Sources of Revenue:

General Fund,Special Fund,Other Fund Federal

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

This measure will increase costs of state government by mandating payment for leave that is not currently paid, and consequently, not currently included in agencies' budgets. Paid leave for classified employes is regulated by the Administrative Rule of the Division of Personnel (143CSR1, Section 14). Paid leave for classified-exempt employees is also regulated by this rule to the extent that employers of those employees have elected to adopt its provisions. The current rule provides that employees earn leave according to a formula based on years of service. The rule also provides, again according to a formula based on years of service, that employees can carry a certain amount of annual leave from one calendar year to the next. Any unused annual leave in excess of the amount allowed to be carried forward is forfeited (i.e., "use it or lose it"). This bill provides that employees would be paid for such leave instead of forfeiting it.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2008 Increase/Decrease (use"-")	2009 Increase/Decrease (use"-")	Fiscal Year (Upon Full Implementation)
1. Estmated Total Cost	13,309,796	13,709,090	14,120,363
Personal Services	13,029,659	13,420,549	13,823,165
Current Expenses	0	0	0
Repairs and Alterations	0	0	0
Assets	0	0	0
Other	280,137	288,541	297,198
2. Estimated Total Revenues	0	0	0

Explanation of above estimates (including long-range effect):

This estimate is based on data extracted from the State Budget Office report "Personal Services By Account Fiscal Year 2008" dated 12/31/07. Number of employees: 35,670 Average annual salary: $37,989.47 Daily rate of pay*: $146.11 (i.e., $37,989.47/260 days paid) Hourly rate of pay: $18.26 (i.e., $146.11/8 hours) * See "Memorandum" for notes on technical defects. The 2008 increase estimate is based on 50% of employees having an average of 40 hours of "excess" leave at the end of calendar year 2008: 17,835 employees multiplied by 40 hours each at a rate of $18.26 per hour. Benefits costs at 20.15% (10.5% retirement, 7.65% FICA, 2% Workers' Compensation) are included in the "Other" category. The 2009 increase estimate is based on the 2008 estimate plus the proposed 3% pay increase. Future increases would be based on increases in actual rates of pay. In 2007, 5.27% (427 employees) of a group of 8,104 employees forfeited an average of 41 hours of annual leave each. The above estimates are based on the assumption that the number of employees with "excess" leave would increase significantly if employees were paid for this leave instead of forfeiting it. It would not be unreasonable to assume an estimated increase in personal services costs as high as $30 million.

Memorandum

Technical defects: The provision in the bill that specifies that the calculation of "daily rate of pay" excludes holidays as normal noncountable time is technically defective. Holidays are days for which employees are paid. Consequently, they are countable as part of an employee's salary (pay). As such, they must necessarily be included in the calculation of the daily rate of pay; i.e., annual salary divided by number of days paid. Any variation in the number of holidays from one year to the next (e.g., 13 paid holidays in 2007; 15 paid holidays in 2008) has no effect on the annual salaries of employees - their annual salaries are neither increased nor decreased based on the number of holidays. An issue not elsewhere captured on this form is the rationale for providing paid annual (i.e., personal/vacation) leave as a benefit of employment. It is generally accepted that the purpose of providing paid annual leave is to give employees needed relief from the physical and mental demands of work, and thus, contribute to their ability to be productive and sustain the stress of their jobs. As such, it is meant to be used by employees. In many cases, employers force the use of personal/vaction leave by shutting down operations, closing offices, etc. However, in cases where employers provide more flexibility regarding when employees can take such leave, those employers generally enforce a "use it or lose it" policy. In addition to assuring that employees take advantage of opportunities for needed breaks from work, this policy also allows an employer to control the costs of this benefit. Almost all state governments have such a policy.

Person submitting Fiscal Note: Tari Crouse
Email Address: tari.m.crouse@wv.gov