McCrory, Steckel, Wos
Gov. Pat McCrory, Medicaid director Carol Steckel and DHHS Secretary Aldona Wos as they announced proposed changes to the state's Medicaid program in April. Photo credit: Rose Hoban

With the passage of a new law, Gov. Pat McCrory has been given the power to make hundreds of workers in DHHS exempt from the State Personnel Act. What will that mean for the department?

By Tyler Dukes, WRAL News, and Rose Hoban

As the staff of the state’s health department grapples with issues such as Medicaid funding and new abortion rules over the next few years, they’ll do so with more politically vulnerable directors and managers among their ranks.

Gov. Pat McCrory now has the power to designate 1,500 positions within his cabinet departments as “exempt” from the State Personnel Act – at least 1,000 more than his Democratic predecessor, Bev Perdue. Tapping these workers as exempt effectively strips them of certain job protections, meaning they can be let go without reason with no ability to contest the decision.

McCrory, Steckel, Wos
Gov. Pat McCrory, Medicaid director Carol Steckel and DHHS Secretary Aldona Wos as they announced proposed changes to the state’s Medicaid program in April. Photo credit: Rose Hoban

As of July 1, McCrory had already designated about 1,000 of these positions across eight departments, with the next wave due by Oct. 1.

Records show the largest changeover in at-will workers took place at the Department of Health and Human Services, where almost 400 positions  are now classified as exempt. Under Perdue in the fall of 2008, that figure was 79.

A WRAL News analysis, conducted in collaboration with the nonprofit North Carolina Health News, has found the changes go several layers deep in the management structure at DHHS, affecting program managers and other civil servants who have typically spent their careers keeping programs going despite changing political winds.

But now those workers will be more subject to the political wishes of their supervisors.

Critics of the changes say they will make managers and health policy experts less willing to push back on policies they think might be damaging to the department or patients, for fear of being fired. And some say the highly skilled workers who run DHHS programs, but who make less than they would in the private sector in exchange for job security, are being given a signal that they’re now expendable.

“That’s going to be awfully difficult to overcome some of the angst that you’re causing,” said Allen Feezor, former senior policy adviser to the secretary of DHHS under Perdue. “It may become harder to get what you need: the best ideas, the best energy and the most effort, from the people who know the programs and the environment.”

In a letter to newly exempt employees on Aug. 20, DHHS Secretary Aldona Wos said these changes were about ensuring both quality employees and accountable managers.

“We will be able to leverage your creativity, passion and expertise for the benefit of the Department and the people we serve every day,” Wos wrote.

Department’s size, structure means high exempt numbers

Staff at the Office of Human Resources attribute the massive increase in at-will workers to the size and structure of DHHS, which employs around 17,000 people across the state.

Change in exempt positions

Department Perdue McCrory Change % change
DHHS 79 388* 309 391.1%
DENR 24 167 143 595.8%
Transportation 44 167 123 279.5%
Administration 15 50 35 233.3%
Commerce 35 62 27 77.1%
Revenue 16 23 7 43.8%
Public Safety 102 106 4 3.9%
Cultural Resources 13 11 -2 -15.4%
Source: Office of State Personnel
*Although the governor’s memo has 388 positions listed as exempt, a DHHS spokesperson says the number is actually 379 due to duplications and other errors.

“[DHHS] is greatly decentralized,” Paula Woodhouse, deputy state personnel director, said in an early August interview. “We’ve got some hospitals that are larger than some agencies.”

Compared to other agencies, the percentage of exempt employees at DHHS is a little less than average at about 2 percent. The legislative changes that bumped up the cap on these designations now allow governors to create more alignment across different departments, said Director of the Office of State Human Resources Neal Alexander. That way, similar positions can all be exempt no matter what department they’re in.

“They’ve got so many divisions and organizations, like hospitals and these other things, that allow them to get consistent within their organization,” Alexander said of DHHS in early August.

With all those employees, the department has a huge impact.

“DHHS programs touch more than 2 million lives in the state of North Carolina daily,” Feezor said. “There are not that many agencies that do that.”

But the change inside the department is a big one.

Exemptions vs. agency size

Department Employees % exempt
DENR 3,500 4.77%
DHHS 17,127 2.27%
Transportation 13,085 1.28%
Administration 691 7.24%
Commerce 2,608 2.38%
Revenue 1,466 1.57%
Public Safety 27,450 0.39%
Cultural Resources 945 1.16%
Source: Office of State Personnel,
July 2013 state employee data

About 300 employees at DHHS have received letters over the last few weeks informing them of their newly exempt status. The growth of these employees represents an almost five-fold increase, second only to the spike in the Department of Environment and Natural Resources.

And the reach is deep, according to numerous former DHHS officials who spoke both on and off the record. Some of the newly exempted positions are for program managers who are three, four and even five layers down the chain of command.

“I can’t imagine why you want to make some of those jobs exempt,” said former Office of Rural Health head John Price, who retired at the end of February. “Those are professional people and it’s hard to find those credentials.”

Price said there are about three dozen people in the Office of Rural Health. As head, he was exempt, and he had perhaps one other employee who had that status.

Now that office alone has five, Price said after being shown the list of exempted employees.

Critics say at-will status drives good workers away

Price said he spent decades as a field worker in the Office of Rural Health without having to worry about the political winds that blew from the left or the right.

