AN ACT Relating to employee incentives; amending RCW 41.60.015, 41.60.041, 41.60.050, 41.60.100, 41.60.110, and 41.60.120; and adding a new section to chapter 41.60 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. Section 1, chapter 167, Laws of 1982 as last amended by section 72, chapter 287, Laws of 1984 and RCW 41.60.015 are each amended to read as follows:

(1) There is hereby created the productivity board. The board shall administer the employee suggestion program under this chapter and shall review applications for incentive pay for state employees under RCW 41.60.100, 41.60.110, and 41.60.120.

(2) The board shall be composed of:

(a) The secretary of state who shall act as chairperson;

(b) The director of personnel or the director's designee;

(d) A representative of the higher education community appointed by the governor; and

(e) Three persons with experience in administering incentives such as those used by industry, with the governor, lieutenant governor, and speaker of the house of representatives each appointing one person. The governor's appointee shall be a representative of an employee organization certified as an exclusive representative of at least one bargaining unit of classified employees, but no one organization may be represented for two consecutive terms.

Initially, the person appointed by the governor shall serve a one-year term, the person appointed by the lieutenant governor shall serve a two-year term, and the person appointed by the speaker shall serve a three-year term. Thereafter, these members shall serve three-year terms.

Members of the board shall be compensated in accordance with RCW 43.03.240.

Sec. 2. Section 9, chapter 167, Laws of 1982 and RCW 41.60.041 are each amended to read as follows:

(1) Cash awards for suggestions generating net savings to the state shall be ((~~calculated on a sliding scale percentage basis in the following manner:~~

~~(a) Ten percent of the first ten thousand dollars;~~

~~(b) Eight percent of the next twenty thousand dollars;~~

~~(c) Six percent of the next thirty thousand dollars;~~

~~(d) Four percent of the next forty thousand dollars; and~~

~~(e) Two percent of all amounts in excess of one hundred thousand dollars~~)) ten percent of the net savings.

(2) No award may be granted in excess of ten thousand dollars.

(3) If the suggestion is significantly modified when implemented, the percentage((s)) specified in subsection (1) of this section may be decreased at the option of the board.

(4) The board shall establish guidelines for making cash awards for suggestions for which benefits to the state are intangible or for which benefits cannot be calculated.

(5) Funds for the awards shall be drawn from the appropriation of the agency benefiting from the employee's suggestion. In addition to the amount awarded, the agency shall transfer ((~~two~~)) ten percent of the savings to the department of personnel for deposit in the department of personnel service fund. Moneys so transferred shall be used exclusively for the operations of the productivity board. Any moneys remaining unexpended at the end of the fiscal biennium shall revert to the original fund source.

Sec. 3. Section 5, chapter 142, Laws of 1965 ex. sess. as last amended by section 3, chapter 54, Laws of 1983 and RCW 41.60.050 are each amended to read as follows:

((~~Until~~)) After June 30, 1985, administrative expenses of the board in administering this chapter ((~~shall not exceed~~)) may be funded by an appropriation of fifty thousand dollars per year((~~. After June 30, 1985, such expenses shall not exceed~~)) in addition to the revenue transferred to the department of personnel service fund under RCW 41.60.041(5) and 41.60.120. Administrative expenses shall be paid from the department of personnel service fund.

Sec. 4. Section 2, chapter 167, Laws of 1982 and RCW 41.60.100 are each amended to read as follows:

With the exception of the legislative and judicial branches and the immediate administrative officers of the offices of elected officials, any organizational unit of any agency of state government having an identifiable budget or having its financial records maintained according to an accounting system which identifies the expenditures and receipts properly attributable to that unit may apply to the board for selection as a candidate for the award of incentive pay to its employees. The application shall be submitted prior to the beginning of any year and shall have the approval of the head of the agency within which the unit is located.

Applications shall be in the form specified by the board and contain such information as the board may require, including but not limited to those evaluation components developed by the applying unit which will provide quantitative measures of program output and performance.

