BOISE – Idaho state agencies have spent more than $125,000 in the past six months to boost the retirement accounts of three departing employees, including one agency director, even though state law bans severance payments to state employees who leave voluntarily.
Gov. Butch Otter’s administration maintains the payments don’t violate the severance ban because the state paid the money to the Public Employee Retirement System of Idaho, rather than directly to the employees.
But at a time when many state workers are being hit by budget cuts, lawmakers and a state employee association question the legality and fairness of the payments.
“It seems like an extraordinary amount of money that seems, perhaps, inappropriate given the budget reductions that agencies are facing, and given the number of people that are spending furlough hours,” said state Sen. Dean Cameron, R-Rupert, co-chairman of the Legislature’s joint budget committee. Senate Minority Leader Kate Kelly, D-Boise, an attorney, said, “The argument that they’re not getting the money directly, it doesn’t fly with me.” She said, “This basically sounds like a severance bonus, and whether you’re directly giving it to the employee or putting it in their retirement account, it is effectively a net benefit to the employee.”
The head of the state’s Human Resources Division, Judie Wright, retired Oct. 31, eight months earlier than she had planned, in exchange for a $72,781.58 state payment into her PERSI account. The payment made her retirement benefit the same as if she had worked the additional eight months. She already was eligible for full retirement.
“It sounds like this was really special treatment in her case,” said Donna Yule, executive director of the Idaho Public Employees Association.
That was the biggest of the three payments this year. In June, the state Tax Commission paid $13,530.78 into the PERSI account of an employee who was being terminated for disciplinary reasons as part of a settlement that allowed him to retire instead.
Also in June, the state Department of Education paid $42,142.58 to allow a low-paid, longtime employee to retire two years short of her full eligibility, rather than be laid off.
It’s the Human Resources case that has aroused the ire of lawmakers, however, because state agency heads serve at the pleasure of the governor and can be dismissed at any time.
“I think it sets a very dangerous precedent,” Cameron said. “I think that’s something that we’ll have to take a careful look at during the session, and maybe that prohibition of severance will have to be adjusted.”
Wayne Hammon, Otter’s budget director, took on the additional title of acting Human Resources director when Wright retired. “We actually saved money by having her leave,” he said. “That savings then is going to cover half of my salary for the next eight months.”
Hammon heads the Division of Financial Management, which will save $40,000 by having half his salary paid from the Human Resources budget. That’s nearly half of the $90,000 Hammon had to cut from Financial Management to meet the 6 percent holdback on the division’s budget that Otter ordered in late September, and Hammon said it allowed him to avoid laying off a Financial Management employee.
“I already had (Human Resources) working on the dismissal letter,” Hammon said. “Judie offered this, said, ‘I’m going to leave anyway – save someone else’s job. I’m happy to do it.’ ”
Wright, a 32-year state employee, made $101,067 a year; Hammon makes $115,918 a year.
The move did cost Human Resources money because it’s paying the lump-sum retirement contribution and taking on half of Hammon’s salary. Hammon said he thought it was a good deal for the state overall.
Hammon said the administration already was planning to propose legislation in 2010 to combine Human Resources with the budget office when Wright retired in July; the move just meant doing that, on an interim basis, eight months early.
State lawmakers, however, haven’t debated that idea.
“Do we have enough leadership and horsepower to do that in a time when both the budget and managing personnel issues are going to be foremost issues for the next year or so?” asked House Minority Leader John Rusche, D-Lewiston. “Certainly the Legislature should weigh into this.”
Idaho has no early retirement incentive program for state employees, because of the law banning severance. Hammon said about a month ago, his office looked into such a program as a money-saving move, but “we found out you can’t … because you can’t pay severance. … It’s pretty specific. It just says, ‘Shall not pay.’ ”
Kelly and Cameron both said if the question is whether Idaho should have an early retirement incentive program for employees to save money, lawmakers should debate such a plan.
“It’d certainly be a worthwhile discussion,” Cameron said. “But this is a little bit different.” Under an early retirement program, he said, it’s available to all employees and a methodology is used to determine the amount paid in early retirement.
“But here it just seems arbitrary. … It seems like they’ve developed their own early retirement program without the statutory authority.”
Kelly said, “If it’s a bonus program to reward good behavior when somebody’s on their way out the door, that’s a totally different matter … given the economy right now, and just the message that sends.”
State Sen. Shawn Keough, R-Sandpoint, said, “My worry is that the perception is that we’re using the taxpayers’ dollars for cushy benefits, and we need to be very vigilant as public servants with how we spend the taxpayers’ dollars.”
Said Cameron, “In my mind … it doesn’t quite pass the smell test.”