Authority: Discretionary Inclusion.

A. Transfers from this Item may be made to supplement general fund appropriations to state agencies for:

1. Adjustments to base rates of pay;

2. Adjustments to rates of pay for budgeted overtime of salaried employees;

3. Salary increases for positions with salaries listed elsewhere in this act;

4. Salary increases for locally elected constitutional officers and their employees;

5. In-band salary adjustments for employees subject to the Virginia Personnel Act to recognize changes in duties or professional skill development, establish internal alignment (equitable salary relationships), or respond to labor market conditions (retention).

6. Employer costs of employee benefit programs when required by salary-based pay adjustments; and

7. Salary increases for local employees supported by the Commonwealth, other than those funded through appropriations to the Department of Education.

This appropriation provides for the compensation adjustments described in paragraph C paragraphs F and M of this Item, subject to conditions stated in this Item.

B. Transfers from this Item may be made when appropriations to the state agencies concerned are insufficient for the purposes stated in paragraph A of this Item, as determined by the Department of Planning and Budget, and subject to guidelines prescribed by the department. Further, the Department of Planning and Budget may transfer appropriations within this Item from the second year of the biennium to the first year, when necessary to accomplish the purposes stated in paragraph A of this Item.

C.1. The Department of Human Resource Management may approve pilot compensation programs within agencies that support the redesigned classified compensation plan. Such pilot programs approved by the Department shall have clearly defined objectives, specified time frames, and shall be restricted to no more than two years. Such pilot programs shall be funded from existing agency appropriations or from funds provided for increases specified in paragraph C F of this Item, or a combination of both. A report on such pilot programs shall be made to the Governor and the Chairmen of the House Appropriations and Senate Finance Committees by October 1, 2003. The Secretary of Administration shall approve any change in compensation plans based on pilot programs, prior to their implementation.

2. Any pilot programs or alternative pay plans authorized under the provisions of this paragraph, shall provide for average annual salary increases that are no greater than those authorized in this Item for general, classified state employees.

D. The Governor is hereby authorized to transfer funds from agency appropriations to the accounts of participating state employees such amounts as may be necessary to match the contributions of the qualified participating employees, consistent with the requirements of the Code of Virginia governing the deferred compensation cash match program. Such transfers shall be made consistent with the following:

1. The maximum cash match provided to eligible employees shall not be less than $20.00 per pay period, or $40.00 per month. The Governor may direct the agencies of the Commonwealth to utilize funds contained within their existing appropriations to meet these requirements.

2. The Governor may direct agencies supported in whole or in part with nongeneral funds to utilize existing agency appropriations to meet these requirements. Such nongeneral revenues and balances are hereby appropriated for this purpose, subject to the provisions of § 4-2.01 b of this act. The use of such nongeneral funds shall be consistent with any existing conditions and restrictions otherwise placed upon such nongeneral funds.

3. Employees who are otherwise eligible but whose 403 (b) provider does not participate in the cash match program by establishing a 401 (a) account are ineligible to receive a cash match.

4. The procurement of services related to the implementation of this program shall be governed by standards set forth in § 51.1-124.30 C, Code of Virginia, and shall not be subject to the provisions of Chapter 7 (§ 11-35 et seq.), Title 11, Code of Virginia.

E. The Director, Department of Planning and Budget, shall withhold from agency general fund appropriations and transfer to this Item an amount estimated at $17,807,598 the first year and $18,503,577 the second year, representing the savings from a reduction in the contribution rate for the group life program for state employees.

F.1. For fiscal year 2003, salaried employees of the Commonwealth shall receive the compensation increases set out below:

a. Except as provided for in paragraphs F 1 a 4) and F 1 b of this Item, classified employees, agency heads, cabinet secretaries, other salaried employees of the Executive, Legislative, and Judicial branches, and salaried employees of Independent agencies shall each elect in writing to receive either:

1) A one-time bonus payment equal to 2.5 percent of base compensation for fiscal year 2003 to be included in the August, 30, 2002, pay, or

2) Ten days of compensatory time off with pay. Such compensatory time shall be credited to employees on July 1, 2002, and must be used no later than June 30, 2003. Compensatory time shall not be carried forward and employees shall not be paid or otherwise compensated upon leaving employment for any balance of unused compensatory time provided to them under this paragraph, or

3) Any combination of bonus and compensatory time, subject to policies and procedures to be developed by the Department of Human Resource Management and the Department of Planning and Budget. The bonus payment portion of any combination of compensatory time and bonus shall be included in the August 30, 2002, pay.

