Sunday, April 13, 2008

Employee longevity pay costing NH millions

The following piece appeared in the Union Leader.
It is time to support and legislators that will do away with archaic legislation that is squandering our tax dollars.

Employee longevity pay costing NH millions
Senior Political Reporter
Sunday, Apr. 13, 2008

Concord – With the state facing big budget shortfalls this fiscal year and next, a 61-year-old state law mandates that state workers receive extra pay simply for being employed a decade or more.

Under the law, anyone who has worked full-time for the state continuously for 10 years receives $300 in longevity pay each year. At 15 years, the worker receives $600 a year until the worker's 20th anniversary, when it jumps to $900 a year. Additional sums of $300 are added every five years.

In 2007, it added up to $3.6 million for 5,020 employees, according to the latest available figures from the state Department of Administrative Services, and has been in the $2 million to $3 million range each year for the past decade.

Longevity pay has been in state law since 1947 and it is unclear if it has ever been seriously questioned by elected officials.

Senate Republican Leader Ted Gatsas, R-Manchester, said, "I'd never heard of it until you mentioned it. It's obvious that if we don't know about it, we should."

Eleven-term Rep. Neal Kurk, R-Weare, a member and former chairman of the House Finance Committee, said he knew the state makes longevity payments but could not recall the issue being closely reviewed.

"It's an incentive for people to stay in state service," he said. "But I can't tell you its history and I suspect that it's now the kind of thing that no longer serves the intended function.

"It's too small to make a difference, and, therefore, it's something that's traditional and provides more money for the employee but doesn't factor into the decision to stay with the state," Kurk said.

In addition to being in state law, Gov. John Lynch noted through a spokesman that longevity pay "is part of the collective bargaining agreement, and any change would have to be negotiated with state employees.

"One of the issues that state government is struggling with is retaining long-term, experienced employees," said Pamela Walsh, Lynch's deputy chief of staff. She also said Lynch "thinks that performance pay could possibly make sense in some areas, but it would need to be considered in the overall context of our collective bargaining negotiations and our goal of retaining valuable employees."

The expenditure for longevity pay is small compared to the state's latest projections of a $47 million budget hole by the June 30 end of this fiscal year and as much as $150 million by end of the two-year budget cycle on June 30, 2009.

But a conservative researcher says it is an example of the personnel costs that drive a large portion of government expenses.

"Costs in state government are often defined by programs," said Charles Arlinghaus, president of the Josiah Bartlett Center for Public Policy, "but the programs are of course carried out by people, so that personnel costs are one of the biggest items in state government -- the salary, the high cost of health insurance, retirement costs and other smaller items like this.

"It explains that every time there is some sort of a budget crisis, every governor has at some point issued an executive order that includes a hiring freeze," Arlinghaus said.

Arlinghaus said he believed that in the private sector, employees "are not guaranteed to get more money simply because they have been there for a long period of time."

According to state Commissioner of Administrative Services Linda Hodgdon, three state laws define longevity bonuses, and all are rooted in a single law that passed in 1947. At that time, she said, the bonuses were $60 at the 10-year mark and $60 more on every succeeding five-year anniversary.

Separate laws now cover unclassified (management) employees, classified (rank-and-file and unionized) employees and state troopers and their command staff.

Hodgdon said 5,020 of the state's approximately 12,000 workers receive longevity bonuses. They receive separate checks containing their longevity pay along with their first paychecks each December.

"I was surprised how far back it went," Hodgdon said. "I don't know what the thinking was back then, but today, when we look at it we think of it as an effort to retain workers, but it's really no longer enough to dissuade workers from leaving."

Longevity pay in New Hampshire is not confined to state government. Several cities and towns in New Hampshire give employees longevity pay. Manchester, for instance, has been making longevity payments for more than 40 years. Its ordinance says that after five years of continuous service to the city, an additional 3 percent "shall be added to the employees' base pay," and additional increments of 3 percent every five years after that.

Longevity pay is also widespread throughout the nation. In South Dakota, for instance, state employees with at least seven years of state employment get $100 annually. The compensation increases to $10 for each year of employment in years 11 to 14. In the 15th year of employment, the longevity pay is $15 for each year of service. The longevity pay then increases at $5 increments for each additional five years of employment.

In Tennessee state workers become eligible for longevity pay after three years of service, while in North Carolina it is 10 years.

The last detailed study of longevity pay found in a New Hampshire Union Leader review was in 1990. At that time, a University of South Carolina researcher found that 26 states award longevity pay to state employees. The author, contacted for this story, said he did not know how many states make such payments today. Nor did officials at the Council for State Governments.

Scarcity of detailed, comparative information is part of the problem, said Peter Sepp of the National Taxpayers Union.

"Longevity pay is not new," said Sepp, "but it's a relatively new phenomenon in terms of how long the general public has known about it. The public has heard countless stories about generous pensions, about using vacation and unused sick time toward pension calculation and being able to bank retirement to get a big bonus, but I've only heard about longevity pay on a regular basis for two or three years.

"It's one of those long-standing perks that has remained hidden in a corner for many years," Sepp said.

Sepp also said longevity pay is rare in the private sector.

"The private sector equivalent, if there is one, is either not as generous or as sweeping," he said.

"Some employees get bonuses for what is called loyalty. Having been on the job for, say, 20 years, you might end up getting a small bonus or the proverbial gold watch.

"But there doesn't seem to be many equivalents for getting a bonus for sitting at the same desk for decades on end."

Sepp said longevity pay is "a relic of a bygone era, when the teacher was a single woman being paid very poorly or the file clerk made very little money toiling away in the same office for 30 years.

"It was probably done to compensate for lower salaries in the public sector 30 or 40 or more years ago," Sepp said. "But the trouble is, salaries aren't as bad as they used to be in the public sector."

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