Remove ImagesAfter The Fact Bonus Defense
May 31, 2012
Usually the Guilford County Board of Commissioners holds discussions on county business and then takes a vote.
However, in the case of early retirement bonuses for some county employees – especially a $61,000 bonus County Manager Brenda Jones Fox is set to receive – the board is having the discussion only after the fact, after it voted on the issue.
That's because on Thursday, March 1, when the board voted 7 to 3 to pass a long list of items all at once, the commissioners, who didn't read their agendas carefully enough to catch the item, didn't know they were voting to temporarily remove a cap on retirement bonuses. So, while some people apparently put carts before horses, in this case the Guilford County commissioners put the vote before the discussion.
Now, however, in light of a Thursday, May 10 revelation in The Rhinoceros Times that the Board of Commissioners inadvertently removed the cap on early retirement bonus pay for long-time county employees, the commissioners and county staff are having quite a lively discussion on the matter behind the scenes – which is all leading up to a public discussion that the board expects to have at its next meeting on Thursday, June 7.
As part of the discussion, Guilford County Attorney Mark Payne has been in consultation with the NC School of Government in Chapel Hill, while Fox and Assistant County Manager Sharisse Fuller, who's also the county's human resources director, have been attempting to show the commissioners what a good idea the temporary removal of the cap was because, Fox and Fuller argue, it will save the county money in the long run.
Commissioner Kay Cashion said this week that she's been looking at the projected savings that county staff has now provided the commissioners, but Cashion added, she has a lot of questions.
"It's all guesswork," Cashion said of the county staff's savings projections, which would supposedly come about largely by leaving some positions unfilled after employees retire.
Cashion said it would have been nice to have this thorough discussion of the matter before the Board of Commissioners voted on the temporary removal of the cap – rather than after the fact, once the $61,000 bonus for Fox came to light.
At the March 1 meeting, the item appeared on the board's consent agenda, which usually contains routine housekeeping-type matters. The three commissioners who voted against the consent agenda that night were Commissioners Billy Yow, Bill Bencini and Paul Gibson. Commissioner Mike Winstead wasn't there.
At the board's Thursday, June 7 meeting, several commissioners have stated that they want to rescind the motion that temporarily removed the cap and allowed Fox to collect $61,500 – four months pay – as a retirement bonus, instead of the $16,500 Fox would have been entitled to if she retired today and the retirement plan was kept the same as it has been for the three years that the county has had the plan in place.
The cap was not lifted for all employees who chose to take part in the county retirement incentive plan – just for those who, like Fox, had been with the county 30 years or more and who chose to retire when Fox did.
Gibson said he would make a motion to rescind the move if no one beat him to it.
Commissioners Kirk Perkins and Linda Shaw have also stated an interest in revisiting the vote.
Some people anticipated that the item would be discussed – and perhaps even voted on – at an untelevised budget work session the board held on Thursday, May 24. However, several commissioners said the proper place to have that important discussion was at a regular televised meeting.
No county employee has retired as a result of the removal of the cap – only those employees who retire between August 1, 2012 and Feb. 1, 2013 are entitled to the extra money, and anyone who wanted to take advantage of that benefit had to mention to a human resources employee, by Tuesday, May 1, that he or she wanted to take advantage of the temporary suspension of the cap.
If they hadn't mentioned it to a human resources employee by that date, then they would not qualify for the plan and they would be subject to the cap on bonus pay. The lifting of the cap that the board approved only applied to those who had been with the county (or in a participating state and local government retirement plan) for 30 years or more.
Payne said this week that he has heard back from the School of Government about any potential legal problems with the board rescinding the vote that removed the cap. Payne said the School of Government agreed that his interpretation of the law was correct: The Board of Commissioners has the right to undo it since it was an action that would take effect at a future date.
Payne has argued that, since no employees have actually retired yet – they have merely made a non-binding statement that they might retire during the eligibility period which ran from August to February – the commissioners can rescind the action.
Payne said those he spoke with at the School of Government thought that was true as well. "Nothing is vested until they actually retire," Payne said.
He added that, with that said, the School of Government also agreed with him that it's a legal issue on which reasonable people can legitimately disagree.
Payne made that point with emphasis last week in an email to The Rhinoceros Times when he put the following in bold print: "Most importantly, reasonable people could, I believe, come to a different interpretation of the legality of making a change now."
Payne also said there's no case law on the specific question Guilford County now faces – where local government retirement benefits for employees had been enhanced but then changed back before going into effect.
Three commissioners have stated concerns about potential lawsuits brought against the county if the board rescinds its policy.
