Leave It to California

Furloughs Lead to Higher Leave Payouts to State Workers

Most full-time workers receive vacation time and other leave benefits. But California’s state government workers are cashing in on these benefits like few others. A new report from the nonpartisan Legislative Analyst’s Office sheds light on how California state workers are abusing vacation benefits and pushing the state’s leave balances to “unusually high levels.”

The report shows that caps intended to curb excessive leave payments are not being enforced and worker furloughs are actually driving up the long-term bills taxpayers will be stuck with.

The problem with the furloughs is that when state employees take their time off, they naturally tend to use up their furlough days first and reserve their vacation days so they can roll over the unused vacation days to future years. This is compounded by the fact that accumulated leave time is cashed out based on an employee’s final salary, not what he or she was making at the time the leave was earned.

As of June 2012, California’s liability for workers’ paid leave was $3.9 billion and growing. In fiscal year 2011-12, state agencies paid out $270 million in “separation payments” to state employees who retired, changed jobs, or otherwise left their positions-the highest level in 30 years and two-thirds higher than the amount paid in 2008.

California’s paid leave benefits are significantly greater than both public sector and private sector employers. The LAO analysis found that paid leave time is normally limited to between 20 and 40 days per year in most places. Most federal government employees get 30 days of vacation and leave. It’s 40 days for New York state workers, and between 23 and 67 days of leave, depending on the length of employment, for Texas state workers.

By contrast, most California state employees can save up to 80 days of vacation and other paid leave time each year. California’s correctional officers now have unlimited leave since the 80-day cap was removed in their most recent contract, and California Highway Patrol officers are allowed up to 102 days of leave.

While vacation and leave costs account for between 8 and 15 percent of annual salary costs in most places, it has now grown to about 27 percent of worker salary costs in California.

To make matters worse, caps on leave are typically not enforced. According to the LAO, “there does not appear to be any concerted or consistent effort by state control agencies to enforce the cap.” Astonishingly, paid leave caps were exceeded for more than 23,700 employees in January 2013.

A psychiatrist who worked in a mental hospital in Napa received a lump-sum payment from the state’s taxpayers of $608,821 in 2011 after retiring with 72 weeks-weeks, not days-of accumulated time off.

According to a recent Bloomberg analysis of state workers’ unused vacation and other paid leave time in the 12 most populous states, lump-sum payments to California state workers were three times as much, on average, as those in the other 11 states studied. Overall, 90 of the 100 largest payments were made to California state employees. The average payout of those top 100 payments was nearly $180,000.

In addition, between 2005 and 2011, more than 1,390 California state employees received retirement checks that were larger than their base salaries. And according to the California Foundation for Fiscal Responsibility, more than 21,000 state employees receive pensions of at least $100,000 a year.

Not only do such payments smack of unfairness to the taxpaying public, the LAO finds they also have negative consequences on agency budgets and productivity.

So what can be done?

California can start by reducing the amount of maximum leave to 40 days of leave per year and implementing a “use-it-or-lose-it” policy on vacation time. Most private sector employers and many government agencies use this use-it-or-lose it approach. The state can also cap lump-sum payouts made to employees who are leaving or retiring. New Jersey has a $15,000 cap for such cases. The government can also institute a leave buyback program in which workers could choose to cash out existing leave balances at their current salaries.

Those fixes won’t solve all of the problems, but they’d be good first steps towards reining in the exorbitant benefits state workers are receiving at taxpayers’ expense.

Adam B. Summers is a senior policy analyst at Reason Foundation. This article originally ran in the Orange County Register (paid subscription required).