September 15, 2010
Over the past two weeks the Civic Federation blogged here and here about the Metropolitan Water Reclamation District’s reaction to its estimated $24 million budget deficit. Specifically, we outlined Executive Director Richard Lanyon’s proposals to reduce this deficit, in part, by making changes to employee and retiree health benefits.
Mr. Lanyon presented his cost-cutting plan to the Board and public at an August 12, 2010 study session. His suggestions were drafted after staff presented a report of the FY2011 budget and the grim financial projection at a study session meeting held on July 8, 2010.
In addition to benefit changes, Mr. Lanyon discussed options for reducing salaries across the District. These options are discussed in more depth below.
Long-Term Acting and Supervisory Differential Pay
According to District policy, if an employee assumes a higher-paid position for a period of 30 days or longer, the employee is entitled to an increase in pay, commensurate with the assumed duties and responsibilities. This situation may arise if an employee serves as an “acting” supervisor or director when this position becomes temporarily vacant. Mr. Lanyon proposed elimination of this benefit to save an estimated $57,000, if applied to non-union employees. This figure excludes possible savings from also applying the change to union employees. The change would require a change to an administrative procedure.
Mr. Lanyon also proposed eliminating supervisory differential pay, which is an additional dollar amount paid to supervisors whose salaries are less than 5% greater than the highest-paid subordinate. The estimated savings from eliminating this differential benefit would total approximately $103,000.
Above Market Rate Pay
The District commissioned a study in 1999 which revealed that a number of employees at MWRD were paid at a rate higher than the market rate for comparable positions, including general services and professional and managerial services positions. The study, which is referred to as the Hay Plan, identified the overpaid positions, but employees in overpaid positions were protected under Rule 5, which states that incumbents in those positions would not be subjected to pay reductions. Instead of applying these changes to incumbents, the District changed its policy so that the next employee in that position would be paid at the market rate.
As part of his cost-reduction plan, Mr. Lanyon suggested a change to Rule 5 that would apply market rates to employees currently serving in overpaid positions. This change would require both Board Action and approval from the Civil Service Board. If market salaries were made effective immediately, the District could save approximately $204,000 annually. If the change was phased in over two years, it would save the District $102,000 over the first two years and then $204,152 for the third year and beyond.
Mr. Lanyon proposes reducing the number of technical, administrative and managerial (TAM) staff eligible for compensation or overtime pay. Cash overtime is paid at 1.5 times the standard rate and compensatory time is paid at twice the standard rate. The savings of reducing the eligible staff grade level is estimated to be $876,000. Implementing this change would require board action and approval from the Civil Service Board.
General Salary Adjustment and Furlough Days
The district contemplates a general salary reduction of 2%, which would save $2,255,000. The Board could also mandate furlough days. The savings from furloughs would range from roughly $422,000 for one day to about $5 million for 12 days, but the work not performed during those days would have to be factored in as a cost.
For more information about the MWRD, you can read the Civic Federation’s analysis of the District’s FY2010 budget.