Proposed overtime rules could have significant impact on state workforce
When President Obama proposed new federal overtime thresholds in June, his administration anticipated it could affect about 5 million people in the United States.
If approved by the Department of Labor, those making under $50,400 a year would be eligible for extra pay if they work beyond their normal schedule. That’s up from the current cutoff of nearly $24,000.
In states like Delaware, where a significant chunk of the workforce is made up of public employees, that could strain an already overextended budget where the projected revenue shortfalls for next year range between $130 and $160 million according to state officials.
Delaware Public Media political reporter James Dawson crunched the First State number to see how this OT rules change could affect the state’s payroll and more.
An analysis of 2014 state payroll data shows about 38 percent of full-time public workers in Delaware earn less than the proposed $50,400 annual salary mark, potentially making them eligible to collect overtime benefits.
The situation becomes even starker if you exclude employees who are part of a union or already collect overtime like state troopers or nurses. That number then climbs to 59 percent of full-time public workers according to state records.
Office of Management and Budget officials haven’t looked yet at their own records to see what cost to the state, if any, these proposed regulations might have according to its director, Ann Visalli.
“I wouldn’t commit to any analysis at this point until we get the final interpretation of the policy from the federal government,” Visalli said.
Delaware Public Media’s analysis shows nearly 12,000 state workers could start accruing overtime if Obama’s proposal goes through unchanged.
Despite that number, Visalli says it’s unlikely each of those employees would need to stay on the clock longer.
“Who is eligible is one of the drivers, but also whether or not they regularly work overtime, so there obviously may be other exemptions."
Those exemptions come down to an individual employee’s specific duties, including whether they manage other workers or mostly perform office work.
Records show the state paid out $55.9 million in overtime last year, or about three percent of the total payroll.
For example, nearly 1,000 state troopers earned some amount of overtime pay last year. Over half of them took home more than $10,000 in 2014 according to that data, with one earning nearly $100,000 in overtime.
Visalli argues paying for those extra hours ultimately save the state money.
“Hiring a full time is certainly more expensive, especially given our generous pension plan and health care than overtime, much of which is driven on a temporary basis,” she said.
One of the most likely scenarios is that the state will simply not have employees work past a full week. That’s according to Ross Eisenbrey, Vice President of the Economic Policy Institute, a union-backed think tank that supports Obama’s proposal.
“That was the fundamental purpose of the Fair Labor Standards Act was to control excessive hours and to say, 'The standard workweek is 40 hours a week and we will have a disincentive for employers to work anyone longer than that. We’ll make them pay extra,'” Eisenbrey said.
And Joint Finance Committee chair Sen. Harris McDowell (D-Wilmington North) agrees.
Right now, only those making under $23,600 are automatically eligible for overtime.
“A lot of those white collar workers would be eligible for food stamps and other benefits, and so the increase in pay would maybe on one hand cost us, but on the other hand, it would save us money,” McDowell said.
Instead, he says his bigger worry is that Delaware’s stagnant wages will lead its workers to jump to the private sector.
“I’m more concerned, frankly, about a brain drain on the state employees, not because of this change, but because of all these restrictions and austerity that we’ve placed upon our state employees."
In several speeches and presentations over the past year, Gov. Jack Markell (D) has repeatedly touted cuts he made to Delaware’s public workforce since first taking office in 2009.
During that timeframe, Markell slashed about 1,000 state jobs through attrition.
A recent report funded by the Business Roundtable, a group of Delaware CEOs, urges state lawmakers to trim the state’s payroll even further through hiring freezes or eliminating positions altogether.
But with those cuts, public employees – like many private sector workers in America - have had to shoulder more responsibilities for stagnating wages.
According to a Pew Research Center report from 2014, average wages peaked nationwide in 1973, with inflation barely keeping pace, or, in some cases, even falling.
Markell has proposed a single one percent pay raise in his seven years on the job aside from restoring a salary cut he and state lawmakers made to help weather the 2009 recession.
Eisenbrey says under those circumstances an exodus to the private sector like McDowell fears is understandable.
“If the pay is really falling behind, you’re more likely to jump. It’s going to be – it is already and it’s going to be - a worse problem going forward for public agencies to retain good people,” Eisenbrey said.
Visalli notes that “there’s nothing the governor would like more than to be able to provide regular pay increases” but points to another looming $130 million deficit for next year – this time for the cost of health benefits.
“If we weren’t facing the significant cost to the state for providing these health care benefits – many of which are way more generous than what you might face in other governmental entities and the private sector – there may be more funds freed up for other kinds of compensation increases like pay,” she said.
The U.S. Department of Labor is currently looking over the nearly 250,000 comments received before finalizing any potential changes to Obama’s proposal.
Eisenbrey estimates that any revision would go into effect by the end of next summer based on past experience with similar federal rule changes.
That timeline gives state officials short notice to adapt to any changes, with early budget presentations starting in November.