By Todd Shepherd | Colorado Watchdog

It’s natural to assume when a state employee gets a promotion, there’s a raise that goes along with it; greater responsibilities usually correspond with greater rewards.

Saved Pay generated significant pay premiums for the state, roughly $2-million dollars total, during the past three years.

However, when a state employee is demoted or moved to a job with less responsibilities, a statutory rule also allows the worker to keep their previous higher rate of pay. The policy was created in state statute in 1963, and is typically referred to as “Saved Pay.”

An analysis of Saved Pay workers — obtained via the Colorado Open Records Act — by Independence Investigates found more than 175 employees who have  gained from this obscure rule over the past three years. In most cases the Saved Pay “premium” (i.e., the excess between what the individual earns, compared to what they would be earning if the Saved Pay rule weren’t in effect) is usually only a hundred or a few hundred dollars per month. But taking all of the program’s beneficiaries in the aggregate, Saved Pay generated significant pay premiums for those employees, roughly $2-million dollars total, during the past three years:

• 2009-10: $629,266
• 2010-11: $762,974
• 2011-12: $666,241

Sometimes the benefit from Saved Pay can be as little as $40 per month. However, in fiscal year 2011-12, 47 state employees took home a Saved Pay premium of at least an extra $5,000 per year. Of those 47, 17 made a Saved Pay premium of more than $10,000 per year.

This spreadsheet identifies all Saved Pay recipients over the last three years. Consider employee #21 (names have been removed because this report is focused on the rule, not the employee). This individual is currently in an (unidentified) position that according to state guidelines should only pay a maximum of $6,828 per month. However, because of Saved Pay, the individual is instead taking home the maximum pay scale for a “General Professional IV” which pays $8,467 per month. On an annual basis, this person grosses an additional $19,688 because of the Saved Pay rule.

Saved Pay is not indefinite. Per the rule, it can only benefit a worker for a maximum of three years.

Jeffrey Martin is a former deputy with the Colorado unemployment division, and says the saved pay rule has consequences beyond a single person’s paycheck.

“Nothing was more unbearable than seeing a coworker who –despite having less experience and fewer skills in performing same job duties that you were performing- made more money solely because the previous position they performed had either been eliminated or because of the ineptitude by the individual. ‘Save pay’ in is an unjust system of personal patronage by managers and its allowance within the State Personal Rules causes tremendous harm to morale,” Martin said.

In this year’s legislative session, “modernizing” state employee rules has become one of the higher profile discussions. But the efforts to revise state employee rules is likely to last beyond this year’s General Assembly.  And Saved Pay could become a part of that discussion.

“We are working on a review of all the rules that govern the state’s personnel and hope to have a package of changes to recommend to the Governor by early next year,” said Sabrina D’Agosta, spokeswoman for the Department of Personnel and Administration. “As part of that review, we will analyze the pros and cons of saved pay, how it’s implemented and whether it is the right way for the state to do business.”

Editor’s note: This story was originally published April 22 by the Independence Institute.