Sunday, March 7, 2010

Political Panaceas with Unintended Consequences

This is a story about politicians cutting costs with unintended consequences.

As in many states, California ordered state employees to take three furlough days from work each month for an annual estimated payroll savings of $1.2 billion. Now they learn from a state auditor's report overtime of essential employees in 24/7 departments is costing the state $1 billion

Prison nurse Nellie Larot took the 14% furlough cut but earned an additional $177,512 in overtime pushing her annual salary to $270,000. It exceeds the $225,000 annual salary of her boss, Matthew Cate, director of the entire state prison system.

The auditor's report said 50 state employees -- 35 of them nurses -- earned more than $100,000 in overtime paid at 1 1/2 times regular pay and after the 14% furlough cut was factored in.

The furlough plan, advanced by Gov. Arnold Schwarzenneger in February 2009, actually reduced overtime by $64 million last year but the total still exceeded the amount the state paid in 2005 by $808 million.

State Auditor Elaine Howle said a review by her office found that more than 100 nurses and psychiatric workers on the state payroll had at least doubled their salaries with overtime, working as many as 90 hours a week. She said two nurses at Napa State Hospital were paid more than $1.3 million combined in overtime in a five-year span ending in mid-2008.

The auditor expressed concern more than just the costs -- that excessive hours could impair performance and jeopardize patients.

Nancy Lyerla, a leader of the largest union representing state nurses, said the politicians were warned that furloughs would create staffing gaps that would have to be filled by employees working overtime. "They didn't look at what it costs to replace the people on furlough," Lyerla said.

Aaron McLear, a spokesman for the governor's office, said state department heads must do a better job managing furloughs so they do not require overtime.

Jon Coupal, president of the anti-tax Howard Jarvis Taxpayers Assn., charges some employees are gaming the system.

For more details, click on this link to the Los Angeles Times story.


The moral to this story is that while Father Knows Best, politicians don't. The furlough system in California has forced some employees to file for bankruptcy and lose their homes. It has a residual effect on the services they render whether the beneficiaries are patients or drunk drivers allowed to drive the streets with inadequate enforcement from a shortfall of law enforcement officers. It has caused further delays already existing in the Department of Motor Vehicles.

Of much greater magnitude, it makes one wonder of the billions in so-called savings promised in the health care reform legislation will ever be realized or whether -- as a leaking New Orleans flood channel -- extra costs will leak into areas unanticipated by the politician authors.

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