State pays a bundle in unused leave

At a time when Georgia’s state government wrestles with financial problems, it paid workers who retired, quit, transferred or were laid off $43 million last year in unused vacation time, according to a new audit report.

Including payroll taxes and payments to the health benefits system, the total cost to state taxpayers was closer to $60 million.

And the state is obligated to pay out hundreds of millions more to current employees in coming years. State employees had banked more than $550 million worth of unused time off as of the end of fiscal 2010. The state must pay them for that time when they leave their jobs, minus any time off they actually take.

The report, released last week, said private companies generally provide fewer days of leave, are less likely to allow leave to be carried over and are less likely to provide a retirement benefit for unused leave.

The report comes less than two weeks before Gov. Nathan Deal will release his 2013 state budget proposal that is expected to include further spending cuts in funding to state agencies — on top of billions of dollars in cuts in recent years.

Senate Appropriations Chairman Jack Hill, R-Reidsville, whose committee requested the audit, said his panel will review the findings when the General Assembly convenes Jan. 9.

“It is a lot of money,” Hill said. “I bet you will see some revisions [to state policy].”

Hill noted that the review showed other states and public universities have similar policies that allow employees to get paid or apply the banked time towards retirement benefits. And advocates for state employees say the benefit is justified since many government workers could earn higher salaries in the private sector.

However, with governments across the country looking to save money, other states are looking at putting new caps on the number of paid time-off hours state employees can bank.

“It would be wise for Georgia to review the limits on how many vacation or sick leave hours can be carried over year-to-year,” said Kelly McCutchen of the Georgia Public Policy Foundation, a free-market think tank in Atlanta.

“Employers should want their employees to take some time off mentally and physically from their job each year,” he said. “Employees should be able to save a limited amount of unused hours and should then be paid at the end of each year for any remaining hours so the state doesn’t build up such large liabilities.”

Early retirement

Some employees received more than $20,000 when they left their state jobs and many were able to retire months early because of policies allowing them to use some unused leave and sick days toward retirement, the audit said. A majority of ex-employees received less than $2,500 when they left.

Most state employees get three weeks of annual leave in their first five years and 4.2 weeks after 10 years, the review said. They also get three weeks of sick leave. The University System follows slightly different rules. Employees also get 12 paid holidays, which were three more than private companies included in a report cited by the Department of Audits and Accounts in its review.

Employees who don’t use their time off can save it, and if they leave their state jobs they can get paid for up to 45 days of unused leave. If they accumulate enough unused vacation and sick leave, they can also use it to speed up their retirement. In other words, if they have enough excess unused leave, they can retire after 33 1/2 years of service but get credit for working 34 years, pumping up their pension.

University System employees, who often belong to a separate Teacher Retirement System, have different rules, but in some cases, their unused sick leave can also be used toward retirement.

The biggest payouts went to employees of the University System; the Department of Corrections, which runs the prison system; and the Department of Human Services, which oversees child protection programs, food stamps and other functions. That’s not surprising since the University System and Department of Corrections employ about 60 percent of all state workers, and human services is in the top 10 among state agencies. They also have among the most retirements and other turnover in state government.

Employee retention

Meanwhile, state legislators have been slashing state spending since the Great Recession hit, and the budget is about $2 billion smaller than it was at the end of 2008.

Most state employees have gone without raises since then, although an Atlanta Journal-Constitution review last year found a big increase in pay for top college administrators and a 30 percent increase between 2007 and 2010 in the number of university staffers earning more than $100,000 a year.

Leslie McGuire, head of the Department of Audits and Accounts’ performance audit division, said the state’s unused leave policies — and any possible changes — should be considered in the context of the entire compensation package for state workers.

State officials have long defended benefits policies by saying their workers could earn more in the private sector. Better retirement or other benefits make up for lower pay, they say, helping them attract and keep top employees.

“There is a whole package that needs to be considered when you evaluate an employee system,” McGuire said.

In addition, changing policies so that employees lose unused leave days could create problems. For instance, officials in prisons, which need a certain level of staffing, may find it hard to staff facilities if employees take days off at the same time.

“There are some potential consequences,” she said.