State’s Lax Enforcement of Vacation Time Cap Is Costly for Taxpayers

The state has a 640-hour cap on the amount of vacation time state employees are allowed to accrue, but lax enforcement of the cap is costing taxpayers dearly, the Los Angeles Times reported March 7.

The Times reported that when Bijan Sartipi retired after 36 years of state work, “he was paid $405,000 for time off he never used – one of more than 450 state workers who took home six-figure checks when they left their jobs last year.”

A prison surgeon in Riverside was paid $456,002 for unused time off.

The newspaper continued:

“Last year, the state paid its employees nearly $300 million for banked time off, according to a Times analysis of payroll data from the state controller’s office. The data include most agencies and departments, but not legislative employees or other taxpayer-funded institutions such as the public university systems. That means the actual cost to taxpayers for unused vacation is much higher.

“The total unfunded liability also does not account for employees who used stockpiled days off at the end of their careers to remain employed while not actually working, boosting the value of their pensions.

“All told, state workers had $3.5 billion in unused leave as of 2017, the most recent estimate available. The blame, said Stanford public policy professor Joe Nation, rests entirely on government mismanagement.”

“It’s like having a speed limit but not enforcing it,” Nation said. “This is not a good way to run any organization.”

“Some departments have offered workers a chance to cash out up to 80 hours accrued time off each year in hopes of reducing the liability of larger payout when workers retire at a higher salary,” the Times reported. “According to the Department of Finance, the state wrote checks totaling $111 million over a three-year period ending in 2017 to help reduce vacation balances – an effort started under former Gov. Jerry Brown. Most private-sector employers cap vacation between 40 hours and 400 hours and do not allow time to be earned beyond those limits.”

When employees cash out their banked leave, the state pays them not just for the hours they have on the books, but also projects how much additional time they would have earned if they had taken the days off.

“For some, vacation payouts can surpass annual salaries,” the Times noted. “And since state labor code requires employers to compensate workers for unused days off based on final pay rate – not what they were earning when the time was accrued – the actual cost of each vacation hour increases over time.”

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