance evaluation will be eligible for merit pay raises, and the governor will decide on the percentage of merit pay raises near the end of fiscal 2024 that ends June 30, she said.

The state’s executive branch has about 22,509 employees with an average salary of $50,762.45, state officials said earlier this month.

The governor has signaled that she hopes to overhaul the state employee pay plan in its entirety during the 2025 regular session.

In March of 2023, the governor announced she wouldn’t support a broadbased pay plan increase in the state government’s employee classification and compensation bill with an $80 million price tag that doesn’t consider the strategic needs in education, public safety, health care and corrections.

State government last overhauled its pay plan in 2017 under then-Gov. Asa Hutchinson. That plan was projected to cover 25,000 full-time state workers and cost about $57 million to implement in fiscal 2018, including about $24 million from general revenue, with the remainder coming from other revenue sources.

In June of 2023, Sanders authorized merit pay raises for what she called exceptional employees in the executive branch agencies in a move that the transformation department said meant about 5,760 of the state’s more than 22,000 executive branch employees received merit raises, effective July 9, 2023, with a total cost of $16.3 million, including $6 million in state general revenue.

Sanders’ plan led to some state employees grumbling to state lawmakers about the merit raises authorized by the governor.