Human Resources proposes $38.8M budget; health care and self‑insurance costs drive increases

The Department of Human Resources told the finance committee it is seeking a total FY2026 budget of $38,800,000, with the largest increases concentrated in self‑insurance and employee health care costs. OMB fiscal analyst Robert Jones said the department requests $3,700,000 for personal services, about $7,000,000 for materials and supplies, and $28,100,000 for self‑insurance accounts, which include the city’s employee health plan.

The proposal matters because rising medical and prescription claims and higher insurance premiums are driving the largest year‑over‑year increases in the HR budget. “Self insurance costs increased by a net $1,760,000 following the latest review of claims expenses,” Director of Human Resources Natalie Barnes told council, attributing most of the increase to an 8.7% rise in medical costs and an 11.4% rise in prescription costs. The department asked council to consider those actuarial and utilization trends as part of the city’s larger budget deliberations.

OMB and HR officials emphasized that the $24,500,000 health and welfare fund request — up roughly $1,800,000 — reflects post‑pandemic utilization returning to pre‑COVID levels and higher prescription spending. The HR presentation identified obesity and diabetes as persistent drivers of pharmacy and medical spending and noted the city’s medical stop‑loss coverage triggers at claims above $250,000.

HR also requested increases in the city’s self‑insurance accounts: the risk management fund is proposed at $5,700,000, an increase of about $483,000 driven mainly by restored personnel and higher claims projections. The department said it reinstated a full‑time risk manager (restoring one FTE) at an all‑in cost of roughly $163,657 to support succession planning in the risk management unit.

Workforce and classification changes were a second major topic. Barnes described work that followed a compensation and classification study by consultant Peter Johnson: job descriptions were updated, and reclassifications and salary adjustments were applied where job scope had changed. Barnes said 23 positions were reclassified, producing salary increases that aggregate to about $182,000 across 47 affected employees; the reclassification decisions were made using the consultant’s classification tool and reviewed with departments, employee groups and unions.

Council members pressed HR about the practical effect of those changes on incumbents. Barnes said there were no pay reductions and that where a title suffix (for example, “Administrative Assistant I”) was consolidated the change reflected realignment of titles rather than a downgrade.

Residency, recruitment and the newly authorized residency assistance fund were a third focus. Council adopted a residency assistance ordinance last year; HR told council the FY2026 proposed budget includes $50,000 for a relocation/assistance program but that the money will not be available until the FY2026 budget is adopted. Barnes said HR must draft rules to implement the program and that task‑force recommendations suggested possible reimbursement caps (examples discussed were up to $5,000 for relocations within a 25‑mile radius and $7,500 for greater distances) and suggested a three‑year employment retention requirement; she stressed those parameters are recommendations and that HR will promulgate the final rules.

HR staff said the residency requirement continues to affect hiring. Deputy Director Taylor West told the committee that the residency rule applies to a small share of positions and that 76% of the city workforce is unionized; she said only 22 employees on the city’s payroll currently are subject to the residency requirement. West explained some applicants withdraw during the hiring process or decline offers after learning about the requirement, while others apply and later withdraw when they learn they must reside within the city boundaries.

The department also outlined near‑term operational investments: $167,000 of a $173,000 workshops and seminars line would fund a single consolidated learning and performance management platform (a combined learning and performance management tool), and the remainder would support content development and ad hoc training. HR said the platform will centralize learning, support onboarding, and help the department identify skill gaps across employees.

Other notable items in the HR presentation: $90,000 in professional fees to cover background investigations, temporary staffing and arbitration costs; a planned FLSA audit conducted by a woman‑owned vendor (described as DBE); an FLSA and classification review tied to the consultant’s tool; and a planned RFP this fall for the city’s temporary staffing vendor (Integrity Staffing currently provides temporary staffing but does not hold an exclusive sole‑source contract). HR said temporary staffing dollars are budgeted in the user departments that hire the temps rather than exclusively in HR’s line.

Several council members asked about summer internships, stronger university recruiting and the transition pathways from temporary agency work to permanent city employment; HR said job posting and hiring rules in the city code require posting and a merit‑based process but that HR will expand training and interview‑preparation supports for current employees and temporary staff seeking permanent roles.

Ending

Barnes closed by emphasizing the department’s priorities for FY2026: implementing the new learning and performance system, finalizing a DEI strategy by Jan. 1, 2026, and completing the FLSA audit and follow‑up classification work. Questions raised by council members will be tracked by staff; the HR presentation produced several follow‑up items HR committed to provide to council staff.