MINUTES OF THE meeting
of the
ASSEMBLY Subcommittee on Ways and Means
Seventy-First Session
May 15, 2001
The Subcommittee on Ways and Meanswas called to order at 1:38 p.m. on Tuesday, May 15, 2001. Chairwoman Chris Giunchigliani presided in Room 3137 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
COMMITTEE MEMBERS PRESENT:
Ms. Chris Giunchigliani, Chairwoman
Mrs. Marcia de Braga
COMMITTEE MEMBERS ABSENT:
Mr. Lynn Hettrick (excused)
STAFF MEMBERS PRESENT:
Mark Stevens, Fiscal Analyst
Bob Atkinson, Program Analyst
Andrea Carothers, Committee Secretary
Assembly Bill 90: Eliminates limitation on amount of unused sick leave employee in public service is entitled to carry forward from year to year. (BDR 23-532)
Assembly Bill 122: Requires payment for all accrued unused sick leave of state employee under certain circumstances. (BDR 23-691)
Mark Stevens, Fiscal Analyst, stated that he had provided a description of the bills before the subcommittee along with some proposals (Exhibit C). A.B. 90 proposed to eliminate the special sick leave account for state employees. Currently, once a state employee accumulated 720 hours in their regular sick leave account, 50 percent of the sick leave earned and not used each year accumulated in a “special sick leave” account and the other 50 percent would be added to the regular sick leave account. Mr. Stevens explained that the hours accumulated in the “special sick leave” account might be accessed after the regular sick leave account was exhausted. However, the “special sick leave” hours could not be considered in determining the cash payment allowed for unused sick leave upon termination. Mr. Stevens noted that based on the fiscal note presented with the bill, it appeared that most people met the maximum benefit of unused sick leave without considering the “special sick leave” account. The fiscal impact submitted by the Department of Personnel indicated that if the “special sick leave” account was used in the cash benefit of sick leave it would cost approximately $12,000 per year.
Mr. Stevens went on to say that A.B. 122 proposed to compensate individuals that left state service for 100 percent of their sick leave they had accumulated during their tenure in state government. Under current law, the first 240-hours was deducted before the cash value of accumulated sick leave was determined. Mr. Stevens stated there was a maximum rate that could be paid based on an employee’s hourly salary. For 10 years of service the maximum was $2,500; for 15 years it was $4,000; for 20 years it was $6,000; and for 25 and more it was $8,000. Mr. Stevens explained that if an employee had 1,000 hours in their sick leave account, 240 hours would be deducted and the remaining hours would be multiplied by the employee’s hourly wage. The employee would then be reimbursed for that amount or up to the maximum allowed; whichever was the lower amount. The current sick leave law cost the state approximately $1.1 million per year. Mr. Stevens testified that A.B. 122 proposed to eliminate the 240-hour deduction and to remove the maximums based on years of service as outlined earlier. The additional cost of the change was estimated to be approximately $6 million per year.
Mr. Stevens stated that S.B. 95, which would revise provisions authorizing state employees to obtain additional retirement credit as payment for unused sick leave, was in the Senate Committee on Finance.
Staff had spoken to the State of Nevada Employees Association (SNEA), due to the last session’s sick leave subcommittee, about a reward system for employees that had not used as much sick leave as others. The SNEA had provided examples of their suggestions (Exhibit C). Mr. Stevens noted that staff had compiled some suggestions to present to the sick leave subcommittee. In the previous session staff had examined paying a percentage of the unused sick leave amount less the 240 deducted hours. That proposal had not progressed. In the handout, Mr. Stevens indicated that the average sick leave usage for employees was 94 hours per year, up from 89.6 hours two years previous. The charge that the Chair had given to staff was to present an idea that would be an incentive for employees not to use as much sick leave. Staff had included a table in the exhibit that demonstrated the value of sick leave balances for employees at Grades 27, 35, and 40 with 10, 20 or 30 years of service, with an average of 30 hours, 60 hours, or 90 hours of sick leave per year. Mr. Stevens reminded the committee that the numbers in the chart were only the value of the sick leave, and employees were only compensated up to the maximums previously discussed. One of the proposals that had been suggested was to increase the maximum payout amount. One proposal would increase the maximum from $8,000 to $10,350 based on the change in the Consumer Price Index (CPI) since the last increase in the maximum allowed for sick leave payouts. The estimated cost of the increase was $325,000, of which General Fund would be approximately 50 percent.