The board shall evaluate the applications submitted. From those proposals which are considered to be reasonable and practical and which are found to include developed performance indicators which lend themselves to a judgment of success or failure, the board shall select the units to participate in the incentive pay program.

Sec. 5. Section 3, chapter 167, Laws of 1982 and RCW 41.60.110 are each amended to read as follows:

(1) To qualify for the award of incentive pay to its employees, a unit selected shall demonstrate to the satisfaction of the board that it has operated during the year of participation at ((~~less~~)) a lower cost ((~~than the immediately preceding year either with an increase in the level of services rendered or~~)) with no decrease in the level of services rendered.

(a) A unit participating for the first time shall compare costs to the preceding fiscal year expenditures or standard costs based on engineered standards and the unit's historical data; and

(b) A unit participating in the incentive pay program for more than one year may use an average of successful years of participation in the incentive pay program or production standards based on the unit's historical data, time study, work sampling, or a combination of two or more of these techniques.

(2) The board shall satisfy itself from documentation submitted by the organizational unit that the claimed cost of operation is real and not merely apparent and that it is not, in whole or in part, the result of:

(a) Chance;

(b) A lowering of the quality of the service rendered;

(d) Stockpiling inventories in the immediately preceding year so as to reduce requirements in the eligible year;

(e) Substitution of federal funds, other receipts, or nonstate funds for state appropriations;

(f) Unreasonable postponement of payments of accounts payable until the year immediately following the eligible year;

(g) Shifting of expenses to another unit of government; or

(h) Any other practice, event, or device which the board decides has caused a distortion which makes it falsely appear that a savings or increase in level of services has occurred.

(3) The board shall consider as legitimate savings those reductions in expenditures made possible by such items as the following:

(a) Reductions in overtime;

(b) Elimination of consultant fees;

(d) Improved systems and procedures;

(e) Better deployment and utilization of personnel;

(f) Elimination of unnecessary travel;

(g) Elimination of unnecessary printing and mailing;

(h) Elimination of unnecessary payments for items such as advertising;

(i) Elimination of waste, duplication, and operations of doubtful value;

(j) Improved space utilization; and

(k) Any other items considered by the board as representing true savings.

Sec. 6. Section 4, chapter 167, Laws of 1982 and RCW 41.60.120 are each amended to read as follows:

At the conclusion of the eligible year, the board shall compare the expenditures for that year of each unit selected against the expenditures of that unit for the immediately preceding year or expenditures determined in accordance with RCW 41.60.110(1) (a) and (b) and, after making such adjustments as in the board's judgment are required to eliminate distortions, shall determine the amount, if any, that the unit has reduced the unit's cost of operations or increased its level of services in the eligible year. Adjustments to eliminate distortions may include any legislative increases in employee compensation and inflationary increases in the cost of services, materials, and supplies. If the board also determines that in the board's judgment a unit qualifies for an award, the board shall award to the employees of that unit a sum equal to twenty-five percent of the amount determined to be the savings to the state for the level of services rendered. The amount awarded shall be divided and distributed in equal shares to the employees of the unit, except that employees who worked for that unit less than the twelve months of the year shall receive only a pro rata share based on the fraction of the year worked for that unit. Funds for this incentive pay shall be drawn from the ((~~appropriation of the~~)) agency in which the unit is located.

In addition to the amount awarded, the agency shall transfer ((~~two~~)) ten percent of the savings to the department of personnel for deposit in the department of personnel service fund. Moneys so transferred shall be used exclusively for the operations of the productivity board. Any moneys remaining unexpended at the end of the fiscal biennium shall revert to the original fund source.

NEW SECTION. Sec. 7. A new section is added to chapter 41.60 RCW to read as follows:

Other than suggestion awards and incentive pay unit awards, agencies shall have the authority to recognize employees for accomplishments including outstanding achievements, safety performance, and longevity. Recognition awards which may not exceed fifty dollars in value per award may include, but not be limited to, cash or such items as pen and desk sets, plaques, pins, framed certificates, clocks, and calculators. Award costs shall be paid by the agency giving the award.