Lawmakers looking to deter, recover salary overpayments

The state as of Dec. 31 was still trying to reclaim balances on nearly $1.4 million in salary overpayments mistakenly made to public employees over the years — some stretching back as far as the 1990s.

The figure includes the full amounts that were overpaid to any employee who still owes the state money. The outstanding balance across state departments was about $394,700 as of Dec. 31 after amounts recovered through installment payments and amounts referred to the Attorney General for collection are deducted.

Monthly balances in 2017 ranged from a low of $387,542 in November to a high of $613,883 in March, according to data from the Department of Accounting and General Services, which administers the state’s payroll.

State Sen. Donna Mercado Kim says those balances are too high and has introduced legislation aimed at motivating state departments to more aggressively recover balances owed and deter salary overpayments in the first place.

Most of the overpayments happen when employees call in sick or take vacation when they don’t have enough or have exhausted their paid leave. State employees earn 21 sick days and 21 vacation days a year. Other reasons include being paid after termination or resignation.

“The problem is we have automatic salary payments. You automatically will get your paycheck every two weeks unless notified otherwise,” Kim (D, Kalihi Valley- Moanalua-Halawa), the lead sponsor of Senate Bill 2598, said in an interview.

“So when you use up all of your leave but you take sick leave anyway or go on vacation, the system doesn’t pick that up. When the payroll goes in, you get paid the full amount,” she said. “When the system realizes, ‘Oh, this person doesn’t have leave,’ now the system realizes that they overpaid you.”

Individuals who no longer are employed by the state account for more than half the amount still owed, or 53 percent of the outstanding balance.

SB 2598 would require state departments to deduct overpayment costs from their annual budget requests to the Legislature and require departments to place employees who exhaust their sick leave on a manual payroll system. An earlier provision that would have allowed the state Employees’ Retirement System to garnish the pensions of retirees who owe the state for overpayments has since been removed from the bill.

“The hope is that by the departments knowing that it’s going to come out of their budget, that they realize they need to be more on top of it and pay more attention to it,” Kim said. “This is money that can be used for other things. … We’re talking about over the years over $1 million. This is taxpayer dollars.”

Kim, chairwoman of the Senate Committee on Government Operations, says for years she has been grilling department heads about salary overpayments when departments submit their budget requests to the Legislature.

“Every year the amounts pretty much stay the same,” she said.

Kim said departments aren’t taking advantage of an existing state law that allows “indebtedness” to the state, including salary overpayments, to be promptly recovered via payroll.

“Yes, it was the state’s mistake, but at the same time, it’s money that they weren’t supposed to get,” she said. “The law says, if it’s under $1,000, we can collect it all in one paycheck. If it’s over $1,000, we can collect 25 percent of the salary per paycheck (until the debt is repaid). But we are not taking advantage of that.”

Education matters

Kim said the problem historically has been most persistent within the Department of Education, which has more than 20,000 salaried employees.

Of the $394,700 outstanding overpayment balance across state departments at the end of last year, more than $204,000 was from the DOE, followed by the Department of Health ($60,023); Department of Land and Natural Resources ($57,108); and the University of Hawaii ($28,195).

“Unlike other departments, the Hawaii state Department of Education faces circumstances that require different approaches to tackling salary overpayments,” DOE spokeswoman Donalyn Dela Cruz said.

She said the DOE is the only department with 10-month employees — mostly teachers and some other school staff — who, as part of collective bargaining agreements, earn all of their paid leave benefits up front without working an entire school year.

As of November, Dela Cruz said, 54 percent of the department’s total salary overpayments — including both collectible and noncollectable amounts — were to 10-month employees.

The DOE has taken steps to improve oversight and prevent overpayments including issuing a memo in its annual school year packet to remind employees of their responsibility to report and submit proper documents when requesting a leave of absence, and establishing a training unit to help schools with better tracking and monitoring of employee leave benefits.

SB 2598 cleared the Senate Committees on Government Operations, Labor and Ways and Means, and next heads for a full Senate vote.