Vacancy Savings

The JBC and the Executive Branch have struggled for years over how to handle vacancy savings. That's the money that builds up over time in a department's Personal Services line. The JBC considers that excess money that should return to the budgeting process for appropriation. Departments claim it's not as much as the JBC thinks, and they wind up spending it on things that legislature should, but doesn't appropriate money for.

Usually, the JBC imposes an across-the-board cut to every department's Personal Services line to sweep out accumulated vacancy savings. The amount clawed back has ranged from 0.2% to 2.5% of the department's Personal Services line. It's step six in the mysterious Option 8 method of calculating Personal Services.

Why Vacancy Savings Accumulate
Vacancy savings are the result of unfilled jobs. Say the legislature approves a new job in a department and appropriates $30,000 money to pay for it. The state's fiscal year starts July 1st, but the department department has to write a job description, publish the job, receive applications and interview candidates before actually hiring the person. That takes three months.

The legislature appropriated $30,000 to pay a year's salary, but the new employee is only going to work nine months. The department has saved $7,500 by not paying anyone for the first three months.

The same thing can happen when someone quits or retires. Retiring can generate some big savings. Let's say a 30-year veteran employee retires. The job stays open for a couple of months, then the department hires someone new, but at the bottom of the pay scale instead of the top. The department saves money from the vacancy, then saves even more by paying a lower salary to the new employee.

Departments with a lot of employees and a lot of turnover can build up considerable sums of money in their budgets. That's money we might want to appropriate for something else.

Why They Don't
Of course the departments have a different view of the situation. Take the retiring senior employee scenario. The department will acknowledge the difference between the senior salary and the starting salary, but argue that the money doesn't accumulate.

First, they'll say, they have to pay for the retiring employees unused vacation and sick leave. That will eat up part of the savings. Then, they'll point out that losing a senior employee costs them a lot of accumulated knowledge. To minimize the effect of that, they'll hire the new employee before the existing employee actually leaves to allow time for training and mentoring. All of that, they say, is more likely to leave them in the hole rather than sitting on excess cash.

Those are the general arguments. Each department has it's own specific reasons why we shouldn't try to take back vacancy savings. The general opinion among departments is that taking back vacancy savings is an arbitrary cut imposed by the JBC to free up money for other things.

Saving the Savings - Their View
This year OSPB tried to do away with the across-the-board Personal Services reductions. It argued that after years of reclaimed "vacancy savings" departments had lost so much Personal Services money that they don't have the minimum amount they need to do their jobs.

Saving the Savings - Our View
The JBC responded by imposing a 1% across-the-board reduction and waiting to see what departments came back with requests for exemptions. Applied to every department, the 1% clawback would have brought in $12 million ($7 million GF).

Negotiations
All of them asked for exemptions, via an OSPB Personal Services comeback.

Human Services said the 1% reduction would force them to hold open 31 jobs, leaving places like the Mental Health Instiute in Pueblo and the Wheat Ridge Regional Center dangeroulsy understaffed.

Corrections argued that most of the employees they lost last year were in their first five years on the job. That means the new employees hired to replace them will be earning about the same salary. And while the positions are empty, someone will be earning overtime to cover the shift. The department said it's already operating at or below minimum staffing requirements and the clawback would eliminate another 87 employees.

OSPB argued that it's Budget Balancing Package of negative supplementals already took out vacancy savings, so the additional 1% was both hurting departments and discouraging them from volunteering cuts to account for open positions.

Truce
This year the JBC relented. OSPB had some good arguments -- especially since we were reclaiming a lot of Personal Services money from the hiring freeze.

The issue isn't resolved, though. The state constitution prohibits the legislature from telling the governor how many people to hire; we just control how much is in the budget. That means truing up the Personal Services budgets with the amount actually paid as salaries will alway be a cat-and- mouse game between the legislature and the executive branch.