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Taxpayers' tab high for unused sick time
When Allentown Police Chief Stephen L. Kuhn announced in July that he was leaving his job after only 16 months, he instantly became eligible to cash in on any of the 42 sick days he accumulated but did not take.
Including his vacation time, Kuhn had $28,440 awaiting him.
''Does the city of Allentown have these kinds of resources to throw around?'' asked Scott Armstrong, chairman of the Allentown Committee, a taxpayers organization. ''We paid Kuhn more money than we can afford and we are paying him more money we don't have to get out of town. How is that good for the taxpayer?''
But while Kuhn's exit package was noteworthy for its size, it represents only a fraction of the cost to taxpayers for public employees' unused sick time.
In the Easton Area School District, for example, 15 employees over the past five years each received checks for more than $20,000 for unused sick time some for far more than that.
Lehigh Valley taxpayers have shelled out millions of dollars in recent years to public employees for unused sick time. The payments come even as public employee wages and benefits outstrip those of private industry, and as numerous local governments and districts raise taxes. And even with the payments, public agency workers call in sick more often than their private-industry counterparts.
Paying workers for unused sick time is a benefit that some experts say is costly and unfair, especially since few private businesses offer pay for unused sick time.
''Basically, sick leave accrual policies pay you twice,'' said Stephen E. Fox, a Dallas, Texas, labor and employment law expert. ''I don't understand why that's fair.
If you get to accrue the benefit and then get to cash it in at the end, to me you're being made more than whole.''
Employees with such benefits are paid normally for the days they work, and then paid again for not calling in sick usually only upon retiring. Unlike Kuhn, most employees who receive the benefit are paid for a portion of the sick days they did not take.
Pay for unused sick days has outraged taxpayers across the country, in many cases where the payout was much higher than Kuhn's. According to news reports, two employees for the city of Tampa, Fla., received nearly $100,000 each in unused sick time. The outgoing superintendent of a Minneapolis area school district left this year with a $350,000 severance, including pay for 385 unused sick and vacation days accrued in 10 years. Health and Human Services Secretary Tommy G. Thompson racked up about $300,000 in retiree health insurance, based on unused sick time from his employment with the state of Wisconsin.
While Lehigh Valley agencies don't report such extraordinary payouts, the total sum spent on unused sick time still amounts to a big piece of change.
Consider, for example, taxpayers in Bethlehem.
Last year, Bethlehem paid 56 retiring city workers $83,202 for unused sick time.
Taxpayers in the Bethlehem Area School District, two-thirds of whom live in the city, for the last school year doled out $118,856 to retirees for coming to work and not using sick days.
Bethlehem's share of the school district cost, plus payments to city employees, adds up to roughly $162,674 in one year.
But that's not all.
Bethlehem taxpayers also paid their share for unused sick pay received by Northampton County employees. In 2002, only seven county employees retired and took unused sick pay of $14,827 an unusually small amount. The county averaged payouts of more than $70,000 for the last four years. But thanks to the county's small cost in 2002, Bethlehem's share, based on population, was only about $4,000.
Retiring state employees also are allowed to cash in. Across the state, Pennsylvania taxpayers shelled out more than $32 million last year for unused sick days.
Again, using a general population average, that single benefit to retiring state workers cost Bethlehem taxpayers around $186,000 last year.
The rough bottom line for local, school, county and state workers' unused sick time last year in Bethlehem: $352,674.
(Federal employees hired before 1984 receive a credit for unused sick days in their retirement annuities, but employees hired since then are paid nothing for unused sick days.)
The payouts came at a difficult time for Bethlehem taxpayers. Since December, school district property tax increased 3.1 percent, city property tax rose 5.5 percent and the county real estate tax soared 19 percent.
''Once a contract is forged 10, 20 years ago and there are some things that are givens, there are some things that are very hard to negotiate out,'' said Bethlehem Area School Board President Margaret Williams.
''It comes up at every contract negotiation, I can tell you that,'' said Williams, a teacher who defended the practice for school districts.
The Bethlehem example is not at all unusual in the Lehigh Valley area. Among the more than three dozen public agencies contacted for this story, the city of Bethlehem was among the most frugal in terms of unused sick time pay. Retiring police get $10 per unused sick day up to 260 days and all other employees get $10 a day up to 170 days, said Personnel Director Jean Zwiefel.
The benefits are more generous in the Stroudsburg Area School District, where support personnel receive $45 per day, teachers get $70 and administrators $100 per day.
There, Patricia Tancredi ended a 31-year-long career as assistant superintendent for curriculum last year. When she left, she received taxpayer-paid retirement incentives and pay for leftover vacation days.
Tancredi also cashed in 113.5 unused sick days, good for $11,350.
In the Easton Area School District, where unused sick days have cost taxpayers at least $950,000 over five years, administrators acknowledged that costs accompany the benefit of having employees withhold use of their sick days.
''The negative part, there's a lot of dollars there,'' said Superintendent Dennis Riker. ''The positive is that
these people are extremely dedicated people.''