Another option the staff had assembled was a payment of all or a portion of the “special sick leave” account. Mr. Stevens reiterated that after an employee accumulated 720 hours of sick leave the remainder accumulated was divided in half between the “special sick leave” and the regular sick leave account. If employees were compensated for 100 percent of their special sick leave balance at termination there would be a cost of approximately $700,000, based on a fiscal note from the Department of Personnel. Compensating employees who terminated from state service for 50 percent of their “special sick leave” would cost approximately $350,000 annually. Mr. Stevens stated that he had provided a table that demonstrated the value of the “special sick leave” balances (Exhibit C). The table represented 100 percent of the value of the “special sick leave” account. The percentage that was decided upon by the subcommittee would be multiplied by the amounts, and that would be the benefit that the employee would receive. Mr. Stevens gave an example of an employee with 25 years of service, the employee would be paid the $8,000 maximum on the regular sick leave account, and the payment on the “special sick leave” account would be an additional payment.
The final item staff had brought for the committee was random drawing. This proposal was for a random drawing from a list of employees that used a minimal amount of sick leave. The chosen employees would receive a cash award or a certain number of hours times their hourly rate. Mr. Stevens stated that the final two pages of his handout had been provided by the SNEA, and were sick leave proposals provided by that organization during the interim.
Mrs. Marcia de Braga confirmed that the staff proposals continued to include the 240-hour deduction, and that the random drawing was an additional payment proposal.
Chairwoman Giunchigliani asked how the Department of Personnel felt that A.B. 90 was an incentive. Jeanne Greene, Director, Department of Personnel, said A.B. 90 was not meant to be an incentive to save sick leave, but rather to reward employees that had hours in the “special sick leave” category and were not able to access the hours. Ms. Greene indicated that the department felt that employees were entitled to payment on the “special sick leave.”
Mrs. de Braga asked why the “special sick leave” was unable to be accessed. Ms. Greene stated that under current statute employees were ineligible for any payment for the “special sick leave” category. The hours were forfeited regardless of whether the employee retired or terminated state service.
Bob Gagnier, Executive Director, State of Nevada Employees Association, stated he had supplied the committee with indexed increases that had been discussed in the personnel subcommittee of the Governor’s Fundamental Review of State Government (Exhibit C). The first proposal was a graduated percentage increase, and that was estimated to cost approximately $190,440. The Department of Personnel had proposed that would continue the dollar caps, but would pay 25 percent of all hours over 800 hours. The cost for that proposal was approximately $166,106. The second proposal from the Department of Personnel was a variation of the graduated percentage increase proposal. Mr. Gagnier stated he had also provided a handout that had been prepared in response to an inquiry from the Senate Committee on Government Affairs and the Senate Committee on Finance (Exhibit C). The proposal considered what would happen if the cost of living since 1991 was applied to the flat dollar caps as 1991 was the last increase for the flat dollar caps. Mr. Gagnier stated that the final page in Mr. Stevens’ handout was facts and figures related to S.B. 95 (Exhibit C). S.B. 95 allowed employees to buy one day of retirement with unused sick leave time. After discussions with the retirement system, it was determined that the originally proposed one hour to one day ratio was insufficient, and there actually needed to be closer to a two hours to one day ratio. The cost in the packet would be approximately half of what was printed. Mr. Gagnier opined that S.B. 95 would not be processed by the Senate in its current form.
