Horry County leaders consider cutting employee benefits to avoid tax hike

Faced with an expanding budget hole, Horry County leaders may trim employee benefits to avoid raising taxes.

Although the county has seen 1 percent growth in revenues, expenses have risen by 2 percent and officials contend the benefits packages offered to the county’s nearly 2,100 employees are creating a financial strain.

“That’s a big, big part of our budget when you look at personnel costs for health insurance and retirement,” said County Administrator Chris Eldridge.

Employee health insurance costs the county $13.8 million each year, accounting for 16 percent of total salaries. Retirement expenses top $10 million (11.5 percent of salaries).

Another major expense is workers’ paid leave, which amounts to $8.3 million (10 percent of salaries). Each new hire accrues five weeks of paid general leave per year. That time could be used for sick days or vacations. When the county’s 12 paid holidays are factored into the mix, that means each county employee receives about two months of time off each year. Longtime workers receive even more days. For every five years of employment, workers receive another week of paid leave. That’s capped at nine weeks after 20 years of service. As of March 5, county workers had amassed 698,417 hours of paid time off — valued at nearly $14 million.

“It’s a lot,” Eldridge said. “And if people are taking it, it does impact operations.”

One area where paid leave is affecting the county is public safety. When those employees use their time off, other workers are often paid overtime to man their peers’ shifts. Overtime costs the county $3.4 million annually.

During a Tuesday workshop, some council members expressed shock at the amount of paid time off for employees.

“How did we get to this point?” asked councilman Harold Worley. “If you go out in the private sector and look at the average package of vacation and leave time, this doesn’t make sense. ... Getting paid for 12 months and you’re off two months?”

It wasn’t always like this. In the early 2000s, county council opted to combine sick and vacation days into general leave time because some workers were taking sick days when they weren’t ill, said Patrick Owens, the county’s human resources director. That enabled those employees to save their vacation days.

“It’s very easy to get a doctor’s excuse,” Owens said.

He said the five weeks of general leave was in line with what other large South Carolina counties were providing at that time.

Council members, however, don’t want to continue the practice.

“That needs to be separated,” councilman Jody Prince said of sick and vacation time. “It makes no sense why we would have ever done that.”

Most council members agreed that the plan should be changed for new employees, but some insisted the workers who were hired under the current leave rules should be allowed to accrue time off at the established rate.

“We have to make sure that whatever changes we make don’t affect our existing loyal employees,” councilman Johnny Vaught said. “Because they were hired based on what we told them we were going to do for them.”

Councilman Bob Grabowski echoed that sentiment.

“The people that are working now were hired under these expectations,” he said. “I don’t think it’s fair to go back to them and tell them, ‘Well, you can’t have it.’”

But other council members argued that grandfathering employees won’t help the county’s financial woes. With a budget of nearly $400 million, county officials fear that if they make a practice of dipping into reserve money to balance the budget they will find themselves in a financial crisis. County officials estimate they will have about $8 million in reserves to balance their next budget, if the money is needed.

“We’ve got a hole here that’s getting deeper and deeper,” Worley said. “We need to do the right thing. ... Anybody, beyond holidays, that takes 30 days off of work, they probably need to be in a nursing home.”

Council members dealt with a similar budget problem several years ago when they tackled retiree insurance. In that case, they stopped offering the benefit to new hires and modified the program.

“We split the baby in half,” councilman Marion Foxworth said. “We could look at that. If any employee has already earned so many days, then perhaps they get to keep them. But changing it so they don’t earn that many moving forward is perhaps something we need to look at. Because if we just grandfather all existing employees, then we’re just rearranging deck chairs. We’re not accomplishing anything.”

What makes county benefits seem so generous isn’t that they’ve exploded beyond control, Foxworth said, but that private sector compensation has dwindled.

Traditionally, he said, public sector jobs were prized for their stability and benefits while private sector work was seen as less stable but more lucrative.

“In the last 30 years, the private sector deal has gotten much worse,” he said. “There’s no such thing as private sector pensions anymore. Private sector insurance is very slim and in the last seven years private sector salaries have fallen. ... Now when you compare the two, the public sector looks much better.”

Along with changing the county’s paid leave policy, council members are considering other cost-reducing options, including changing the health insurance coverage offered to county workers.

The county is part of the South Carolina plan now, which means premiums and plans are dictated by the state and there’s little incentive to control expenses. The county could become self-insured or partially self-insured, which would give local officials some flexibility in plans. However, no plan changes can occur until after June 30, 2016.

The discussion of changing or trimming employee benefits is a concern to workers. In February, the county surveyed employees to find out which parts of their compensation are most important to them.

Salary increases ranked No. 1, followed by health insurance and paid leave time.

The survey also asked why employees joined the county. Health insurance was the top answer, while salary came in fourth.

When asked what changes employees would be willing to make to keep their health insurance at the preferred level, reducing the number of paid holidays led the list. Lower salary increases ranked at the bottom.

“Most employees don’t want to give up anything from a paycheck,” Eldridge said.

Tom Fox, who oversees the J. Reuben Long Detention Center, urged council members to use caution when looking at worker benefits. If the cuts are too drastic, he said, that could cost the county talented employees and force public safety departments to spend more on overtime.

“It’s an important morale thing for staff to have good benefits,” he said. “Bad morale, bad attendance. Bad attendance, increased overtime.”

He encouraged council members to compare the county’s benefits with those of other local governments.

“If you don’t think they’ll leave Horry County to go to Myrtle Beach, North Myrtle Beach and Conway because of benefits, they will,” he said. “It’s going to create an enormous staffing crisis.”

Auditor Lois Eargle, who was not at the meeting but has spoken with other elected officials about the possibility of benefit reductions, said county employees are worried. Eargle fears county council may go too far with its cuts.

"Maybe some things need to be changed," she said. "But the thing about it is, they’ve got to go overboard."

County officials insist they’re not trying to punish workers.

“The reality of it is we’ve got to manage our budget, too,” said council chairman Mark Lazarus. “Or we’re going to have to look at tax increases, and that’s something that nobody up here or any citizen wants to hear. But we’re going to have to make some tough decisions.”