Furloughs add to California's multibillion-dollar employee leave tab

Published: Friday, Mar. 15, 2013 - 8:18 am | Page 1A
Last Modified: Wednesday, Feb. 26, 2014 - 11:34 am

Furloughed California state workers have taken less paid time off than usual, prompting the state to pay exiting employees a record amount last year to cash out accrued leave, according to a new report.

Furloughs have squeezed about $5 billion in savings from payroll, but the extra banked leave time created will cost about $1 billion more over several years, according to the report from Legislative Analyst Mac Taylor.

The future liability is so heavy that lawmakers should consider a leave-buyback program rather than carry the time on the books, Taylor's report said.

The Legislative Analyst's Office also suggests the state impose a "use-it-or-lose-it" policy on future leave accruals and clamp down on enforcing the state's leave cap, which some departments have routinely ignored.

"During the furlough period," the report said, "we found no evidence that the cap had an effect on containing state employee leave balances."

Pat McConahay, spokeswoman for the California Department of Human Resources, said Gov. Jerry Brown knows "it's a problem, just like the deficit was. It's a carryover from a prior administration."

Brown is "developing policies to cut leave balances," she said, but declined to discuss details, citing upcoming bargaining talks with the unions.

Taylor's report said the state paid a record $270 million in 2011-12 to cash out unused leave, while the total liability for unused state employee leave grew to $3.9 billion in June 2012, up from $2.75 billion reported from state records by The Bee in 2010.

Those costs will grow again this summer because most state employees will receive previously negotiated raises of between 3 percent and 5 percent.

The wage increases offset higher monthly pension contributions they've paid for some time, but raises also make accrued leave hours more valuable. Employees cash out the time at the pay rate they earn when they leave state service, not the wage they earned when they accrued it.

The number of banked leave hours per state worker has grown, too. The analyst's report estimated balances grew an average 16 days from 2008 through 2012, while state employees were furloughed between one day and three days per month. Each furlough day equals about a 5 percent monthly pay cut.

"All of these factors were discussed in detail," said former finance director Mike Genest, who helped shape then-Gov. Arnold Schwarzenegger's furlough policy to help close a $60 billion budget deficit.

Fiscal conservatives in the Republican governor's administration argued against furloughs for fear it would push up paid-leave balances, Genest said, but they agreed that state workers couldn't be spared while the rest of government suffered.

"To cut as many things as we did and not have any damage done to the take-home pay of state workers wasn't acceptable," Genest said. "You had to show there was blood on the floor everywhere."

The civil-service process to lay off employees would take too long, and across-the-board pay cuts would require union sign-off, legislative approval or both, he said. That left furloughs.

"It was a mistake," Genest said, "but there was no other tool."

The impact of furloughs, which started in February 2009 and are scheduled to end this July, also has exposed the state's poor enforcement of the rule that caps most state employees' leave at 640 hours. Established by regulations and by contract, it's the highest accrued-leave limit of any state in the nation. Still, more than 23,700 employees – roughly 10 percent of the state workforce – had more than that banked in January.

"Each department has unique reasons for high leave balances," said Nick Schroeder, the state personnel expert who wrote the analyst's report.

Many understaffed smaller departments, for example, struggled to get their work done before furloughs. Once they lost employees up to three days per month, managers had a harder time authorizing vacations.

The report suggests several fixes, including a renewed emphasis on enforcing the 640-hour cap, and a leave-buyback program to bring down long-term leave costs.

"You could do that and save money in the long run," said Mike Shires, a Pepperdine University professor who studies state budgets, "but it would cost you more up front."

The state has done leave buybacks before, but they require gubernatorial authorization. A secret leave buyback program at the state Department of Parks and Recreation led to revelations of wider fiscal mismanagement last year and brought down longtime director Ruth Coleman.

"If they'd like to implement a vacation buyback, I'm sure our people would be in favor of that," said one union official, Bruce Blanning, executive director of the Professional Engineers in California Government.

The analyst's report also suggests lawmakers impose a "use it or lose it" policy on future leave accruals. Many public and private employers have such rules that prevent employees from banking leave above a set limit.

The tougher policy would need to be bargained. The state in 2005 put tighter leave controls on its agenda for labor talks, but negotiators set the issue aside when the unions made other concessions and effectively argued the matter was a management issue, not a rank-and-file problem.

"Our members are held to the cap," said Chris Voight, executive director of the state scientists' union. "When they're not, the work they're doing is absolutely essential."


The Sacramento Bee state worker pay database has been updated and now includes 2012 civil service pay. Find it at sacbee.com/statepay.

Call The Bee's Jon Ortiz, (916) 321-1043. Follow him on Twitter @thestateworker and read his blog, The State Worker.

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