“I was insulated from the political stuff by the director and the assistant director,” Price said. “They dealt with that stuff, and I was able to focus on my job.”

Price said that’s the way it should be for state employees. They’ll do what they’re instructed to do, he said, but they don’t want to have to pass a political litmus test.

On the other hand, Price said when he took his job as director, he knew what he was signing up for.

“When I signed the paperwork, it said I knew I was becoming exempt,” said Price, comparing it to being named an assistant football coach. “If the head coach went away, I knew I could lose my job.”

But Price said there was some uncertainty that came along with his decision. And with more exempt positions in the department, “it discourages people from career growth, that you have to worry about losing your job if you get promoted to a certain level.”

“When you change anybody’s employment terms, they’ve got to decide whether those are terms they want to live with,” said Dr. Georges Benjamin, executive director of the American Public Health Association, especially if there are better-paying jobs in the private sector that they qualify for.

Other former division heads say they’ve heard from old co-workers that morale is low – “jumpy” is how one described it – and they say many long-time employees are looking to leave state service or have already left.

For example, at least three long-time top Medicaid officials have left that division since February.

Deb Cassidy, the former head of the Division of Child Development and Early Education, said she was pushed out to make way for someone without qualifications and that her deputy also left.

“And when you have the two top people leaving like that, the division loses direction,” Cassidy said. “It’s hard enough when you put in qualified people, but when you put in people who don’t have the deep knowledge, it’s a serious setback for state government.”

When asked about allegations of low morale inside the department, Assistant Director of Communications Julie Henry said the secretary’s focus is on trying to “encourage people to do the best they can and be proud of a team that makes a difference.”

“The overall goal is to accomplish what we set out to do and meet the needs of people in North Carolina,” Henry said.

She said she doesn’t see the rise in exempt positions leading to a more politicized department.

“This is an $18 billion organization, comparable to big companies in the private sector,” Henry said. “At those organizations, individuals who have these responsibilities are expected to perform.”

But the private sector analogy in a bad one in a lot of ways, Benjamin said. He points out that private companies don’t have to be accountable to the public and lawmakers for taxpayer dollars. Nor are their CEOs, along with the entire management team, subject to change every few years as the political landscape shifts.

“I often hear elected officials say, ‘I want to make this look like the private sector,'” Benjamin said. “Well, this is not the private sector. This is government.”

And to questions about how state workers are now simply facing what other workers in a right-to-work state face, all of the former directors said the people they had under them were well-qualified to leave and make more in the private sector.

“Look, they’re there every day looking after my health and the health of my family and the folks who live around them,” said Price of many of the newly exempt employees. “They wake up every morning with that on their minds. It’s not a job for them.”

‘Exempt’ doesn’t always mean ‘political’

With major decisions on the horizon for DHHS, including a controversial new law rewriting regulations for abortion clinics, McCrory has reassured voters these rules will be made by experts.

“It’s kind of ironic, I hear the media talk about stringent regulations which will close clinics,”McCrory told the Triangle Business Journal’s Erik Spanberg this week. “They haven’t been written yet and they’re going to be written by a doctor, not politicians.”

But that doctor may have been hired in a highly political atmosphere — one critics say may intensify with more at-will employees among the health department rank-and-file.

Duke University public policy professor Don Taylor Jr. said it’s not necessary to exempt a lot of workers for a new administration to get what it wants in terms of policy.

“It’s useful from everybody’s perspective to have some civil servants who are career employees and are seen as somewhat a bit above the fray,” Taylor said.

And he said people at the top will drive the policy changes. The workers below them will be obligated to carry out the policies the governor and his division heads want.

Taylor said the thing to watch is the amount of turnover the department now the letters have been sent. And  Benjamin, who in his role at APHA interacts with government workers around the country, agrees.

“You can make it more political, but you don’t have to act on it,” he said. “The real test will be if those jobs have turnover after they are exempt.”

Making use of flexibility

McCrory has repeatedly made mention of added flexibility as the big reason for the expansion in exempt positions. With the grievance process removed for these employees, McCrory has said he and his staff can improve the efficiency and effectiveness of state government.

And because these employees run divisions and departments, DHHS spokeswoman Henry says this at-will status promotes a higher level of accountability.

“The positions designated exempt are people who have responsibility for large program areas, budget areas,” Henry said. “It’s not just their responsibility to come in and do their own job.”

Although these employees are no longer explicitly protected from arbitrary termination, McCrory spokesperson Rick Martinez said it’s in no one’s interest to rid any department of professionals with deep institutional knowledge.

“No chief executive is going to want to get rid of that for the sake of giving a buddy a job as a political payoff,” Martinez told WRAL News in early August. “Gov. McCrory has stressed efficiency probably more than any other governor in recent times, given his background.”

Henry said no determinations have been made yet about additional at-will positions in the department, so it’s unclear whether the number will change after McCrory designates his additional 500 exemptions.

But regardless of how the number fluctuates in the department over the next four years, Benjamin said the real issue for DHHS will be how McCrory — and his health secretary — use their expanded firing power.

“I remind people — and I always tell my political friends — this is a very small world,” Benjamin said. “If you don’t treat your professionals well, your ability to get someone else to take that job is very limited.”

Copyright 2013 by Capitol Broadcasting Company and North Carolina Health News. All rights reserved.

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