California Needs to Address State Employee Paid Leave Abuses

California’s liabilities for state workers’ vacation and other paid leave has become a growing problem in recent years. This has been exacerbated by furlough policies that provide workers with a strong incentive to take time off during furlough days, allowing them to rack up additional unused paid leave time. While discussion of state employee compensation is dominated by pension and salary considerations, the state should not overlook the increasing costs of employees’ vacation/annual leave benefits.

Earlier this year, California’s nonpartisan Legislative Analyst’s Office issued a report highlighting abuses of paid leave benefits by state employees. The LAO report concluded that the state’s vacation/annual leave liabilities are at “historic levels,” and that its cap on unused leave is “totally ineffective.”

According to a Bloomberg analysis of vacation and other paid leave benefits in the 12 most populous states, lump-sum payments to California state workers averaged three times as much as those made to workers in the other 11 states. In addition, between 2005 and 2011, more than 1,390 California state employees received retirement checks that were larger than their base salaries.

In an article that ran in the Orange County Register, I addressed California’s inability to control these costs:

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.

In light of these problems with current state employee paid leave policies, California should enact the following reforms:

  1. Reduce the amount of maximum leave to 40 days of leave per year.
  2. Implement a “use-it-or-lose-it” policy on vacation time.
  3. Cap lump-sum payouts made to employees who are leaving or retiring at $15,000 (New Jersey currently has such a cap).
  4. Institute a leave buyback program in which workers could choose to cash out existing leave balances at their current salaries.

While these measures may not eliminate all the problems with the state’s compensation policies, they would represent good first steps towards reining in the exorbitant benefits that many state workers are receiving at taxpayers’ expense.

See the full article here.