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HomeMy WebLinkAbout3.h. Employee Hours, Pay and Benefits for 2010 3. h. City of Shako pee MEMORANDUM TO: Mayor and City Council Mark McNeill, City Administrator FROM: Kris Wilson, Assistant City Administrato~ SUBJECT: Employee Hours, Pay and Benefits for 2010 DATE: May 15,2009 Introduction The Council is asked to consider and provide direction on several specific issues related to personnel costs for the 20 I 0 budget. Background There are several cost-savings measures related to the City's personnel budget that have come up through employee suggestions, department head discussion and following steps taken by other government entities. Whether or not the City elects to pursue any of these approaches depends in part on the overall philosophy the Council prefers, as discussed under agenda item #3. It is also important to remember that virtually all of these items will have to be negotiated with the City's three unions, which represent approximately half of our full-time workforce. Without union participation in these items, the potential cost savings is significantly reduced and workforce equity and morale is jeopardized. Discussion Potential cost savings include: 1. No Cost of Living Increase - The budget shortfall projections are based on the assumption that we would provide a 2% cost of living adjustment in 2010, as we did for 2009. If the City provides no cost ofliving adjustment for 2010, that would save $162,000 (as each percent of salary increase costs the City $81,000). I have been monitoring contract settlements in other metro-area cities, and so far, despite what the general economic climate suggests, very few other cities have followed our path and done something other than the traditional 3% COLA for their union employees in 2009. 2. Wage Freeze - A wage freeze would entail no cost of living adjustments, as well as no step increases for years of service. Slightly more than one-third of our full-time employees are still working their way up through the step system, while the remainder are already at the top step of their pay grade. This will obviously raise issues of equity in treatment. 3. Reducing Hours / Adjusting Work Schedules - Some cities are moving to 36 hour work weeks for non-police employees and closing their offices at noon on Friday - particularly during the summer months. We have not yet estimated the potential cost savings of this approach, although it would be primarily in wage savings versus building operating costs. If the Council desired to save on the costs of operating our buildings, the move to a four-day work week, with staff working four 9 or 10 hr. days, would be the more likely candidate for achieving that goal. A reduction in work hours could be implemented on a voluntary basis, by selecting particular positions, or on an across-the board basis. A major policy issue for any reduction in work hours would be whether we expect employees to accept both a loss of wages and a loss of benefits (we typically pro-rate benefits for those employees that work between 30 and 40 hours per week) or if we would continue benefits at the full-time level for employees working something less than 40 hours per week. 4. Unpaid Furloughs - This is something we are reading quite a bit about in the news in regards to other public sector organizations. It would most likely amount to a requirement that all employees take a certain amount of unpaid time off over the course of the year. Something in the range of 40 hours is commonly referenced (which would result in about a 2% reduction in earnings). Allowing employees to spread their time off over the year would reduce the immediate economic impact to employees and their families, and the service impact to City residents, compared to a solid one-week of City offices being closed. Furloughs could probably be accomplished City-wide, but they do present a unique challenge for the police department and for exempt employees. 5. Freeze Health Insurance Contributions - One ofthe significant cost projections included in the 2010 budget numbers is the assumption that we will have another year of20% increases in health insurance premiums. Unfortunately, we won't have the actual number until after the Council has adopted the preliminary budget and tax levy. We can hope for better renewal rates than what we received for this year, which would solve a portion of our budget shortfall without any undesirable actions on the City's part. However, another option would be to freeze the City's contribution toward employee health insurance at the current dollar amount, forcing employees to pick up and any all premium increases. This would reduce the projected budget shortfall by $215,000. However, if the premium increase is as high as last year's this would be a major financial hit for our employees, especially if we were to combine it with any of the other cost savings items listed above. 6. Early Retirement / Voluntarily Separation Incentives - This is an approach that we tried in preparation for the 2009 budget without much success. However, it is a cost-savings tool that many other jurisdictions are using. We could develop a program if that is Council's direction. The most cost effective result would be if the position being vacated could remain vacant, the service impact of which will have to be viewed on a case-by-case basis. Otherwise, the savings will be only the difference between (usually) the top step of the pay plan, and where the replacement employee would be hired. Requested Action Council is asked to discuss and provide feedback on the above items, once again keeping in mind that these potential cost savings would all be subject to negotiations with our union employees.