Report: Furloughs increase Calif's long-term costs

Report: Calif. worker furloughs increased long-term liability for paying state leave balances

Associated Press

SACRAMENTO, Calif. (AP) -- State worker furloughs saved California $5 billion over five years but left taxpayers on the hook for $1 billion in unused vacation because employees banked many of their paid days off while they were forced to stay home, according to a report released Thursday.

The accumulated leave time greatly increased the state's cash liabilities because employees must be paid for the unused time off when they quit or retire from their government jobs, the nonpartisan Legislative Analyst's Office found.

Payments to employees for accrued leave time are now at historic levels, reaching nearly $270 million in the last fiscal year.

The furloughs began in February 2009 as a way to help close ongoing state budget deficits. But the report says many workers simply used furloughs for time off instead of their normal vacation days.

California's long-term liability to pay employee leave balances now is $3.9 billion annually, of which $2.1 billion comes from the state's general fund. The $3.9 billion amounted to 27 percent of all state salary costs, a greater percentage than for most other public and private employers.

Each day of unpaid leave amounted to a pay cut of about 5 percent. That cost the average state worker about $21,000 over the last five years, but also increased their overall time off by about 50 percent.

The furloughs started under Gov. Arnold Schwarzenegger and continued under Democratic Gov. Jerry Brown but are scheduled to end this July. Spokesmen for Brown and the state Department of Finance referred inquiries about the analyst's report to the California Department of Human Resources.

"The governor is developing policies to cut leave balances at the same time that he's stabilizing the state budget," said Human Resources spokeswoman Pat McConahay. But she couldn't give specifics or say when those policies might be revealed.

"Basically the problem, just like the deficit, is a carry-over from a prior era," she said. "Employees were furloughed for a short-term savings, and it has left us with a long-term debt."

The average employee had 79 furlough days during the five years the unpaid time off was imposed, ranging from 12 for California Highway Patrol officers to 94 for prison guards, engineers, scientists, attorneys and park rangers.

The average state employee's annual leave balance increased by 16 days during the five-year period. The state will have to pay employees for that time unless they are forced to take their vacation days.

The report by the nonpartisan analyst recommends that the state do just that:

— The Legislature could require state workers to take their time off or lose it in the future, rather than banking it to inflate their payout upon retirement. Existing leave balances can't be reduced because employees have already earned the time off, the analyst said.

— Agencies could enforce the state's existing cap on how many vacation days employees can accrue. Most employees are supposed to bank no more 640 hours, the equivalent of four months' vacation. But nearly 24,000 of the 215,000 employees who work for state agencies — roughly 11 percent — have leave balances greater than what is allowed by state policy. The cap "seemed totally ineffective," the analyst found.

— The state could buy back some of the unused time now rather than waiting to pay employees for it later.

The report notes that California gives state workers more paid days off each year, along with more generous pension and health care benefits, than are typical for employees nationwide. Unlike many employees, state workers can cash out their unused vacation days as well as unpaid overtime and holiday credit.

The state also is more generous in letting its employees bank their unused vacation time. While California employees are supposed to accrue no more than 80 days, the federal government caps leave balances at 30 days. Caps of between 20 days and 40 day are typical among both public and private employers, the analyst said.

Some California state workers have received lump sum payments at retirement of hundreds of thousands of dollars, the report said. That has led to adverse publicity, particularly when employees have been paid for months of accrued leave above what was permitted by state policy.

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