Howard County Maryland Blog

Local Politics and Current Events

Misplaced Envy?

Posted by bsflag2007 on Tuesday, January 30, 2007

Leaving enriches Howard officials

(from baltimore sun)

The story is that people leaving jobs in county government as a result in the “changing of the guard” following the election are benefiting financially in an unseemly, somehow undeserved boondoggle at the expense of the taxpayers.

 

Well, when there is public money involved, people ought to pay attention.

 

But let’s not jump to conclusions of inappropriateness too fast.

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(the Sun reports) “$400,000 paid to six departing employees who made way for new administration:

 

Nearly half that amount, $188,638.78, went to one person: former Chief Administrative Officer Raquel Sanudo, a 22-year employee who was the county’s top appointed official. The pay out, which Sanudo said included unused vacation time, 10 weeks of severance pay and her last week’s salary, is more than her $168,854 annual salary.

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Now, that does seem like a lot of money. Average citizens may be tempted to say “hey, fire me any day if you’re going to give me a check like that” — but read the details : “UNUSED VACATION TIME” – “LAST WEEKS SALARY” — that’s just money earned but not yet paid over TWENTY TWO YEARS.

 

 

22 years is a long time to work for a company – does anyone think she should lose that vacation time pay just because she was too busy doing the company’s business to take the time off? Would you like that kind of deal?

 

The 10 weeks “severance pay” is another question – but at her stated salary of $169,000 (ish) that’s $3250 per week – so the severance is about $32,500. Not a large part of the total.

 

Is 10 weeks pay after being “let go” because of a change in management reasonable? It is less than half of the “rule of thumb” for executive level basic severance in industry – which is (according the US Labor Dept) “one week pay for each year of service – but can reach much higher, beyond one month pay for each year of service”. At basic levels – “most” industries would have offered at least 22 weeks of pay – more than twice the amount HoCo offers.

 

I don’t know the severance pay details of the other payouts – though the amounts listed below would consist of unused (earned) vacation time and final paychecks (earned but not yet paid).

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Six Howard County officials received substantial cash payouts as they left county government:

Raquel Sanudo, chief administrative officer $188,638.78
Nina Benz, information technology director $63,754
Leonard S. Vaughan, housing director $52,962.47
Neil Gaffney, deputy housing director $39,620.64
Victoria Goodman, communications director $36,600.36
Rufus Clanzy, director of Office of Human Rights $25,592.99

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Once you get beyond the misplaced envy for the “windfall” of a lump sum payment of earned/deferred income – there are a couple of questions that are reasonable and “might ought” to be looked into.

 

Ken Ulman seems to have a reasonable perspective on the situation. It is not a question of whether these payments are fair or reasonable — if they were the agreed upon “deal” for these folk’s employment – then they must be honored.

 

However, these kinds of “lump sum” bills coming due at one time without being adequately budgeted for could be problematic for the budget.

 

“This is a system I inherited,” Ulman said. “My concern is getting saddled with big numbers that weren’t budgeted for.”

 

Greg Fox also brings up a good question. “Severance” pay is a reasonable benefit to offer employees, especially those who might be “let go” through no fault of their own with limited advance notice. It is supposed to ease the financial impact from their abrupt departure from gainful employment while they find a new job or make other income arrangements. It may not be appropriate for someone who was going to retire anyway.

 

Does planned retirement qualify as an “involuntary severance”? If the “retired/severed” employee collects a severance and simultaneously begins collecting a public pension — is that a permissible or reasonable “double dipping” situation?

 

Whether the current batch of departing employees “deserve” the payments they are receiving…. or whether they are reasonable amounts of money … is hard to argue. Earned money must be paid – and fair and equitable severance is not only fair but smart unless you want to be involved in lawsuits .

 

However, the questions of whether it is fiscally sound business practice to allow these kinds of “payables” to be accumulated … ie, unused vacation … to be “dropped like a bomb” at some future date —- and what the appropriate definition of “involuntary severance” should be – are matters our Council might want to take up to avoid excessive unbudgeted financial burdens.

 

There are several ways to avoid the kind of accumulation of deferred payouts HoCo has just experienced. It is not uncommon practice to have a “use it or lose it” vacation policy. This can mean requiring folks to actually take their vacation time – which is a well known tool to avoid and detect fraud as well as beneficial to employee morale and avoidance of burnout — or to zero out vacation accounts at the end of every fiscal year and make whatever payment is necessary to compensate each employee for unused vacation time.

 

The question of reasonable severance pay and future plans may be more problematic. What an individual’s plans are for after they are involuntarily “severed” – whether it be looking for a new job or not- may not be the important factor. Perhaps a provision to disallow “double dipping” with both severance and immediate retirement benefits would be in order. In any event – the “loophole” which might allow an employee who is actually “voluntarily” vacating a position to collect “involuntary severance benefits” should be closed. Only employees who are truly being involuntarily replaced through no fault of their own should be compensated.

 

The bottom line is – these things must be clear and agreed upon as conditions of employment. “The deal” between employers and employees must be honored – no matter how jealous we might feel when we hear about someone getting a large chunk of money at one time…. and the “business” of the County ought to be coordinated to avoid budget “surprises”.

 

Cindy Vaillancourt

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5 Responses to “Misplaced Envy?”

  1. numbers.girl said

    HoCo has a use it or lose it policy in effect, limiting the amount of carryover. However, not sure when it was enacted. I’m betting that it was recently and that these individuals were grandfathered in.

    Severance is a sliding scale, topped out at 10 weeks for 10 years service.

  2. bsflag2007 said

    That’s what I understand about the severance package – though I’m not sure the question about severance rules to account for “retirement” versus “termination” have been addressed. Do you have any info on that?

    Since the carry over of unused vacation time has been limited – then this “excess” payment situation upon terminatin and the potential budget impact should not be a recurring problem – except for those who may have been “grandfathered” in.

    Surely someone in accounting knows what the extent of that pending liability is. This should not come as a surprise when the bills come due.

    cv

  3. numbers.girl said

    Severance is paid for no-fault termination by the company. i.e. budgetary cutbacks/ layoffs, change in ranks, etc. If the employee retires, he or she does not receive severance. If the employee was planning on retiring, but didn’t file the paperwork, and in the meantime, was let go due to no fault of his or her own, he or she would receive severance.

    I think any rules above and beyond “no fault” and “termination by the company” would be treading into dangerous territory. And generating additional monitoring costs for a relatively small return on the investment. (since most of this expense is vacation payout).

    As far as booking the liability, you are correct, the liability should be accounted for on the financial statements,and probably is. BUT, that is different than the budgeting process. For budgeting purposes, it is very likely that they anticipated paying out those liabilities in the form of vacation days over the next 5 years, or some other figure. However, when the cumulative total is charged in one year, it will create a variance in the budget that, well, doesn’t look good.

  4. numbers.girl said

    To clarify, I think the Sun does a poor job of differentiating the amounts paid from accrued leave vs. severance. Greg Fox does make a good point- however, no severance is paid when someone retires. If someone was going to retire “anyway”- can’t prove it, so severance must be paid.

  5. bsflag2007 said

    exactly.

    cv

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