|Date Requested:January 31, 2008
Time Requested:06:31 PM
| FUND(S) |
Sources of Revenue
Legislation creates:Neither Program nor Fund
Effect this measure will have on costs and revenues of state government.
| The purpose of this bill is to allow for the purchase of unused sick leave of State employees once per year.
While the note attached to the bill states that the purchase of unused sick leave will be restricted to employees hired prior to July 1, 2001, there are no restrictions stated within the bill that would preclude any State employee from applying for and receiving payment for unused sick leave. If it is the intent of the bill sponsor to restrict this buy-out then a specific amendment to the existing language would need to be included.
The following costs and potential return on the reduction of the unfunded Other Post Employment Benefits (OPEB) liability are based solely on the bill as it presently exists. The presumption is that all those employees hired prior to July 1, 2001 that have a sick and annual leave conversion benefit and wish to sell the unused sick leave will do so immediately. The reduction to the OPEB unfunded liability is only applied to FY-09 because all those having a retirement leave conversion benefit will have sold theirs the first year it is offered. The cost exposure for FY-09 also includes those employees hired after July 1, 2001, that will have accumulated enough sick leave to sell it and will wish to sell down to the 50 day limit. The following years show the cost of buying sick leave from employees hired after July 1, 2001, that will sell the unused sick leave as soon as they are eligible to do so (five years of service and at least 60 days of accumulated sick leave);
Fiscal Year Cost Exposure Reduction of OPEB Unfunded Liability
FY-09 $15,579,517.00 $30,443,000.00
FY-10 $ 3,917,614.00
FY-11 $ 6,001,939.00
FY-12 $ 8,879,140.00
Totals $34,378,210.00 $30,443,000.00
Based upon this calculation the State would see a net loss for providing this benefit of $3,935,210.00 in the first four years. Continuing the buy-out program after that date would result in increasing pay outs to post July 1, 2001 employees without a reduction in the unfunded OPEB liability.
Should the bill be amended to match the intention stated in the Note of the bill then the expected cost exposure would be reduced to $13,154,852.00 with a reduction of the OPEB unfunded liability remaining at the quoted $30,443,000.00.
|Effect of Proposal||Fiscal Year|
|1. Estmated Total Cost||0||0||0|
|Repairs and Alterations||0||0||0|
|2. Estimated Total Revenues||0||0||0|
3. Explanation of above estimates (including long-range effect):
| Technical concerns:
The bill does not match the intention of the bill as stated in the accompanying note because there is no language that will limit the sell out provision to just those persons employed prior to July 1, 2001.
1. Administsrative cost associated in the verification of accumulated sick leave, eligibility of the employee for the buy out and the subsequent processing of payment within the individual agencies and the Auditor's Office would be substantial.
2. There is a concern that by placing a computable value on sick leave that it could now be viewed as a property right and therefore a vested benefit. An example would be that if an employee having 150 sick days were terminated on May 1, that terminated employee could well convince the courts that it was his/her intention to cash in that sick leave that year and should therefore be paid its full value. If the courts should grant this it would be just a matter of time before any employee leaving employment from the State of West Virginia would be provided payment for the remaining sick leave balance upon separtion just as annual leave now is.
3. As was noted by the Division of Personnel in their Fiscal Note response, it is our assumption that many of those that would take the buy out at .25 on the dollar would either be those that knew they were leaving employment with the State; would not have converted the benefit at retirement because of other benefit opportunities; or were in dire financial straits and would be the least likely to properly prepare for a retirement that was years down the road.