Councilman: Review city pay perk

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Former Omaha Police Chief Eric Buske retired in 2009 after 17 months on the job, locking in a pension payment of more than $100,000 a year.

His short-lived stint as chief also helped earn him a retirement gift many would envy: a check for almost $130,000.

Buske's payment came courtesy of a city policy that allows employees to bank unused sick and vacation time over the course of a career, then cash in the hours when they leave.

The hours are paid at the rate a person earns at retirement. In Buske's case, a 25-year career saw his hourly pay rise from $10 in the mid-1980s to $25 in the mid-1990s. In 2006, just before his promotion to police chief, he was making $51 an hour.

Yet the hours he racked up over the course of his career were paid at his chief's pay: $63 an hour.

Over the past five years, the city has shelled out more than $23 million in such payments. That's an average annual cost higher than needed to run some city departments. Buske's payment was the most generous; the average payment was about $25,000.

"Wow. To me, that's robbery," said City Councilman Franklin Thompson. "There is no intention on the citizens' part to do it that way."

Thompson said he would like to further review the policy, which is spelled out in city labor contracts, now that the council has taken back authority over contract negotiations with city labor unions.

The perk is another example of the disparity between public- and private-sector employee benefits examined by The World-Herald in this era of pension problems, cuts in public services and growing taxpayer frustration.

Changing the policy would require either concessions from unions or changes at the state level.

"The system is broken at its roots," Thompson said.

That's largely because such benefits are common in cities similar to Omaha. In 2008, the Nebraska Commission of Industrial Relations, the state's labor court, found that six of seven surveyed cities paid out for unused vacation time, and five paid for owed sick time.

The practice of paying out at the current pay rate is also standard in similar cities, and spelled out in labor contracts, to boot.

If a majority of cities have the policy, then the court can order Omaha to offer it, too.

The benefit has grown as city negotiators have opted to kick costs down the road rather than increase current spending.

There can be a gap of decades between the time when agreements go into effect and the first payout, because costs are incurred only when employees leave. That gap has made it an attractive bargaining chip whenever the city has had to ask for concessions, said Assistant City Attorney Bernard in den Bosch.

"In lieu of giving pay raises, they would give more time off," he said. "It's no secret."

Ever since the city first recognized unions in the 1970s, employees have been allowed to bank unused vacation time. The number of hours has grown only slightly over the years. Employees can now carry over between 280 and 360 unused hours.

The policy regarding sick pay, meanwhile, has grown from nothing.

The first contract with the city's largest civilian unit, in 1975, explicitly stated there would be "no compensation for accrued sick leave."

The very next year, the contract called for employees to be paid for up to 720 hours of sick pay, earning an hour of pay for every eight hours they accrued over the course of their career.

Today, employees in that union can cash out up to 2,000 hours of sick time.

The benefit rules vary from union to union. Some hours are paid out at full value while others are worth as little as one eighth of the hourly rate.

Recently the payouts have come up in negotiations with various unions as the city has tried to corral spending, in den Bosch said.

For example, Mayor Jim Suttle's proposed fire union contract — rejected by the City Council — included components that would have slowed the rate at which newer employees earned vacation time.

The change would have been slight, however, and the contract included no other reduction beyond those ordered by the state labor court.

The exact rules of sick and annual leave payouts differ for each of the city's seven unions. Police, for example, can receive payouts for sick time only if they work at least 20 years. They are paid full value for the first 1,200 sick hours banked. After that, four hours are worth one hour of pay, for up to 3,200 total hours.

Firefighters have no tenure requirements and earn 57 percent of the value of their accrued hours.

"We always thought it was a huge amount of money and hoped there was a way to tinker with the process that allowed it," said Paul Landow, chief of staff for former Mayor Mike Fahey. "But negotiations being what they are, it was very difficult, and we were never able to make it happen."

Landow himself received such a payout when he retired in 2009, though it was a comparably small $8,500.

While there are ways to scale back the benefit, Landow said, any solution would be tricky.

Contracts with various union groups outline everything from the number of hours an employee can accrue each year to the rate at which they will be paid.

City officials could try to adjust the payout percentage, awarding a smaller rate for each accrued hour, said Landow, now a professor at the University of Nebraska at Omaha. They could also attempt to decrease wages, which in return would reduce the cost of the payouts. They could look at paying the hours at the rate the person was earning at the time.

Or they could try to reduce the number of hours overall.

But any of those approaches would require concessions from unions. Landow said that would be a hard sell to employees.

"They use it as a retirement strategy," he said. "It's an employment benefit, part of an incentive package. Once something has been in the contract for 30 years, it's virtually impossible to remove it."

Fire union President Steve LeClair disputed the idea of the hours being viewed as a retirement benefit.

"I don't know if it's something that is counted on as income. There's no way to gauge whether you're going to be sick. If you're sick, you're sick, and you're going to burn through that time," he said.

In den Bosch said the policy serves a purpose, acting as a stand-in for disability insurance. Omaha has no disability policy, so incapacitated employees often use banked time to continue earning a salary.

He recalled one receptionist who used banked time while she was recovering from chemotherapy sessions.

"She at least had some income coming in because she'd accrued it. By the time she retired, she had none," he said.

David Kramer, an attorney who often deals with public-sector labor disputes, said the idea of using the system as a stand-in for disability insurance doesn't justify the cost. Even a generous disability insurance policy would cost less than the millions of dollars in payouts each year, he said.

That the policy even exists, he said, is a reflection of Nebraska's system for setting public employee wages. Ultimately, terms and conditions of employment — including the policy for sick and vacation payouts — are based on whether similar cities do the same thing.

That's what happened in a 2008 case before the CIR. Based on a survey of other, similar-size cities, the commission upheld the practice and ended a cap on accrued sick time. Before the decision, officers could accrue only about a year and a half of paid time off.

The court threw out the cap, although it decreased the number of hours employees can earn each year.

"When you compare Cadillac benefit plans to Cadillac benefit plans, you still wind up with a Cadillac benefit plan," Kramer said. "It's a self-fulfilling prophecy, a never-ending cycle."

Getting unions to agree to scale back the perk would probably be difficult, he said. If Omaha or its citizens want the issue addressed, it would have to be done through legislation at the state level, he said.

"As long as the system is dependent on what other employers do, the hands of the city and other political subdivisions are really tied," he said.

"In order for there to be dramatic changes, the Legislature would have to do it."

Contact the writer: 402-444-3144, matt.wynn@owh.com

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