While 200,000 teachers and state workers were mostly getting minuscule raises, the Georgia Office of Insurance Commissioner was doling out 11 percent salary hikes to staffers and hiring new employees in a spending spree that left the agency with a giant budget hole, a new audit says.
The audit released Wednesday was requested by the House Appropriations Committee after The Atlanta Journal-Constitution reported last year that overspending in Insurance Commissioner Ralph Hudgens’ office resulted in layoffs and hundreds of staff furloughs.
The audit noted that 12 staffers were laid off and 212 agency workers were furloughed for four days to get the badly unbalanced budget in line in the final few months of fiscal 2017, which ended June 30.
The furloughs were the first in state government in several years, likely since it recovered from the effects of the Great Recession. The agency’s chief financial officer resigned but found another job in state government.
“The overspending resulted from a number of factors, including (the agency’s) decision to internally fund pay increases and to hire additional staff,” the audit said.
The audit said that between 2014 and 2017, the agency handed out more than 300 pay increases without requesting additional funding from the General Assembly. The pay increases added about $2.2 million to agency spending in 2017.
The agency also began filling vacancies, adding an additional $1.8 million to spending that year.
In fiscal 2016, when teachers and state employees were scheduled for 1 percent raises, the audit said 181 Insurance Department employees received an average pay boost of 11 percent. From 2014 to 2017, average percentage pay raises that were given out by the agency exceeded what was budgeted by the General Assembly for most other state employees.
“These pay increases were funded by the (agency) with its existing budget and were in addition to annual pay increases funded through the appropriations act,” the audit said.
Some state agencies provided bigger raises to retain or attract top employees, something Hudgens’ agency cited as its reason for boosting pay.
Auditors found that the agency “failed to comply with state law and budget instructions” to spend above budgeted limits in two programs, in part by redirecting money that was supposed to go to fraud investigations and prosecutions.
It said the agency did not request additional state funding from lawmakers to pay for the salary hikes and additions in staff.
Hudgens told the AJC last year that the shortfall was due to faulty information from his CFO about how much money was available to boost pay in his department.
However, auditors said, “interviews with current members of the (agency’s) management and staff as well as the former CFO revealed that the former CFO met with members of the senior leadership team (not including the commissioner) on a monthly or near monthly basis to discuss the budget and shortfall projections.”
In a statement Wednesday, Hudgens said he disagreed with some of the audit’s findings, but “I did agree with many of their recommendations and the central theme of the report, which was the need for my agency to improve its budgeting practices.”
Hudgens said he received inaccurate budget information in 2016.
“As soon as we became aware, my leadership team took aggressive fiscal actions which helped us reduce our spending and meet our agency’s overall budget for 2017,” the commissioner said. “Additionally, I hired a new chief financial officer who I am confident will provide us with accurate budget recommendations consistent with the findings in the audit report.”
Hudgens’ agency is responsible for regulating the insurance and small loan industries. He also serves as the state fire marshal, and his agency runs fire safety and prevention programs and investigates fires.
The Insurance Department saw its budget cut about 20 percent during and immediately after the Great Recession. Its state-allocated budget has been largely flat in recent years.
Furloughs were common during the Great Recession, when state revenue plummeted and agencies sought to avoid mass layoffs. They continued for years in many rural school districts that struggled to pay bills even after the recession was well behind the state. But state budget officials said the Insurance Department’s furloughs were an exception for state agencies.