State employees due $2.2M in vacation pay

By Johnny Brannon
Advertiser Staff Writer

As the state wrestles with calls to slash spending or raid special funds to bridge a hefty budget shortfall, it must also decide whether to spend more than $2.2 million extra to pay for accrued vacation time of 151 political appointees.

Most public employees earn 21 vacation days each year and can save up to 90, which the state must pay for if the person doesn't take the time off before they leave their job.

Newly elected governors are entitled to appoint new leaders for most departments, so those who served under Gov. Ben Cayetano will cash out to the tune of $1,507,546 when they step down after voters choose a new governor in November.

And because the entire staffs of the governor and lieutenant governor are normally replaced as well, 77 employees from those two offices stand to reap $717,016 more, bringing the total to $2,224,562. That works out to an average of $14,732 for each of the 151 employees.

Cayetano's proposed supplemental budget for this year sought extra money to fully cover that cost, but House lawmakers voted to chop $1.1 million from that line item.

Rep. Dwight Takamine, House Finance Committee chairman, said the decision reflected a priority to retain financing for essential services, such as public education.

"There are many needs and not enough resources to meet those needs," said Takamine, D-1st (Hamakua, N. Kohala). "Vacation pay was one of those areas where there wasn't enough to provide full funding. This year there's more of a situation to deal with because of the change in administration."

If the Senate follows that approach, it would leave enough to pay for vacation days owed only to 85 employees of the governor and lieutenant governor, and the departments of Hawaiian Home Lands and Human Resources Development.

The other 14 affected departments would have to absorb costs for the remaining 66 employees with spending cuts, said state budget director Neil Miyahira.

"They're going to have to find the funds, because this is an obligation that's due," he said.

Though departments pay for accumulated vacation whenever a rank-and-file employee retires or otherwise leaves a job, they do not normally budget for the payouts in advance, Miyahira said. Instead, they typically keep authorized positions vacant and use the saved money to cover the vacation debt.

"We don't allow them to budget for it," he said. "Typically, they just have to eat it."

The situation is quite different in an administration's final year, however, because of the large number of people who will leave their jobs at once, many of whom hold the highest-paid management positions.

And the Legislature is scrambling to find new sources of cash or reduce spending this year. State tax collections dipped sharply amid the economic slump that followed the Sept. 11 attacks.

Barring a dramatic rebound, the state expects to have $300 million less to spend this year and next than lawmakers had expected when they drafted the state budget last year.

Russell Okata, executive director of the 24,000-member Hawaii Government Employees Association, said failing to budget for rank-and-file workers' vacation payouts makes no sense in any year.

"They balance the budget on the backs of the employees," he said. "How do you expect to keep the morale in public service when your own boss doesn't take care of you on this?"

But Lowell Kalapa, head of the independent Hawai'i Tax Foundation, said the looming vacation payout this year underscores a system rife with problems that unnecessarily inflate the cost of government.

Allowing employees to bank 90 days of vacation ensures that the state will pay more to cash those days out than they were worth when the employee earned them, because most salaries increase with years of service, he said.

And in addition to the 90 banked days, officials can cash out the 21 days they earn in their last year, for a total of 111.

"That's a lot of money, especially if you're at the high end of the pecking order," Kalapa said.

Most private-sector workers can carry far fewer vacation days over from year to year — if any at all — and the number of days they earn generally starts out smaller and increases as they stay at a job longer.

Most of the state's 41,000 full-time employees earn 21 vacation days each year and can bank up to 15 of them at a time. At that rate, it takes only six years to accrue 90 days, which can steadily increase in value as time goes by.

Labor contracts negotiated last year reduced the number of vacation days for newly hired workers in their first years of service, but the number of days that employees can bank has not changed.

Cayetano said he believes it would be more economical to allow workers to carry no more than 45 vacation days, said press secretary Kim Murakawa. But he realizes it is often difficult for some employees to take time off.

"I think the department heads particularly feel a responsibility to their jobs and therefore don't always take the time they are entitled to," she said.

Cayetano has taken few vacation days since he was first elected governor in 1994, and has lost days because he did not use them during his more than 27 years in government, Murakawa said.

Okata said the union would strongly oppose any move to decrease the number of vacation days that could be accrued.

"To attract the best and brightest to public service, we feel these types of benefits are important," he said. "If there's going to be a take-away, we'd like to know the reason why."

State employees generally earn 21 days of sick leave each year as well, and there is no limit on how many they can accumulate during the years, said Jim Halvorson, deputy human resources development director.

There is no direct payout for unused sick days, but they can boost retirement pay by crediting workers with additional employment time, he said.

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.