4) All employees who are covered by Chapter 2, 2.1, or 3, Title 51.1, Code of Virginia, shall receive a one-time bonus payment equal to 2.5 percent of base compensation for fiscal year 2003.

b. Each institution of higher education shall receive the first year an amount equal to 2.5 percent of the base compensation of teaching and research faculty, administrative faculty, part-time faculty, and graduate teaching assistants. These funds shall be used to provide, at the discretion of the institution:

1) A one-time bonus payment, or

2) Such other monetary or non-monetary incentives and awards as each institution shall deem appropriate for the retention of teaching and research faculty.

3) These incentive payments shall not be included in base compensation for purposes of retirement.

c. In the first year, each independent agency may use funds equivalent to 2.5 percent of employee base compensation in the first year for one-time compensation actions consistent with the established agency pay plans.

2.a. Classified employees in the Executive Department shall receive the increases authorized in subparagraph F.1.a. above only if they attain a rating of at least "contributor" on their latest performance evaluation.

b. Increases for other employees listed in subparagraph F 1 a. shall be consistent with the provisions of subparagraph F 2 a. as determined by the appointing or governing authority. The appointing or governing authority shall certify that employees receiving the awards are performing at levels at least comparable to the eligible employees as set out in the preceding subparagraph F 2 a.

G. State agencies and institutions of higher education shall make payments to the Virginia Retirement System for retirement contributions, Virginia Sickness and Disability Program contributions, and retiree healthcare credit contributions on a quarterly basis.

H. Included in this appropriation is $9,436,558 the first year and $9,846,843 the second year for an increase in the contribution rate for the Virginia Sickness and Disability Program resulting from the addition of long-term care insurance coverage and an update of the program assets and liabilities.

I. 1.The Director, Department of Planning and Budget, shall withhold from agency general fund appropriations and transfer to this Item an amount estimated at $563,662 the first year and $644,185 the second year, representing savings in VRS retirement contributions resulting from 7 percent and 8 percent across-the-board reductions in the administrative expenses of the Virginia Retirement System.

2. Nongeneral fund amounts estimated at $563,662 the first year and $644,185 the second year appropriated for the payment of Virginia Retirement System contributions shall be transferred to the general fund pursuant to § 3-1.01 of this act, representing savings in VRS retirement contributions resulting from 7 percent and 8 percent across-the-board reductions in the administrative expenses of the Virginia Retirement System Appropriated funds from federal sources are exempted from this transfer.

J.1. This appropriation includes $101,400,000 to provide a compensation increase in December 2003 for:

2. State employees, including faculty of state-supported institutions of higher education, as established in subparagraphs 2 a through 2 d of paragraph B of this Item.

3. State-supported local employees as set out in subparagraph 2 e of paragraph B of this Item.

4. Public school employees, including instructional and support personnel, funded through the Standards of Quality.

K. The Director, Department of Planning and Budget, shall withhold from agency general fund appropriations and transfer to this Item an amount estimated at $4,926,220 the first year and $5,140,405 the second year, representing the reduction of the employer contribution rate for the state employee retiree health insurance credit program.

L. The Director, Department of Planning and Budget, shall withhold from agency general fund appropriations and transfer to this Item an amount estimated at $3,911,095 the first year and $4,081,141 the second year, representing the reduction of the employer contribution rate for the sickness and disability program.

M.1. The base salary of employees listed in this paragraph shall be increased by 2.25 percent on November 25, 2003, for those employees set out in subparagraphs 2 a through 2 d of this paragraph. The base salary of employees set out in subparagraph 2 e of this paragraph shall be increased by 2.25 percent on December 1, 2003. This appropriation includes the following estimated amounts for these purposes:

2. Transfers from this Item shall be used to effect this increase and related increases in employee benefits for:

a. Executive Department

1. Full-time employees of the Executive Department subject to the Virginia Personnel Act;

2. Full-time employees of the Executive Department not subject to the Virginia Personnel Act, except officials elected by popular vote;

3. Teaching and Research and Administrative Faculty at the institutions of higher education;

4. Any official whose salary is listed in § 4-6.01 c and d of this act, subject to the ranges specified in the agency head salary levels in § 4-6.01 c; and

