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State racking up huge debt for employees' stored leave

SACRAMENTO--California paid more than a quarter of a billion dollars last year alone to compensate departing and retiring state workers for vacation and other leave time saved during their careers, and one public employee topped the list with a US$488,000 check.

Data show that 24,000 state employees are banking vacation time while exceeding a state cap on such mass accumulation of benefits, according to a 2013 report by the Legislative Analyst's Office. That's a 140-percent increase from 2005.

And the state's bill is sure to grow, too. The most recent calculation, done in 2012, showed the state owing its employees US$3.9 billion in unused leave pay. There are no estimates of what that unfunded liability is today.

The state's cap on banked vacation leave for an employee in most departments is 640 hours, which is considered generous compared with the private sector and other state governments. But managers complain that the cap is hard to enforce because public employees aren't penalized when they exceed the limit.

“That is really quite shocking,” said Loren Kaye, president of the California Foundation for Commerce and Education. “The reason private employers have caps on these sorts of benefits is because of the enormous liability that can accrue over time. That's just simple good business practices.”

Last year, 280 state workers received six-figure payouts for time banked during their careers, with much of that money doled out for vacation days that were never taken, according to payroll data from the state controller's office, which included many state departments, but not all.

More than 1,600 state employees received at least US$50,000 last year after leaving state employment or retiring, according to the controller's data.

Mystery Amount

The full extent of the cost each year is not known, because some employees take their vacation at the end of their careers instead of taking a lump sum payment. Others appear to treat the banked benefit as an auxiliary retirement account, albeit one that is heavily taxed when it's paid as a lump sum. Accrued leave is paid based on a worker's final salary, so banked vacation days increase in value following pay raises.

“I'm very aware of the problem,” said state Sen. Mark DeSaulnier, D-Concord. “Banking vacation is not the intended use of the benefit. It's so employees can come back refreshed. There needs to be flexibility in some lines of work, but this is a problem. It's a management problem and it's a perception problem in the public.”

The highest leave payout in 2013 went to prison psychiatrist Rajababu Kurre, who was paid US$488,000, nearly two years of salary. Kurre retired from the California Institution for Women in San Bernardino County after 20 years of state service and receives an US$8,100 monthly pension. Mohinder Kaur, a supervising psychiatrist for Coalinga State Hospital, received US$403,000 in vacation and other leave. Kurre and Kaur could not be reached for comment.

The top leave payouts typically go to public-safety and medical professionals in 24-hour-a-day, seven-day-a-week operations such as the Department of Corrections and Rehabilitation, the Highway Patrol, and the Department of Forestry and Fire Protection, where officials say emergencies and staffing shortages make it difficult to take vacations.

The state's prison guards union successfully bargained in 2011 to lift the cap on vacation hours they can accrue. As of December, 9,500 correctional officers each had more than 640 hours — or 80 days — in vacation time saved, according to the California Department of Human Resources.

'Poor management'

“This strikes me as extremely poor management of the workforce,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “You would never see this in the private sector.”

State workers generally earn seven to 16 hours of vacation time per month.

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A pedestrian walks by a Stockton Record newspaper rack displaying the headline “Bankrupt!” in Stockton, California on June 27, 2012. (AFP)

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