California State Worker Retirement Payouts Reach Historic Highs

California lawmakers should require state workers to use their vacation time rather than bank it until retirement, the Legislative Analyst’s Office said after finding the costs to taxpayers has reached historic highs.

More than 23,700 public employees have exceeded the maximum vacation time they can bank, after time off increased by 50 percent when workers were forced to take unpaid leave, or furloughs, to trim payroll costs, the LAO said today in a report. The liability for unused leave grew to $3.9 billion in 2011 from $1.4 billion in 2003, according to state financial reports.

Payroll data compiled by Bloomberg on 1.4 million public workers in the 12 most populous states, published in December, showed how managers and employees throughout California government ignore limits on accrual of paid vacation and other leave, leading to lump severance payouts. A psychiatrist retiring from a mental hospital in Napa was paid $608,821 in 2011 after banking 72 weeks’ worth of time off.

California costs will continue to grow next year, the LAO said, as most state employees receive a 3 percent to 5 percent pay increase in July. That means state workers will get paid for those banked vacation days at their new pay rate, not at what they were earning when they amassed the days off.

The nonpartisan LAO said lawmakers should impose a “use it or lose it” cap on future time-off accruals and institute a buyback program to reduce long-term costs. New Jersey caps lump- sum payments at $15,000 per state employee, and such limits are common at private companies.

‘Strict Cap’

“Most of the other states we looked at have some form of a strict cap on the amount of vacation/annual leave that employees may accumulate,” the analyst’s office said in the report.

Governor Jerry Brown, a 74-year-old Democrat, has proposed a budget for the fiscal year that begins July 1 that doesn’t include more furloughs.

More than 111,000 people who left jobs as employees of the 12 most populous U.S. states collected $711 million in 2011 for unused vacation and other paid time off, according to payroll data compiled by Bloomberg.

California employees accounted for 39 percent of that total. Since 2005, the state’s workers collected $1.4 billion for accumulated leave.

Base Pay

In the seven years ending in 2011, more than 1,390 full- time California state workers collected retirement checks that were greater than their annual base pay, data compiled by Bloomberg show. Those workers were paid a total of $141 million, or an average of $101,274.

More than 19,000 lump-sum payments totaling $275 million were issued in California in 2011, an average of $14,110 each. The average payment in the other 11 states was $4,764.

California recipients included a pair of prison dentists who cashed out $784,000 combined, and a highway patrol chief who took a $280,258 check when he retired. Of the 100 biggest payments in 2011 in the dozen states, all but 10 went to California state workers. The average payout for the top 100 was $178,267, in addition to regular wages.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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