Legislative committee hears FY26 proposal for 1.25% pay increase for South Dakota state employees; advocates call it inadequate

Darren Seeley, commissioner of the Bureau of Human Resources and Administration, told a legislative committee in Pierre that Gov. Roden’s FY26 budget recommends a 1.25% across‑the‑board salary increase and a matching 1.25% movement of pay grades for state employees under the governor’s authority.

The proposal is intended to hold workers’ compa ratios — an employee’s pay divided by the midpoint of their pay grade — roughly steady between FY25 and FY26, Seeley said, because matching the raise and the pay‑grade movement would “essentially” leave compa ratios unchanged unless an employee receives a promotion or other raise.

The issue matters to workers and lawmakers because state employees have recently received several targeted and across‑the‑board increases. Seeley described a series of compensatory measures over the past four years: decompression pay funded by benefit changes, two years of targeted increases aimed at pay groups farthest from market rates, and three consecutive annual across‑the‑board raises of about 6%, 7% and 4% that moved many workers closer to or above pay‑grade midpoints.

Seeley told the committee the agency’s metrics cover about 8,000 employees under the governor’s authority. He said the average compensation for those employees rose from $48,434.21 in FY2020 to $67,139.25 in FY2025. He said the Bureau is signing a contract this spring for the next four‑year remuneration study and expects to return next year with updated market comparisons.

On pay‑grade mechanics, Seeley warned that moving pay grades at the higher market rate without a matching salary action would create two problems: some employees would fall below their pay‑grade minimum — which administrative rule does not allow — and pay compression would reappear between newer and longer‑tenured employees. He summarized the fiscal constraint by quoting the governor: “this is a 0 sum game when you have to balance a budget,” and said the 1.25% recommendation reflects what the administration considers affordable under the current budget.

Eric Ollila, executive director of the South Dakota State Employees Organization, testified online and urged larger increases and more detail from BHRA. “I’m disappointed that you’re not getting as much information as I think that you should be getting from the commissioner,” Ollila said, and requested historical pay tables, age and tenure breakdowns, and annualized pay distributions. He told the committee that retiree cost‑of‑living adjustments from Social Security and the South Dakota Retirement System are higher than 1.25% this year and warned that health‑insurance premium increases would outpace the proposed raise.

Ollila said he has heard from employees concerned that premium increases — which he described as about 5% for most plans — will erode the value of a 1.25% pay increase, and he noted that many employees are limited by conflict‑of‑interest rules from taking second jobs in their professional fields.

Seeley responded that some of the specific statistics Ollila cited are not accurate today and that legislators were provided a workforce fact sheet by email with data on retirement eligibility and employee counts by branch. He gave the Department of Corrections as an example of a substantial pay shift: a 2019/2020 starting correctional officer rate of about $17.50 an hour has risen to $25 an hour, which Seeley said is roughly $52,000 annualized at full time.

Committee members asked questions about the size of the employee population the chart covered (Seeley said about 8,000), whether the salary figures given were averages (Seeley: average), and the limits of the Bureau’s data on whether departing employees move out of state (Seeley: exit surveys do not capture destination state). Several members suggested adding or collecting more exit‑survey items, age/tenure breakdowns, and cross‑branch comparisons.

No formal change to salary policy was adopted during the hearing; Seeley said BHRA would provide additional information on request and proceed with the planned remuneration study. The committee adjourned after the presentation.