Personnel costs typically make up the largest expenditure of any municipal budget and regardless of our budgeting philosophy, our approach to these costs as managers and budget directors is often formulaic. We project the personnel hours needed to fulfill our mission, multiply those hours by applicable wage rates, adjust for variables such as absences and backfill costs, and load the whole lot for bennies and mandates. But where do we go to cut costs after there are no more efficiencies to be gained through Lean Six-Sigma analyses, restructurings and consolidations, or reductions in force? One fertile ground that often remains untilled in the budget building process is a critical look at the formulas behind the formulas.

Charleston, W.V., experienced an “Aha!” moment in this substrate as it wrestled with its unfunded pension liabilities for its uniformed services. A review of lump sum salary enhancements upon the January retirement of a handful of veteran firefights unearthed a layered onion of hidden drivers bloating our bottom line.

There were, of course, the usual and well-known legally mandated pension loadings like salary-boosting lump sum payouts for accrued, but unused, vacation leave; however, we uncovered others that had escaped our notice in the past. These ranged from payouts for unearned holiday leave to expanded sick leave awards and, ultimately, to all-pervading inflated wage rates.
The first layer, involving holiday leave, was revealed as an unchecked departmental practice of transmuting the timing of accruals. Staffing efficiencies for the 24/7/365 fire service dictates that all accrued vacation leave be scheduled for the entire year in advance. For the same reason all holiday leave is prescheduled, which makes it seem and function like vacation leave, but the manner of accruing the leave time differs. Vacation leave accruals for the Charleston Fire Department are awarded annually on Dec. 31 based upon years of service, whereas holiday leave is triggered by and upon the official day of celebration, notwithstanding the need to take the equivalent time off on some other date.

Needless to say, most retirements in the CFD occur in January, just after a member’s full contingency of annual vacation leave accrues. In keeping with the maxim that if it walks like a duck and talks like a duck, it must be a duck, it was discovered that CFD would routinely requisition additional lump sum reimbursements for a year’s worth of upcoming holidays even though the retiree would be long gone before the holidays. Therefore leave credits for the holidays running from Martin Luther King Jr. Day to Christmas could accrue.

Peeling back this initial layer prompted a closer look at other practices and revealed a codified sick leave disparity. Like most paid departments, the CFD is composed of three battalions with staggered tours of 24 hours on duty, punctuated with 48 hours off duty, for each battalion. In its purest form this equates to 2,928 annual duty hours for each member, compared to the 2,080 annual duty hours of the typical five-day, 40-hour work week.

Under this scenario, firefighters are scheduled to work roughly 150 percent more hours than non-uniformed workers. Parity would warrant a similar ratio for sick leave accruals. Thus, where non-uniformed personnel accrued sick leave at the rate of one day, or eight hours, per month, parity was achieved by legally defining a “day” for CFD members as 12 hours — eight hours x 150 percent, notwithstanding that the scheduled tour of duty was, in fact, 24 hours.

CFD members are organized as a local but do not have a contract or collective bargaining rights. Over time they were able to persuade the city council to lower their annual duty hours from 2,928 to 2,548 by using “Kelly Days,” whereby every eighth tour of duty is unscheduled and backfilled so that a member has 120 hours off as opposed to the rhythmic 48; all without a reduction in pay, of course.

The record is unclear, but it appears that a later council was persuaded that because members of the CFD work roughly 25 percent more than the non-uniformed services, parity would warrant that they should accrue sick leave at the rate of 1.25 days per month compared to the one day per month accrued by other employees. Had the council looked back to the codified definition of “day,” its members would have realized that they were not comparing apples to apples. In fact, the CFD members were now actually accruing 25 percent more than their compatriots. All of this matters because when a member calls off sick, the position has to be backfilled — usually by someone working at overtime wages.

Finally, it was discovered that the budget formula passed down from finance director to finance director for deriving wage rates from salaries involved deducting vacation leave from the gross number of annual duty hours. This had the effect of inflating the wage rates and thus overtime payments by as much as 14.5 percent. We traced this practice back to the early 1990s and a misplaced reliance upon a federal court case from another jurisdiction, which was subsequently clarified or overturned, but this fact was unbeknownst to us for over 20 years. In typical onion-layered fashion, it was this inflated wage rate that was used to calculate the lump sum salary enhancements for vacation and holiday leave that started this deep dive.

There are different ways to build a municipal budget — from traditional incremental approaches based upon historical baselines to radical zero-based budgeting that requires all proposed expenditures to be justified anew — but they all have this in common: The end result is a product of the assumptions and practices embedded in the inputs. Too often systemic cost drivers are just below the surface if not hidden in plain sight. If you have looked everywhere else, try looking at the formulas behind the formulas — you might just find a blooming onion’s worth of savings.

DAVID MOLGAARD | Guest columnist
City manager, Charleston, W.V.