Senate finance panel presses for clearer tracking, cost estimates on executive branch letters of agreement

The Senate Finance Committee on Feb. 12 heard from legislative finance and the Office of Management and Budget about an increase in executive-branch letters of agreement with labor unions and the steps the administration is taking to document their fiscal effects.

Alexi Painter, legislative fiscal analyst, told the committee that LOAs can range from single-employee accommodations to agreements that alter monetary terms for whole classes of employees and that the legislature first became aware of a notable increase in such agreements during the 2022 session. "For example, the Department of Corrections signed a letter of agreement ... to offer hiring bonuses as they were struggling to recruit and retain correctional officers at the time," Painter said.

Why it matters: committee members said LOAs can alter the state’s expenditures and complicate longer-term budgeting because some LOAs were financed using savings from vacant positions; if jobs are later filled, the ongoing cost remains an open question. Painter told members the legislature has received two differing legal interpretations about whether monetary changes in LOAs require affirmative legislative approval, and he cautioned he was "not an attorney, so I'm not going to cover the legalistic interpretation."

What OMB reported: Lacey Sanders, director of the Office of Management and Budget, said the administration paused new LOAs in August 2023 to let payroll staff catch up and to assemble the documents. She described operational problems: LOAs were handled as paper documents with no electronic tracking and the state accounting system, IRIS, did not reliably separate LOA-driven pay changes from other pay adjustments. "To an earlier comment by senator Stedman, in the dollar value, we're able to capture about $3,500,000 through the accounting system right now. I believe that's understated," Sanders said.

Sanders described steps the administration is taking: a standardized cost-estimate template for departments, a requirement that new LOAs be transmitted to legislative finance with cost estimates, two statutorily required reports (one already delivered), and a planned July 1 change to add an individual tracking code in IRIS for each LOA so future fiscal impacts can be reported more precisely.

Committee members pressed on scale and permanence. Painter and Sanders gave examples ranging from a $10,000 hiring bonus for corrections to a 2% wage increase that previously came as an LOA. Painter said aggregates covered in OMB's reports amounted to "a few million dollars," while Sanders said accounting limits likely understate the true cost.

Committee direction and open items: senators asked whether implementation of the statewide salary study would reduce LOA use; Sanders said LOAs likely remain a necessary temporary tool but "should never be used into perpetuity." She also said the administration will review each LOA ahead of a planned July 1 "reset" to determine which should continue and which should end or be negotiated into contracts. The committee asked for follow-up information, including: the detailed OMB report recently produced, copies of the dueling legal opinions, and additional breakout of LOA costs by department and class of employee.

Ending note: members pressed for written follow-up on legal authority and for OMB and legislative finance to provide the more detailed LOA listings and cost analyses they have begun producing. Sanders said the administration will continue refining reporting and return with more complete figures and documentation.