inside 2006 LHP financial report: compensated absences

We have $1,000,000 in long term liability for compensated absences. That’s time people bank but don’t use. So if you have 5 weeks vacation, but only use 3, then you roll 2 over. In the corporate world, there is nearly always a policy that you can’t roll 2 years in a row and you can’t have more than 2 weeks.

Many government entities don’t have any rules regarding this. So what happens is a person may have 6 months or even a year banked at the time they retire. It’s a nice nest egg when they leave. Great for the retiree, bad for the taxpayers. Why?
1. It creates unexpected lump sum payments that were not in the budget. In Fort Lauderdale it was such a huge problem that I’m sure you read about the financial problems they’ve experienced.
2. The pay rate changes. So if the employee took the vacation within a reasonable time, the taxpayer cost would be one rate. But 20 years later, they are now taking the money out at THEIR HIGHEST EVER SALARY RATE.
I’m not suggesting we do something about this with current employees who have developed expectations about their employment in LHP, but I certainly think it is a policy that needs to be examined for future hires. Think about it. Our current liability is $1,000,000. That’s a lot of dough because of unused vacation and sick time.
ps I’m all for banking some extra sick time- 1 week just isn’t enough for young families.

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