Senate Finance staff brief lawmakers on House Bill 2 changes, early childhood and pay plan moves

Charles, a budget staff member, briefed the Senate Finance Committee on changes the House Appropriations and Finance Committee (HAFC) made to House Bill 2, focusing on Section 4 (recurring budgets) and Section 8 (compensation). He said HAFC largely started from the Legislative Finance Committee (LFC) recommendation and then made incremental changes — some above and some below the LFC amounts — and walked members through how to read the “blue packet” that compares executive, LFC and HAFC columns.

The packet shows HAFC restored or added funding for several agencies, Charles said: roughly $354,000 in adjustments for newly elected district attorneys; an additional $700,000-plus for the Livestock Board meat inspection program; $100,000 for a resource management change at the state agency labeled MNERD; restorations in Cultural Affairs for museum and historic site staff; and new personnel funding at the Secretary of State and the Public Regulation Commission. On compensation, Charles said HAFC accepted the LFC approach in most cases but layered targeted increases in Section 8, including an average 4% increase for the judicial and executive branches and 4% for school employees that is loaded into the State Equalization Guarantee.

Why it matters: the packet ties those incremental numbers to concrete program changes, Charles said, and helps senators see “what you’re buying” when the committee moves money between personnel, contracts and other categories. He highlighted several budget items the committee may want to scrutinize further: early childhood trust fund allocations, targeted compensation requests, and recurring liabilities.

Early childhood spending and the trust fund. Charles said the LFC recommended roughly $298.9 million from the early childhood trust fund (above the current $250 million operating baseline), while the executive asked for a larger contingent increase that would push the trust distributions higher. HAFC increased spending to $400 million (from the $250 million baseline) and moved many of those increases into child-care assistance, educator incentives and pre-K expansion, while tracking permanent school fund flows separately. Charles noted HAFC’s changes are intended to move toward the executive’s request but remain within the LFC general‑fund target.

Pay study, classified pay plan and liability funding. Committee members pressed on several compensation topics. Charles noted the Deloitte pay study the Legislature commissioned is being implemented and that in some agencies — he cited state engineer positions — pay ranges are near market and additional targeted increases should be weighed against that finding. HAFC layered targeted adjustments: a 4% average compensation package for certain branches and a two‑percent extra increase for the lowest pay bands in the courts. The packet also funds a new classified pay plan with $17 million intended to bring employees up to new band minima when departments convert to a single pay schedule; Charles said the aim is to create room for future within‑band progression rather than immediately pushing all employees to band maximums. He also called out $17 million to supplement recurring liability fund payouts and noted DFA plans to load those recurring costs into agency budgets rather than rely on a single nonrecurring infusion.

Vacancy rates, budget adjustments and oversight. Senators asked about vacancy rates, funded versus unfunded positions and how agencies move money between categories during the fiscal year. Charles explained the “PS calc” used in hearings estimates funded vacancy rates (positions that can be filled with available money) and noted an older set of unfunded position listings still exists in agency records. He warned that funding long-unfunded positions could be effectively “growing government” if the committee does not evaluate whether the positions are necessary. Charles said DFA has issued guidance to scrutinize first‑quarter budget adjustment requests more heavily and to push back when adjustments appear unnecessary.

Other details and follow up. Charles flagged several items for later hearings: detailed early childhood budget line items (staff recommended a committee hearing), the ongoing pay study (a scheduled Saturday hearing), and the largest supplemental request the committee saw (an employee‑benefits request revised to $85 million). Senators asked for historical vacancy reports and department‑level rollups; Charles said the committee already receives related material in volume 3 and that staff could provide multi‑year vacancy trends.

Ending. Committee members asked staff for follow‑up materials (detailed agency rollups, vacancy histories and the pay‑study one‑pager). Charles agreed to provide the additional data and to appear at upcoming hearings the committee schedules on compensation and early childhood services.