A way to over-promise
Receiving cash or, in a few cases, health care coverage for retirees for unused sick days is a retirement goody that's rarely seen in the private sector. According to the U.S. Bureau of Labor Statistics, only 9 percent of employees at medium and large employers could cash in unused sick days that they accumulated year after year.
Most private employers ''don't want this gigantic bank'' of unused days, said Fox, the labor and employment law attorney.
The vast majority of employees in every Lehigh Valley school district, Lehigh and Northampton county governments and the cities of Allentown, Bethlehem and Easton are eligible for some variation of the benefit.
According to Lee Craig, a North Carolina State University expert in public employee benefits programs, the benefit is common in the public sector because politicians can look good today by making promises to government workers that taxpayers will have to keep tomorrow.
''In the public sector, you don't have that type of competitive pressure'' found in the private sector, Craig said. ''And so, there is a natural tendency
to, in a sense, over-promise.''
In most cases, pay rates are set in contracts that apply to all employees covered by the contract. In other cases, lucrative payouts await top administrators who negotiate the benefit individually.
The Saucon Valley School District, for instance, this summer gave a parting gift to retiring Superintendent Ralph Tarola by cashing out his unused sick time. The cost: $25,000.
Tarola declined to discuss the issue.
His replacement, Richard Grove, also declined, saying Tarola and the school board negotiated the payout in private. ''I couldn't tell you what the rationale was,'' Grove said. ''I wasn't part of that.
That's confidential between them.''
Meanwhile, over five years, 22 Saucon Valley teachers have retired and received an average of $3,256 in unused sick time for a total of $71,630. Two mid-level administrators also stepped down and collected $14,680.
Total retirement payouts for unused sick days in the city of Easton have ranged between a low of $14,403 in 1999 to $84,310 in the previous year. This year, Michael McFadden left his business administrator post after 11 years to serve as interim mayor and was rewarded with $13,207 for unused sick days.
Changes in the formula used to calculate teacher retirement packages in recent years meant an upsurge in retirements and unused sick day payouts. When the state increased the retirement pay rate for state employees and teachers in spring 2001, the money started gushing.
The state paid out $12.3 million for unused sick time in 2000-01 to employees. That number rocketed to $32 million in 2001-02. Likewise, the East Penn School District paid out $14,859 four years ago, but saw that figure shoot up to more than $87,500 in the most recent school year.
That might sound like a lot of money, but officials say taxpayers would be stuck with even higher bills if they didn't have the sick-day payout as a retirement incentive.
''If we were able to get 20 teachers to retire with a lump sum buyout of $10,000, it would cost us $200,000 up front, but it would save us over $600,000 a year in salary costs between the retiring veteran and incoming new teachers,'' said Catasauqua Area School District business manager Stuart Whiteleather.
In Northampton Area School District, retirement incentives and a change in retirees' health coverage pushed the cost of unused sick time to nearly $400,000 since 1998. In June, two retirements alone paid out $40,800 for unused sick time, after teachers' and administrators' sick day payments doubled to $75 for each unused day.
''It's a major financial decision,'' said community relations coordinator Denise E. Rader.
Rader and administrators at other agencies also noted that comparing agencies is difficult, if not impossible, because they vary in size and policies. Some agencies pay set dollar amounts for each unused day. Some pay a percentage of daily salary. Some cap the number of days or amount paid. Some allow unused emergency and personal days to accrue with sick days.
Retiring Nazareth Area School District teachers, for example, can choose to receive a severance payment unrelated to unused sick days or $25 for each unused sick day, said business administrator Bernadine C. Rishcoff. Most times, the severance benefits teachers more, so the district has paid out relatively little in unused sick pay.
''When you cost out
they don't take that option,'' Rishcoff said.
Pay and benefits generous
The practice of paying employees for unused sick days reaches back to the days when governments sweetened employee benefit packages to make up for sub-par pay, experts said.
''In the nonprofit and public sector areas, where the employer didn't have the salaries to keep up with the cost of living
they gave employees additional leave time,'' said Ellen C. Kearns, a labor and employment law attorney for Epstein Becker & Green in Boston.
These days, however, government workers are better paid than many in the private sector.
''My impression is that salaries have done well,'' Kearns said. ''Now are saddled with both'' higher salaries and generous benefits.
The most recent wage survey by the Labor Department shows that in the Middle Atlantic region, state and local government workers' salaries averaged 31 percent higher than salaries for private-industry employees. Government employee salaries were higher for white- and blue-collar, service, union and nonunion jobs compared to their private-sector counterparts, according to the survey from January 2001.
While this was going on, public employee benefits ''have far exceeded what private sector employees receive,'' Fox said. ''And so, on the whole, the public sector employees find themselves more often than not in a better position than the private sector employees.''
Representatives of the agencies say that the pay for unused sick days now is a policy designed to ensure that employees show up for work. But even with the benefit, another Labor Department survey showed that, compared to 12 other industry categories, government workers had the highest absentee rate.
Part of the reason for public employees' higher absentee rate likely is that they have more time off to take. Department statistics show that 56 percent of medium to large private companies offer paid sick time, compared to 100 percent of state and local governments.
