AGENDA #2
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Kay Johnson, Finance Director
SUBJECT: Lapsed Salaries in Past Three Years
DATE: June 15, 2005
The purpose of this working paper is to respond to the Council�s request for three years of history of lapsed salaries in the Town�s major departments.
BACKGROUND
On April 27, 2005, we prepared a budget working paper (Attachment 1) discussing the recommendation of the Citizens Budget Sub-Committee of the Budget Review Advisory Committee to budget for lapsed salaries. We reviewed the current practice where the Council budgets for lapsed salaries as a part of the $800,000 in fund balance appropriation that we plan to be able to use in future years and recommended that the Council continue the current practice.
DISCUSSION
In order to achieve savings through lapsed salaries, we must delay the time before a position is filled after a current employee has left a position. While we could achieve savings in this way, we achieve the same result by requiring authorization from the Town Manager before hiring is begun. We believe that our departments are not large enough to have sufficiently predictable annual savings to warrant budgeting for salary savings by department. We note that Durham only budgets for salary savings in its three largest departments, each of which has more employees than our largest department.
The history of lapsed salaries of our largest departments is as follows:
As we discussed on April 27th, we have no lapsed salaries from the Fire Department. Within our Police Department, we use much of the lapsed salaries to pay overtime in order to maintain current police services. We experienced an increase in lapsed salaries in police in 2002-03, primarily because of the receipt of grants late in the year, with expenditures occurring against those grants in the following fiscal year.
The Public Works Department has a different make up than Police, Fire, and Transportation, each of which has a large number of employees doing similar tasks. Public Works has a diversified work force. Some positions could be left open after an employee resigns or retires for a period of time without serious service level issues. For other positions such as sanitation, it is important to fill the positions as soon as possible in order to maintain service levels. Because of the mix of services, we believe that it would not be a best business practice to set a savings target for the Department without taking service levels into consideration. As with other Town departments, lapsed salaries are currently used for overtime and temporary employees in areas of critical need.
Within the Transportation Department, lapsed salaries for full-time permanent employees are routinely transferred to cover overtime and temporary employees so the buses �run on time�.
In each year, the lapsed salaries were the major source of the $800,000 General Fund carry forward for the following year�s budget.
ATTACHMENT