Last week, Shaw said she couldn't support letting the $61,000 bonus for Fox stand; this week Shaw expressed concern that the county might be sued if it did not.
Yow said that he was concerned about the county employees who had made plans to retire based on the removal of the cap. Yow said he doesn't want the county to be sued, and he certainly doesn't want the outcome to be that Fox ends up getting even more than the $61,000 because a judge finds in her favor in a lawsuit.
Chairman of the Board of Commissioners Skip Alston said he knew about the removal of the bonus cap when he voted on March 1, and he also said that the board can't ethically undo the move now.
"We'd be going back on our promise," Alston said.
Alston also said the county would be opening itself up to lawsuits if it voted to undo the action.
Gibson said that Fox may indeed sue the county but, he said, that was a chance he was willing to take.
"Let her sue," Gibson said.
There are 45 employees who were eligible for the removal of the cap as long as, before May 1, they mentioned to a human resources employee that they might want to take advantage of the removal of the cap on the retirement plan payout.
In an email from Fuller to the commissioners, sent on Wednesday, May 23, Fuller laid out some of the specifics that commissioners have asked for in light of the revelation of the increased bonuses: "The following Voluntary Enhanced Retirement (VER) Information is based only on the 22 employees who have 30 or more years of service. A total of 22 employees expressed their intent to retire and plan to do so by 2/1/13."
Those 22 employees are not required to retire even if they said they might, and Fox and Fuller were asked by commissioners to offer more specifics on how many people could be expected take advantage of the plan. The commissioners requested staff to contact the employees who were considering retiring and ask them about their intentions at this point.
Fuller said that, of the 22 who have expressed intent, seven have signed paperwork and plan to leave by September 2012. Another 10 "seem certain" of their decision to leave, and five county employees "appear uncertain, but seemed to want to keep options open."
In the email, Fuller concluded that the "best guess" is 17 of the 22 employees are very likely to retire by Feb. 1 of next year. That's the date on which Fox has told the board she plans to retire.
Fuller continued: "Incentive payments do NOT count as compensation for retirement purposes, so the incentive payment doesn't inflate a person's monthly pension payment."
Under the very attractive state and local government retirement plan that Guilford County employees participate in, retirement benefits are determined by the employees' four years of highest pay while in the system, which in most cases means their last four years of employment. Fox, who has worked in Guilford County government for 41 years, would be entitled to about $142,300 a year for the rest of her life from the county's retirement plan.
All of the 22 employees would benefit at least slightly from the removal of the cap. According to statistics from the Human Resources Department, the salaries for the 22 employees affected range from $52,000 to $183,200 per year.
Those on the low end of the scale wouldn't benefit much from the removal of the cap. For instance, the employee making $52,000 would get $16,500 with the cap in place, but $17,333 with the cap removed.
However, on the other end of the scale, Fox, for instance, would get a bonus that's $44,500 more than she would get if the cap remained in place.
According to the Human Resources Department, the average current salary of the 22 employees is $88,685. In other statistics regarding the 22 eligible workers, the average number of years of creditable service for the 22 employees is 33.9 years.
"For each month a position is not filled, the County saves an average of $7,390 per month," Fuller wrote to the commissioners. "If just one of these positions is not filled, the average savings over a 3-year period (after the extra incentive is paid) is $236,479. Every effort will be made to keep positions vacant as long as possible."
Her email also states the county may save money in other ways as well. Fuller wrote: "The promotional opportunities presented to current employees when a 30-year employee retires often have a 'ripple' effect of savings. So, if a top level person retires, even if the top level position is filled, the savings may instead be seen through the elimination or delayed replacement of a mid-level position or lower, made possible through reorganization."
Of course, a question that isn't addressed by the email is this: If all these people aren't needed to run the county, then why is the county keeping them on in the first place? Fox has been known for a lot of things during her three plus years as county manager, but compassion in the face of potential savings is not one of those things. If these employees are truly deadwood, and the county can function well without them, then why not simply let them go?
In all of the 22 cases, those employees have been around for 30 years or more and are eligible for full retirement benefits. In most cases, even in retirement, these employees would be making more than most people make now when they go to work each day.
Regardless of potential savings to the county, in the case of Fox, there is likely to be none whatsoever. The bonuses are meant to encourage employees to leave county government, but there's considerable evidence that once Alston, Fox's major advocate, is off the board, and new board members are sworn in on the first Monday in December, the new board would get rid of Fox whether she wants to go or not.
An interesting side note is that Fox's contract calls for her to be paid four months salary – $61,000 – if she is fired without cause.