Chairwoman Giunchigliani stated that the SNEA proposal was an indexing of what had not changed in ten years, rather than a reward for employees that had not overused their allowed sick leave hours. Mr. Gagnier stated that when that idea was discussed in the Senate Committee on Government Affairs and the Senate Committee on Finance it had been with the idea that the CPI increase would be built into the statute. He explained that all the proposals discussed continued to have the 240-hour deduction. Mr. Gagnier explained that when the SNEA approached the legislature in the 1970s and had the “pay for unused sick leave bill” passed, the legislature had insisted upon the 240-hour deduction. The SNEA had left that alone because it had been agreed upon with the legislature, but if the current legislature desired to eliminate the 240 hours it was a possibility. The SNEA did not feel as though they could propose the elimination because the SNEA agreed to the 240-hour deduction when the unused sick leave pay was first implemented. Chairwoman Giunchigliani asked what the rationale was behind the 240-hour deduction. Mr. Gagnier stated that the 240 hours was a proposal by a legislature to ensure that no one with less than 30 days was paid for the sick leave. He explained that to his knowledge the 30 days was an arbitrary figure, but the initial discussion regarding the matter stretched Mr. Gagnier’s recollection. Chairwoman Giunchigliani inquired as to the harm and cost of removing the 240-hour deduction. Mr. Gagnier stated that he did not believe there would be any harm in removing the 240‑hour deduction. The removal would benefit all employees depending on the formula for payout. Currently for many long-term employees the removal of the 240-hour deduction would not make a difference, because the employees were reaching the maximum payoff levels.
Mrs. de Braga stated that her point with A.B. 122 was that the 240-hour deduction was time earned by the employees, and the amount appeared to be arbitrary. There did not appear to be a reason to deny the benefit because it was earned as a portion of the employees’ salary.
Mr. Gagnier stated the SNEA was not opposed to the removal of the 240-hour deduction. The argument used by the legislator that proposed the 240-hour deduction was that state employees had not been getting paid for any sick leave so any payment was an additional benefit.
Mr. Stevens stated that regarding the elimination and cost of the 240-hour deduction Mr. Gagnier was correct when he stated there would be no impact for many employees. The only time the removal would enter into play was if an employee had a low amount of sick leave, and the amount of money would be increased because of the 240-hour deduction. Mr. Stevens stated that the removal would not hurt any employees and could potentially help some individuals.
The Chair recognized Gary Wolfe, Lobbyist, Nevada Highway Patrol Association and Teamsters Local 14. Mr. Wolfe gave the committee the handout that he had presented at the original Assembly Committee on Ways and Means meeting on A.B. 122 (Exhibit D). Within the document, Mr. Wolfe stated that it showed that the state saved money by cashing out employees’ sick leave. This was the third time a bill similar to A.B. 122 had been brought through the legislative process. Mr. Wolfe stated that Mr. Gagnier was correct, the 240 hours was an arbitrary amount of time, and Mr. Wolfe was requesting that the 240-hour deduction be removed. Mr. Wolfe stated that it was a great annoyance to state workers to have the 240 hours deducted. Mr. Wolfe stated that he believed the fiscal note attached to the bill was misleading. He had spoken with George Pyne, and Mr. Pyne felt that the bill was “a clean bill” that allowed employees the opportunity to buy retirement, similar to S.B. 95. Mr. Wolfe stated the problem with the fiscal note was that the amount of sick leave on the books was computed, and then a figure was applied to that. What was not included was the savings when a “topped out” employee left state service and was replaced with a new employee at a savings of 35 to 40 percent of salary. The state would immediately begin to see a savings on a greatly reduced gross annual income. Mr. Wolfe noted that the figures included in the document provided proof of his statements. Mr. Wolfe explained that if an employee was out sick from work for six months then rather than payout the sick leave for the employee, the employee was remaining on the payroll, a full salary was being paid, and Public Employees’ Retirement System (PERS) benefits and additional sick leave were being earned. He opined that it would cost the state more money to retain the individuals than to release them.
