Vacation policy takes toll on state budgets

When Nancie Boedy leaves her job at the Teachers Retirement System of Georgia, she can count on a plum from the state: a cash payout of $64,523.

That represents the nine weeks — or 360 hours — of unused vacation time the co-chief investment officer had piled up as of Feb. 28.

Boedy is a 32-year veteran of state government with a $372,800 annual salary. She stands to get paid the most among the more than 15,400 state employees who have amassed nine weeks or more of unused leave time under generous state rules that have so far survived the recession.

In all, state employees have racked up nearly 13 million hours of such time under these rules, creating a $276.5 million liability for taxpayers as of the end of February, state records show. In addition, University System of Georgia employees have amassed $127 million in unused leave time and related costs.

Those costs worry Georgia legislators, who are trying to plug a $1.1 billion hole in the upcoming fiscal year’s state budget. The thorny subject came up this year as lawmakers considered offering early retirement to thousands of employees to cut expenses. But they discovered the state would have to pay out tens of millions of dollars for unused vacation time if they did.

Critics say the state should scrap the unused vacation time policy, given Georgia’s financial crisis and the fact that many private businesses are slashing benefits. Many workers in the private sector must use their vacation time within a year or lose it, they note.

“It is disgraceful,” said John Sherman, president of the Fulton County Taxpayers Foundation, a government watchdog group that advocates for lower taxes. “Government should be similar to private business. In these economic times, we are looking to tighten the belt.”

The rules allowing state employees to carry vacation time over from year to year have been on the books at least since 1959, according to the State Personnel Administration. State officials say the benefits help them hire and hold onto skilled workers who could get paid more in the private sector.

“The ability to accrue annual and sick leave is in my view an enhancement to recruitment and retention,” said Jeffrey Ezell, executive director of the state’s Teachers Retirement System.

Boedy, who helps oversee how the teachers’ and Employees’ Retirement System funds are invested, did not respond to repeated requests for comment.

Under Georgia’s rules, state employees can carry up to nine weeks of unused annual leave time from year to year. When they leave their jobs, the state must pay them for the vacation time.

In addition, the state must contribute toward those workers’ pension benefits for any additional amount of unused annual and sick leave totaling 24 weeks or more. The state could not immediately provide an estimate of the value of those additional pension benefits.

Georgia is not alone in offering its employees this type of benefit. Florida and North Carolina, for example, allow certain state employees to collect up to six weeks of unused vacation time and get paid for it in cash when they leave. Mid- to higher-level managers in Florida can get paid for up to 12 weeks of unused leave time.

Human resources experts, however, say they have never heard of private businesses offering their employees such generous benefits. Companies want their workers to take vacations so they remain rested and productive, the experts said.

Plus, businesses don’t want to carry large costs for unused vacation time on their books. So they generally don’t allow their employees to carry more than a week of unused vacation time over from year to year, said Peter Rosen, president of Atlanta-based HR Strategies & Solutions, a human resources consulting firm that works with companies in Georgia and other states. Rosen called Georgia’s unused vacation policy “archaic.”

“It just doesn’t make good fiscal sense to do it that way going forward,” said Rosen, who has more than 25 years of experience in the industry, including a stint as a human resources executive with Coca-Cola. “Any of the companies today, if they had anything like that, they would be revising their policies to reflect the current reality.”

Workers in Georgia’s Corrections Department, which has more than 12,000 employees, have accumulated $52.5 million in unused leave time and related costs, public records show. A Corrections Department spokeswoman declined to comment.

State law enforcement officers accumulate so much vacation time because they are often busy, said Joe Stiles, executive director of the Police Benevolent Association of Georgia, which represents some state employees, including corrections officers.

“There are a lot of times when officers request time off from work and their request is denied because of some operational necessity,” Stiles said. “So if they truly were allowed to only take so many days a year or lose it, that would really put them in a quandary.”

This subject came up during the current session of the Georgia Legislature. State senators were considering a cost-cutting proposal that would offer state employees cash payments of up to $10,000 to encourage them to retire early, according to interviews and an internal document obtained by The Atlanta Journal-Constitution. That document, drawn up by the Employees’ Retirement System of Georgia, shows 7,781 state employees could retire with some pension benefits as soon as July 1. If all of them decided to take early retirement, the state would have to pay them and contribute toward their pension benefits a total of $73.3 million for unused vacation time, the records show.

The state would save $422.8 million in salaries and benefits after those costs, according to the ERS document, but only if all those employees accepted the offer and if the state did not replace their positions. Those savings, however, don’t reflect the cost of offering the cash payments to encourage early retirement. Those cash payments would total $77.8 million if $10,000 were paid to each of the 7,781 eligible employees.

In addition to the cost, state officials said the early retirement plan could encourage some essential employees to leave.

“A lot of the people that are on this list are heads of agencies, the top four or five people,” said Pamela Pharris, executive director of the Employees’ Retirement System of Georgia. “Some of those positions would have to be replaced. To say there is a $422 million savings — there is not really.”

Those factors made the proposal somewhat unattractive to legislators, but they said they are keeping the option on the back burner. “There is no plan to do it right now,” Senate Appropriations Committee Chairman Jack Hill (R-Reidsville) said about the early retirement option.

Some legislators, meanwhile, say they want to reduce the number of unused vacation hours state employees can pile up. But human resources experts say any changes to these benefits could not be applied to existing employees, who would be grandfathered by law.

In any case, legislators say any changes would probably have to wait until next year because they are preoccupied with the state’s budget crisis now and the legislative session is nearly at an end.

“It is a very real problem,” said Sen. Seth Harp, (R-Midland), a Senate Appropriations Committee member who favors lowering the amount of leave time state workers can amass. “It is obviously money we owe. They have earned it and it is in the system.”

A spokesman for Gov. Sonny Perdue said the unused vacation benefit is “above market average.” At the same time, Perdue has been working to balance the “very rich” benefits state workers have with their comparatively lower salaries, Perdue spokesman Bert Brantley said. But it would be the wrong time to make any changes now, Brantley said, after the state started increasing employees’ health care costs, freezing their pay and furloughing them amid the recession.

“It is certainly an issue that we have done some things about over the years,” Brantley said. “And had this recession not come, I think we could have moved forward on some of that balancing.”

The top five

These five employees would be paid the most for unused leave, as of Feb. 28. All five work for the Teachers Retirement System.

Nancie Boedy, Co-Chief Investment Officer

Hired: 1977 Salary: $372,800

Unused time: 360 hours, $64,523

Charles Cary Jr., Chief Investment Officer

Hired: 1972 Salary: $372,800

Unused time: 356 hours, $63,806

Michael Majure, Director of Equities

Hired: 2003 Salary: $316,000

Unused time: 344 hours, $52,261

Thomas Horkan, Director of Equities

Hired: 2003 Salary: $316,000