82(R) HB 2720 - Introduced version

The bill would authorize state agencies, including institutions of higher education to implement an involuntary furlough program to balance the agency's budget. On approval of the governing body of the agency, the director of the agency may furlough an employee which would require an employee to take unpaid time off. The bill would prohibit an employee from using paid leave while on an unpaid furlough unless the unpaid furlough exceeds one month in length. An employee on unpaid furlough would continue to earn leave, and earn service credit toward longevity pay and retirement benefits as if the employee were not on leave without pay. The bill would include amounts by which a person’s salary is reduced under an involuntary furlough program in compensation for the purposes of retirement contributions; therefore, the employee’s contribution for retirement would be based on their standard monthly compensation, not the reduced salary after the furlough. Any reduction in the employee's hours resulting from the involuntary furlough program would not affect an employee’s full-time status for the purposes of the state’s health insurance contribution. An employee whose unpaid furlough exceeds one month is required to make the contributions required for the health coverage or deferred compensation selected by the employee.

The extent of the savings is unknown because the governing body of each agency would determine the number of employees who would be required to participate in the involuntary furlough program. In fiscal year 2010, the salary expenditure for all state agencies and institutions of higher education was $10.0 billion in All Funds. If all employees were required by the director of their agency to take three days of unpaid time off under the involuntary furlough program, agencies and institutions of higher education could reduce salary expenditures by $115.8 million in All Funds. Three days of unpaid leave in a year would be the equivalent of approximately a 1.2% pay cut for affected employees. The savings would be achieved by reducing an employee's compensation in an amount equal to the number of hours the employee is furloughed times the employee's hourly rate or equivalent hourly rate as computed in accordance with the General Appropriations Act and rules adopted by the comptroller. There would be additional savings to the state for reduced payments of Social Security payroll taxes.

Some agencies with 24 hour schedules such as the Texas Department of Public Safety, Texas Department of Criminal Justice, and Health and Human Service agencies that manage state schools and state hospitals are required to maintain certain staffing levels at all times. Furloughed employees may have to be replaced with employees working overtime which would offset any savings that would result from the involuntary furlough program. If the involuntary furlough program did not apply to public safety employees, correctional officers at TDCJ, certain direct care staff at health and human service agencies, and other essential employees the savings would be reduced. With those exemptions, the savings associated with three days of unpaid time off under involuntary furlough program at agencies and institutions of higher education would reduce salary expenditures by $50.3 million in All Funds at state agencies and $44.4 million in All Funds at institutions of higher education. Under this scenario, General Revenue salary savings at state agencies would be $25.2 million, General Revenue Dedicated salary savings at state agencies would be $2.8 million, and General Revenue salary savings at institutions of higher education would be $34.4 million.

There would be additional savings to Social Security contributions of $3.8 million in all Funds, including $1.9 million in General Revenue and $0.2 million in General Revenue Dedicated funds for state agencies; and savings of $3.4 million in All Funds, including $2.6 million in General Revenue funds for institutions of higher education.

Note: If 3 days of involuntary furlough per year were imposed, the biennial savings would be twice as much as the preceeding numbers.

The bill would take effect September 1, 2011.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 82ND LEGISLATIVE REGULAR SESSION


April 6, 2011

TO:	Honorable Jim Pitts, Chair, House Committee on Appropriations

FROM:	John S O'Brien, Director, Legislative Budget Board

IN RE:	HB2720 by Pitts (Relating to unpaid furloughs for state employees.), As Introduced