Mr. Wolfe presented the committee with an additional handout (Exhibit E). Mr. Wolfe read from the document and said under the current law an employee must have at least ten years’ service to be eligible to purchase any unused sick leave, but only after surrendering the first 240 hours. Mr. Wolfe gave the example of an employee having 600 hours of sick leave, less the 240 for a remainder of 360 hours. Depending on the employee’s hourly rate the employee could be paid up to $2,500 for accumulated sick leave. Mr. Wolfe explained that this was not the most logical formula because to receive the maximum allowed for ten years of service an employee only needed 208 hours. So if there was an employee with less than ten years of service with substantial sick leave on the books, and the employee did not want to continue to work, the state would not provide any money for the employee’s unused sick leave. Mr. Wolfe asked why the employees who were entitled to utilize their sick leave for maternity leave, should relinquish five or six months of salary. Mr. Wolfe stated that the reason the Highway Patrol submitted this bill was because it greatly impacted the department. In the previous two years, four of the department’s members died of cancer. The last one had had nine months of sick leave in a hospice care, and the state had paid the entire salary. The family could have used the accumulated sick leave money to assist in the family and hospice care. The state was the one that lost in this scenario. The family also suffered because they did not have the money needed to help the individual.
Mr. Wolfe stated that when formulas were applied to sick leave, the smaller employee was hurt. It did not take above average intelligence to discover that it took fewer hours of sick leave for the employee that was earning $20 per hour, than for the employee that was earning $10 per hour to reach the maximum payout. When the percentage formulas were applied, the rank and file employees were hurt. Mr. Wolfe stated that it also hurt the higher paid employees because they were giving up the most sick leave. He submitted that when “windfall payouts” were given, the administrators with large amounts of sick leave were as entitled to the sick leave payouts as new employees. Mr. Wolfe stated that the proposal presented was fair, and urged the committee to remove the 240-hour deduction.
Mrs. de Braga stated that she agreed with the removal of the deduction of the 240 hours, and asked how Mr. Wolfe was guaranteeing that an employee would not remain on the payroll while on sick leave if the salary was a greater amount than the cash payment under the proposed legislation. Mr. Wolfe stated that with the bill, the employer would have been able to buy out the sick leave, and she would not have been on the payroll. The employer could have hired a new employee at 35 percent less salary, immediately incurring salary savings to the department. In the first year the department would only save a small amount, but in the second year the state would see an increase in the salary savings. Mrs. de Braga asked what would ensure that the employee would make the announcement that they were ending their service because the salary might be greater than the amount in sick leave. Mr. Wolfe stated that with the employees in the Highway Patrol, when it was time to leave, the employees desired to leave. Mr. Wolfe opined that people in situations such as was described with the pregnancy, the employee desired to be at home and was not concerned with whether an additional thousand dollars could be made. Mr. Wolfe reiterated that an employee could remain on sick leave until it expired and the state would pay for the sick leave. The problem with that was there was an employee being paid without having the employee physically at work. Mr. Wolfe equated the problem to completing preventive maintenance on a building that required cash up front, but would result in overall savings. He restated that the bill was a fair way to reward employees and treated all employees in the same manner.
Chairwoman Giunchigliani stated that the 240-hour deduction could be debated for a substantial amount of time. She stated that the removal of the 240 hours did not harm any employee, but defeated the purpose of the subcommittee. The subcommittee was examining disincentives and incentives. Chairwoman Giunchigliani stated that when a person was on maternity leave, they needed to be on the Family and Medical Leave Act (FMLA), and had to use all sick leaves. Chairwoman Giunchigliani indicated her desire to pass some legislation pertaining to sick leave, in order to reward those employees that did not use a large amount of sick leave.
