Friday, August 19, 2022

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Burlington’s city council reflects on escalating cost of retiree pensions

They may be gone from Burlington’s city hall. But the city’s retired staff members have not been forgotten – at least not by the municipal officials who’ve been tasked with funding their pensions.

In fact, the financial liability posed by these payments was something of a recurring motif earlier this week when Burlington’s city council reviewed some of the city’s personnel policies at its first regularly-scheduled gathering of the New Year.

The council ultimately devoted a disproportionate amount of time to the city’s retirement benefits when it considered some potential changes to Burlington’s personnel policies during a monthly work session on Monday afternoon. Burlington’s city manager Hardin Watkins had submitted these proposed revisions to the council based on the advice of a former human resources administrator from Charlotte who temporarily oversaw Burlington’s own personnel office after the retirement of its long-time director last year.

Watkins told the council that the suggested policy changes address a number of misgivings that the city’s interim personnel director had with Burlington’s existing rules. Her concerns touched on the city’s provisions against nepotism and its recruitment incentives for certain high-skilled positions.

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The interim personnel director also took issue with a 5-percent pay raise that the city has offered to staff members who notify the city of their impending retirements at least 6 months in advance. The council had introduced this farewell salary bump in 2001 in order to encourage employees to provide enough notice for the personnel office to have their successors in place before they retire. Watkins added, however, that the General Assembly approved a new statute in 2014 that discourages this sort of late-term pay increase for government employees.

Although the state doesn’t strictly prohibit these pre-retirement pay raises, Watkins insisted that Burlington’s policy runs contrary to the spirit of the statute, which seeks to limit the financial strain that these increases place on the state’s retirement system.

The council, for its part, saw little cause for concern in the fiscal impact of Burlington’s policy.  Councilman Harold Owen, who had served as Burlington’s city manager before he joined the council, argued that the city’s 5-percent bump pales in comparison to the sort of pay raises that inspired the state to take action in 2014.

“There were some situations over the years at community colleges,” he went on to recall, “where some substantial increases in payment were made through foundations that really bumped up people’s salaries close to the end.”

Owen added that the impact of a 5-percent raise over six months is comparatively modest given that the state retirement system calculates pensions based on the four years when an employee’s salary was at its highest. He pointed out that, for someone who earns $60,000 a year, this bump would equate to an extra $375 a year in retirement pay.

Burlington’s 5-percent raise also seemed “modest” enough to councilman Bob Ward, who served as Burlington’s city attorney before his election to the city council. Ward added that he sees “strong policy reasons to keep” the raise on the books, although he said that the council should still crunch the numbers to gauge the long-term consequences.

Meanwhile, councilman Jim Butler argued that maintaining the raise wouldn’t have any discernable impact on Burlington’s own finances. 

“Let’s face it; we already absorb this in our budget,” he told the rest of the council. “So, we’re not talking about a hit to our budget…and the ability to plan and execute a personnel [succession] plan long-term is very important.”

The council nevertheless seemed to appreciate the overall financial impact of the city’s retirement benefits even if they remained unperturbed by the ramifications of the 5-percent bump. The magnitude of these expenses became abundantly clear when Peggy Reece, Burlington’s finance director, informed the council that the city’s current annual budget sets aside an extra $407,000 over the previous year’s spending plan to cover the city’s contribution into the state retirement system on behalf of its employees.

In the meantime, the council heard a skeptical take on the policy value of the 5-percent retirement bump from Jaime Joyner, the city’s current personnel director. 

“I think we also have to ask ourselves, are we getting what we want out of it?” Joyner said during the work session. “Even though the employee gives us 6-months notice, is that enough time [to hire a successor]?”

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