5. Full-time professional staff of the Governor's Office, the Lieutenant Governor's Office, the Attorney General's Office, Cabinet Secretaries Offices, including the Deputy Secretaries, the Virginia Liaison Office, and the Secretary of the Commonwealth's Office.

b. Legislative Department

1. Heads of agencies in the Legislative Department;

2. Full-time employees in the Legislative Department, other than officials elected by popular vote; and

3. Secretaries and administrative assistants as provided for in Item 1, of this act.

c. Judicial Department

1. Judges and Justices in the Judicial Department;

2. Heads of agencies in the Judicial Department; and,

3. Full-time employees in the Judicial Department.

d. Independent Agencies

1. Commissioners of the State Corporation Commission and the Virginia Workers' Compensation Commission, the Executive Directors of the Virginia College Savings Plan and the Virginia Office for Protection and Advocacy, and the Directors of the State Lottery Department, and the Virginia Retirement System;

2. Full-time employees of the State Corporation Commission, the Virginia College Savings Plan, the State Lottery Department, Virginia Workers' Compensation Commission, the Virginia Retirement System, and Virginia Office for Protection and Advocacy.

e. State-Supported Local Employees

1. Locally elected constitutional officers;

2. General Registrars and members of local electoral boards;

3. Full-time employees of locally elected constitutional officers; and,

4. Full-time employees of Community Services Boards, Centers for Independent Living, secure detention centers supported by Juvenile Block Grants, juvenile delinquency prevention and local court service units, local social services boards, and local health departments where a memorandum of understanding exists with the Virginia Department of Health.

3.a. Employees in the Executive Department subject to the Virginia Personnel Act shall receive the salary increases authorized in this paragraph only if they attained at least a "Contributor" on their latest performance evaluation.

b. Salary increases for employees listed in paragraphs M 2 a 2 through M 2 a 4 and paragraphs M 2 c through M 2 d shall be consistent with the provisions of this paragraph, as determined by the appointing or governing authority. The appointing or governing authority shall certify that employees receiving the awards are performing at levels at least comparable to the eligible employees as set out in the preceding paragraph 3 a.

N. The Department of Human Resource Management shall increase the minimum and maximum salary for each band within the Commonwealth's Classified Compensation Plan by 2.25 percent on November 25, 2003. No salary increase shall be granted to any employee as a result of this action. The Department shall develop policies and procedures to be used in instances where employees fall below the entry level for a job classification due to poor performance. Movement through the revised pay band shall be based on employee performance.

O. The agency heads listed in this paragraph may, at their discretion, utilize the funds provided pursuant to paragraph M of this Item, to implement the provisions of existing pay plans.

1. The heads of agencies in the Legislative and Judicial Departments;

2. The Commissioners of the State Corporation Commission and the Virginia Workers' Compensation Commission;

3. The Attorney General;

4. The Director of the Virginia Retirement System;

5. The Director of the State Lottery Department;

6. The Director of the University of Virginia Medical Center;

7. The Executive Director of the Virginia College Savings Plan;

8. The Executive Director of the Virginia Port Authority; and

9. The Executive Director of the Virginia Office for Protection and Advocacy.

P. The base rates of pay, and related employee benefits, for wage employees may be increased by up to 2.25 percent on November 25, 2003. The cost of such increases for wage employees shall be borne by funds appropriated to each agency.

Q. 1. The Virginia Retirement System shall prepare a report on the feasibility of establishing an Internal Revenue Service approved Special Pay Plan that is qualified under section 401(a) of the Internal Revenue Code for separating state employees. The purpose of the report shall be to determine whether such a pay plan would be of value to state employees and the extent to which state employees have identified the need for such a benefit plan.

2. As part of the review, the Virginia Retirement System shall identify the benefits of such plans, including a determination of cost savings that may accrue to both the employer and employee.

3. The Virginia Retirement System shall also determine whether this benefit should be available to all employees or a subgroup of employees based on factors including but not limited to amount and type of separation pay.

4. In completing this review, the Virginia Retirement System shall seek input from an appropriate cross-section of state employees.

5. The Department of Human Resource Management shall provided technical assistance to the Virginia Retirement System upon request.

6. The results of this review shall be provided to the Chairmen of the House Appropriations and Senate Finance Committees by November 14, 2003.