Chairwoman Giunchigliani stated an employee with 400 sick leave hours less the 240 deducted hours would have 160 hours at $20 per hour and would receive $3,200. If the 240-hour deduction was removed $8,000 would be received. If there was an employee with 200 hours, after the 240-hour deduction was deducted no payment would be received. If the 240 hours were removed the employee would receive $4,000. Chairwoman Giunchigliani said the subcommittee was determining the message that needed to be sent. All sick leave payment was a benefit, and there should be a reward for the benefit. Chairwoman Giunchigliani did not desire to have people randomly using their sick leave, nor did she desire to have an employee retiring with 2,000 hours of sick leave for which they were not adequately reimbursed.
Mr. Wolfe agreed with Chairwoman Giunchigliani and stated that when there were people who were at home sick, the state would offer $8,000. When the employee’s salary was substantially more, then the sick leave would be used. Mr. Wolfe explained that a solution needed to be found because he was not addressing a life style of abusing sick leave, but rather legitimate employees that used months of sick leave and the department was unable to hire a replacement employee. The sick employees would still be receiving PERS benefits that would transfer to their spouses.
Mr. Wolfe reiterated that Mr. Pyne appreciated the bill because it was a “clean way of doing business.” Mr. Wolfe understood that there would be compromise, but he restated that the percentage formula would hurt the smaller employees. There was no collective bargaining, and Mr. Wolfe would love to engage with the legislature and go on a percentage factor in line with the salaries, but the discussion was about $10-per-hour employees versus $40-per-hour employees. Mr. Wolfe asked the subcommittee to consider the amount saved with the hiring of new employees. Chairman Giunchigliani stated that she would consider that savings. Mr. Wolfe opined that employees would appreciate the increased benefit, and it could assist in the retention of employees. Chairwoman Giunchigliani stated that collective bargaining, along with an increase and money to bargain for, would make a large difference.
Ronald Dreher, Lobbyist, Peace Officers Research Association of Nevada, testified in support of A.B. 122. He noted that the Reno Police Protective Association had just negotiated dealing with sick leave usage. If an employee had over 450 sick leave hours, they were given a 50 percent payout rate. If an employee had between 750 to 1,000 sick leave hours, they were given an 80 percent payout rate. After the 1,000 sick leave hours the employees were provided $25 bi-weekly, payable quarterly. Mr. Dreher stated that city employees would be at work and would not be banking sick leave. If there was no incentive then the employee would use sick leave rather than storing it. Mr. Dreher stated that the fiscal note did not take into consideration that an employee using sick leave was being provided with full PERS, and roll-up costs. Mr. Dreher explained that the Carson City Sheriffs Office had negotiated a similar agreement, which provided a bank similar to the Reno Police Protective Association’s bank. He noted that the agreement was one which the PERS and the state could handle. The payments would be made either way, but one would give employees an incentive to save dollars and bank hours.
Chairwoman Giunchigliani confirmed that the agreements were tied to hours rather than years. Mr. Dreher explained there was no minimum number of years served, but rather a number of hours that were needed. He stated that there were employees that were using all of their hours, and not seeing an incentive in saving sick leave time, and were using a day a month of sick leave time.
Colonel Michael Hood, Chief, Highway Patrol, explained that one of his concerns was the cost in overtime that it took to cover employees on sick leave. As an administrator, Colonel Hood knew that overtime was a large portion of the budget. He noted that the Highway Patrol budget for overtime was $2.2 million, and a great deal of that could be saved if the employees that were on extended sick leave could be provided for.
Chairwoman Giunchigliani asked how many employees were choosing to take the lump sum payment, health benefits, or retirement benefits. Mr. Wolfe stated that over half the people surveyed would have preferred to utilize sick leave payouts to pay for their family dependants’ health coverage until funds were exhausted. He noted that if the health care option was chosen it would be at a low impact to the state because of the monthly payment plan.
The Chair adjourned the meeting at 2:23 p.m.
RESPECTFULLY SUBMITTED:
Andrea Carothers
Committee Secretary
APPROVED BY:
Assemblywoman Chris Giunchigliani, Chairwoman
DATE: