Cashing out unused hours

Clark, Washoe face as much as $610M in PTO liabilities

Taxpayers potentially owe almost $610 million to local government employees in Nevada’s two most populous counties for their unused paid time off, financial reports show.

That liability grew 26 percent from 2007 to 2017, and it doesn’t represent compensation that will be paid exclusively for rest, relaxation, illness or personal time. Many of Nevada’s public employees can stockpile their sick and vacation hours and cash them out at retirement. Some of those payouts exceed $100,000.

Over the past five years, governments in Clark and Washoe counties have paid $215 million to departing employees for their unused sick and vacation time, a Las Vegas Review-Journal investigation has found. Because some governments do not budget for the payments, departments must delay hiring replacement employees to recoup expenses.

“It can be sticker shock, depending on who retires,” said Thom Reilly, chancellor for the Nevada System of Higher Education and a former Clark County manager. “If it’s not budgeted and you’re paying it out, you have to make up the cost somewhere.”

The Review-Journal surveyed 22 local government employers in Nevada — including cities, counties, police forces and school districts — and found that each

allowed employees to accumulate unused leave across their careers and sell back those hours when they leave. And retiring public employees start collecting lifetime state pensions after cashing out their unused PTO.

The state of Nevada was not included in the survey because it made public payout amounts to former executive and judicial branch employees but refused to identify the names or positions of those workers. Financial reports show that as of last year, the state owed almost $150 million to its workforce for unused paid time off.

Supporters of paid-leave accumulation policies say they encourage employees to take less time off and spend long careers at the same government.

But those policies also have turned a quality-of-life benefit into taxpayer-funded nest eggs. Payouts for unused hours are based on employees’ final salary, not what employees were paid when they banked each hour of time off. Each banked hour effectively becomes stock that rises in value as a public employee’s base pay climbs.

The result for many workers is a massive final paycheck.

Payroll records show 344 departing workers at the surveyed governments received $100,000 or more for unused sick and vacation time from 2013 through 2017. Twenty-five people, all working in Southern Nevada, received more than $250,000 each.

Enriching the few

When Mark Calhoun retired as Henderson’s city manager in 2012, he collected about $475,000 from the city, spread across three annual payments. The money was for thousands of unused sick and vacation hours accumulated over a nearly 30-year career. “I had vacation that I used. I took very little sick leave because I wasn’t sick,” said Calhoun, now 70.

Eye-popping sums like Calhoun’s are driving a disproportionate amount of payout costs, records show.

Employees who received more than $100,000 for unused sick and vacation time took home nearly one-fourth of the money paid out, but they make up fewer than 2 percent of the people who received payments.

Henderson and some other governments have responded to large payouts by reducing the number of hours departing employees can sell back.

Nevada’s largest city, Las Vegas, began saving $600,000 a year in 2011 when it stopped paying departing executives and other nonunion employees for their unused sick leave, Human Resources Director Dan Tarwater said. The following year, the city halved how much sick leave newly hired unionized workers could bank to further curb an “unsustainable practice” after the Great Recession battered the city’s tax revenue.

“All it did for years and years was spiral up because of competition between local public agencies,” Tarwater said. “Somebody has to start the spiral back down.”

An uncommon perk

Paid time off is a common employee benefit across the United States, but amassing unused hours for an end-of-career payday is not.

The Society for Human Resource Management surveyed thousands of public and private employers last year and found that about 1 in 7 respondents allow employees to cash out their unused vacation leave at separation.

Only 1 in 20 respondents bought back employees’ unused sick leave,