A different survey of 580 employers released this year by the Society of Human Resource Managers showed that employers offering paid sick leave declined by 13 percent since 1999. Like the Labor Department study, the survey showed that government and schools offered paid sick leave more frequently than any other category of employer.
At area school districts, employees generally accrue one sick day for each month worked, meaning 10 days a year for those who work during school sessions only and 12 days for year-round employees. State workers on the average receive 13 sick days annually.
''Why you need 15 sick days a year, it's not necessary,'' Kearns said. ''I don't find that the normal employee needs 15 sick days a year. They don't need 12 days. Maybe four days.''
In some cases, public agencies use a system in which employees can roll over unused sick days into the following year in place of buying short-term disability insurance. ''We, as an employer, tout our sick leave to employees as a disability insurance,'' said Mia Devane of the state Office of Administration.
So when state employees are ill or injured, they draw upon their bank of sick days until a disability policy kicks in. In rare cases, the agency uses accumulated sick days as its only coverage in the event of a disability.
Aside from accumulating sick days, ''the only thing bus drivers have is a pension,'' said ex-Parkland School District bus driver Durrell Hafler. During his three decades of work, Hafler stayed relatively healthy and banked 92 sick days a third of which he received payment for when he retired this year.
Lehighton Area School District business administrator David Bonenberger said his district does not purchase disability coverage for employees, but could not recall a specific case in which a sick employee ran out of accumulated sick days.
School districts, however, generally provide disability coverage, said John Clark, communications specialist with the Pennsylvania State Education Association.
In other cases, agencies allow employees to convert their unused sick time into health coverage after retirement.
Allentown teachers once were paid 50 percent for each unused sick day while accumulating 11 sick days a year. Now, they redeem them for post-employment health care coverage.
''At this point, what is more valuable to a person, health benefits or money?'' said teachers union President Melvin Riddick. ''I believe it's a definite upgrade.''
Critics of the unused sick-day benefit say taxpayers take an additional hit when paying for unused sick days. In many cases, unused sick days accumulate at the early stages of an employee's career, when workers' pay is relatively low. But some policies allow retirees to cash in those days at their current pay rate, usually the highest rate of their careers, noted Fox.
''That again is what
makes it difficult to calculate the cost from the employer's perspective,'' Fox said.
Agencies respond that in the case of teachers or prison guards positions that must be filled by the employee or a substitute paying employees for unused sick days saves taxpayer money. Jean Mateff, Northampton County's finance director, said the county could have spent hundreds of thousands of dollars more per year by having to pay for substitutes if more sick days were used.
''I do think it is an incentive to not drain their sick time,'' Mateff said.
But at least two districts don't believe most of their employees need the benefit as an incentive to show up to work.
Administrators only in the Boyertown Area and Brandywine Heights school districts in Berks County receive the benefit. But other employees' sick day policy is use it or lose it.
''They're very frugal in some areas, but in administrative pay, they seem to be more liberal,'' Brandywine Heights School Board candidate Robert Lowry said.
Told that the district was unusual in not offering to pay teachers and other employees for unused sick days, Brandywine business manager Steven Fischer was amused.
''Is that so?'' he said. ''They'll probably want to get it in their contract.''
Millions held in reserve
Public agencies are not required to keep records totaling what they pay out in unused sick time.
Accounting rules, however, mandate that agencies list unused sick time pay as a liability on their books. The accounting rules require agencies to record the cost of paying for unused sick days as if all eligible employees were able to cash them in during one year. The reports are included in the agencies' annual audits and provide the potential cost of the benefit when records of actual spending are unavailable.
Thus, about a third of the $1.8 million in so-called ''compensated absences'' listed by the Whitehall-Coplay School District is reserved for unused sick time, said business manager Robert V. Strauss. The balance is attributed to unused vacation time, sabbaticals and other retirement benefits, he said.
The Northern Lehigh School District showed nearly $400,000 in compensated absences in its 2001-02 audit. But that figure probably will increase, since the district this year signed a new teachers contract that increased payment for unused sick days to a maximum of $45 a day. In the previous contract, the district paid teachers $10 per day for days accumulated before 1991 and $25 per day after that.
The Allentown School District's figure for compensated absences was $1.2 million in its most recent audit. Human resources director Evelyn W. Rossi said the district did not collect data on unused sick day payments. Later, she did compile the information, but declined to release it, saying she didn't have time to complete an analysis of how the payments saved taxpayers money in the long run.
Bethlehem Area School District business affairs director Stanley J. Majewski Jr. also did not track payments for unused sick time, but extracted the payments out of records.
What he found surprised him.
Payments for unused sick time soared from nothing in 1998 to $28,549 in 1999-2000, $37,635 in 2000-01, $78,833 in 2001-02, and $118,856 in 2002-03.
Majewski over the years assumed the district was spending about $50,000 on the benefit. The payments, particularly in recent years, raised his eyebrows.
''I've never gone through this and had to dig up the detail,'' Majewski said. ''So I'm glad we did this.''