SIOUX FALLS, S.D. (KELO) — Sioux Falls would need an estimated $3.5 million to adjust the wages of all full-time employees for inflation.

The Sioux Falls City Council advanced an ordinance that would provide $3.3 million in general fund money to adjust wages for inflation for full time employees in all employee groups. It would also be used to increase wages of 68 employees whose wages aren’t keeping pace with city goals. The ordinance advanced to a second reading on Feb. 21.

Another roughly $700,000 in money from enterprise funds would be used for the two proposed actions.

Bill O’Toole, director of human resources for the city, said 90% of the total of about $3.9 million would be used for inflation adjustments for employees. Ninety percent of $3.9 million is about $3.5 million. Inflation is an important factor in dealing with wages, O’Toole said.

“It’s a real issue for anyone working for you. Just go to the grocery store,” O’Toole said.

The CPI-U rate was 7% in December of 2022 compared to 1.4% in December of 2021 and 2.3% in December of 2020.

“We haven’t seen these (2022, 2023) rates for a long time,” O’Toole said.

The city is proposing an inflation adjustment for all wages to equal to a 6.5% increase in 2023 for all employee groups.

A CPI-U rate for inflation of 6.5% is used to determine the level of the inflation increase.

For example, members of the AFSCME union would receive an additional base adjustment of 3.5% on top of a planned 3% increase. FOP, or police union employees, would receive a base adjustment of 4% on top of the planned 2.5%.

The inflation increases would need union approval, O’Toole said. Union contracts have already been negotiated and settled, which is why the approval is needed for the adjustment.

This is not first time the city has increased wages for inflation. Wages were adjusted for inflation with lump sum percentages for all full-time employees, according to O’Toole.

The increases are part of the city’s “Employer of Choice Plan” which is intended to ensure the city remains competitive in the public and private sector with its wages and benefits.

The city learned this month that it is competitive with wages and benefits.

Gallagher, a consulting company, completed a wage and benefit study for the city.

Mike Verdoorn, a principal consultant from Gallagher, said at a Feb. 6 city informational meeting that city wages are “highly competitive” both in the public and private sector.

The study did identify several positions the 90% to 95% mark for maximum wage and others that were below 90% of the maximum range, Verdoorn said.

O’Toole said in a KELOLAND interview that the city’s goal is for positions to be at 95% to 105% of the market maximum.

In addition to proposed inflation increases, the wages of 68 employees would be adjusted, based on the wage study.

Those 68 employees are in 29 positions that were identified at below city goals for wages.

Sioux Falls is not the only public entity in the state adjusting pay levels. The state of South Dakota is targeting several employee groups for raises in fiscal year 2024. It took similar action for FY23.

“What can be challenging is how is the market moving,” O’Toole said.

The city had done wage studies roughly every eight to 10 years, he said.

A more comprehensive study such as the one completed by Gallagher needs to be done every three to four years, O’Toole said.