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Ka-CHING$$: City retirees collect millions in unused leave

Copyright © 2014 Albuquerque Journal

Retiring from City Hall often comes with something better than a fancy watch.

In Albuquerque, longtime employees walked away last year with tens of thousands of dollars in cash – compensation for their unused vacation and sick leave.

In fact, seven of the city’s 10 highest-paid employees last year were retirees who boosted their final checks by cashing out unused leave.

It’s a practice that costs the city about $6.7 million a year – all for vacation and sick time never used by employees.

Rob Perry, Albuquerque’s chief administrative officer and top executive under the mayor, said the city should consider limiting the payouts, especially for new employees. But doing so isn’t easy, given that it’s covered in union contracts and is a long-standing practice that workers expect.

“Undoubtedly, it’s a very rich benefit,” Perry said in an interview.earningsbox

The top earner at City Hall last year is an example of the practice. James Breen, who retired as fire chief on Dec. 31 after 23 years, made nearly $160,000 in 2013, about $36,000 of which was a payout for unused leave.

In an interview, Breen said it was difficult to take vacation, and he used sick leave only when necessary.

“As a fire chief,” he said, “the demands of the job really prevent you from taking the amount of vacation leave that they give you. Your presence is required almost every day, and it’s hard to get away.”

The No. 2 person on last year’s top-pay list didn’t cash out any unused leave, but he’s unusual for other reasons. Russell S. Perea, a police officer, made about $157,000 in 2013, the bulk of which – about $121,000 – was back pay after he won his job back. Perea was fired in 2011 after the city accused him of being untruthful and violating procedures in connection with the infamous Levi Chavez case. A judge ordered Perea reinstated.

The third person on the top-earners list is another retiree, Police Chief Ray Schultz, who made $156,000. About $57,000 of his pay was compensation for unused leave. Altogether, most of Albuquerque’s top earners last year got there by cashing out unused leave upon retirement.

The two biggest leave payouts of 2013 went to deputy police chiefs Paul Feist and Stephen Warfield, both of whom retired. Feist was paid $99,000 for unused leave and Warfield about $93,000.

Payouts of that magnitude aren’t unprecedented. Four years ago – when the mayoral administration changed – at least four executives left city government with leave payments topping $110,000 each.

Fairness issue

Almost everyone at City Hall agrees the leave payouts are generous. But it’s not clear whether they can be changed in a way that’s fair to employees, officials say.metro01_jd_26jan_Pay

City Council President Ken Sanchez said he’s open to a change that covers new employees only, especially as the tight job market makes city employment more desirable. On the other hand, he said, the city must be wary of unintended consequences.

Allowing employees to cash out sick leave at retirement gives them incentive to avoid using it frivolously.

Paying for unused leave “is becoming more and more costly,” Sanchez said, “but I would hate to penalize people showing up to work each and every day and doing their jobs for the city of Albuquerque.”

Perry, the CAO, agreed that changing the rules could trigger other problems. Some employees have already made it clear that if a rule change is coming, they will leave now while they still get paid for unused leave, he said.

“If you were to change it, what you’d have is the possibility, from a personnel perspective, of a mass exodus,” Perry said.

There’s also the risk of hurting recruitment, especially in the police and fire departments, where the city faces tough competition with other agencies for new employees, officials said.

Vincent Yermal, Albuquerque’s director of human resources, said the city’s sick-leave payouts aren’t unique among public employers.

“It’s not an entirely uncommon practice” in other government agencies, he said.

Mayor Richard Berry directed his administration to examine potential changes.

“The Mayor has asked his CAO and Human Resources Director to review city rules and regulations governing leave payouts to determine if there are reasonable adjustments that should be considered for future hires, with a focus on stewardship of taxpayer dollars,” city spokeswoman Erin K. Thompson said in a written statement. “The conversation must give priority to maintaining a robust public safety workforce as it relates to recruitment and retention.”

Complicated rules

The rules governing City Hall’s leave payouts are complicated, depending on employees’ years of service and other factors. Generally speaking, employees can accumulate up to 150 days of sick leave and retirees can convert all of their unused sick leave into cash.

For others leaving city employment to take other jobs, they can sometimes convert a portion of their unused sick hours into cash, depending on how much they have. Some employees can also sell back some sick hours once a year, even if they’re not retiring or leaving.

Altogether, the city paid about $4.2 million last year to its employees for unused sick time.

As for vacation time, employees are paid for whatever they haven’t used upon leaving city government, due to retirement or otherwise. That cost the city about $2.5 million last year.

“On the vacation side of it, what we do is pretty consistent with the rest of the world,” Yermal said. As for sick leave, “it is not typical on the private-sector side to see something like this.”

At the city, employees with more than 15 years of service typically get about four weeks of vacation a year.

As for Breen, he said he hit the limit on how much vacation and sick time he could accrue – about 210 days – four or five years ago, around the time he became fire chief. That means he lost additional vacation time, anything that would have accrued since then, without compensation.

Still, he said, “it’s a very generous benefit. It really is.”

In his case, leave just built up over the years. Breen thought of it as something like an emergency fund, in case he faced an extended illness, injury or disability.

“It’s kind of like a savings account,” he said. “A lot of us who reach the executive levels, we tend to be work-centric. We only use sick leave when we’re legitimately sick, and if you do that and you’re lucky, you tend to accumulate a lot of hours that you don’t use.”

And, of course, “there is the knowledge that when you retire, you can cash out” every hour of leave.

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