SHAMOKIN - The city spends half of its annual budget on employee salaries, but the impact lasts far beyond any one fiscal year.

Overtime, compensatory time and unused paid leave all can balloon salary figures, boosting pension payments paid monthly to retirees or their benefactors. It's made possible under the existing terms of city contracts, ordinance and policy.

Those terms could be targeted for change while Shamokin City Council looks to repair its decayed financial structure under guidance from the state.

Monthly payments totaling $51,842.59 were paid to 28 recipients in 2013 from both the police and non-uniform pension plans. Of the $622,111.08 in total combined pension payments last year, 86 percent, or $536,228.04, was paid to the 16 recipients enrolled in the police plan. That figure will jump with the recent retirement of former police chief Edward Griffiths. Calculations for his retirement have not yet been finalized, but his monthly payment is estimated by city hall at nearly $4,500.

The city's annual contribution, known as a Minimum Municipal Obligation, is determined on the performance of the pension fund. A good year lowers the payment; it's the opposite if the fund's returns are poor.

Shamokin missed its MMO payment in 2013. It still owes $220,768.99 to the fund, including the state's reimbursement of $116,530.75 which was spent by the city in 2013. It will also owe interest on the payment, according to the Third Class City Code.

Its 2014 obligation is a combined $218,769 - 94 percent of it for the police fund.

Determined by formula

Employee pension contributions vary, with different standards for police and non-uniform pension plans. So does the pension payout formula.

For the police union, the payout is whichever figure is greater: one-half the final rate of pay or one-half the monthly average of the five highest years of earnings. Non-uniform payout is determined using the five-year formula. When a non-uniform retiree begins to receive Social Security, retirement benefits are reduced. Substantial overtime would boost the payments using either calculation.

Shamokin employed 17 union employees in 2013, 10 from the police department and seven AFSCME members. All the police officers and four of the AFSCME members were enrolled in a pension plan.

Every employee, union or otherwise, receives overtime and compensatory time, including exempt employees in management positions, according to the Early Intervention Plan (EIP) prepared for Shamokin by Financial Solutions, a division of the Stevens and Lee law firm and consulting agency.

Paid leave is substantial. All employees receive between 14 and 16 sick days annually. The AFSCME contract allows up to six weeks vacation for 25 years of service; police officers are eligible for up to five weeks after 20 years.

When a police officer retires, any time accrued is applied to the formula in determining pension payouts, including unused vacation days, compensatory time and as much as $6,000 for the maximum 150 unused sick days.

Unused vacation days and sick days apply the same for AFSCME members. However, public works employees don't receive compensatory time that can be cashed in. Any such time accrued must be used as paid time off within a calendar year or it expires at the end of the year.

Retirees locked in

Shamokin has applied for entry into the state's Act 47 program for distressed municipalities. It could lead to wage freezes for union employees, a decrease in health care and a reduction or elimination of overtime, compensatory time and paid leave - some of the many suggestions made by Financial Solutions.

Employee compensation and benefits were said to be "unaffordable and unsustainable" under Shamokin's current revenue structure, according to the EIP.

But any changes would largely effect the retirement of new hires only. Pensions paid to current retirees and beneficiaries wouldn't be impacted, according to Councilman David Kinder, director of accounts and finance.

He pointed to the EIP, which states: "The city does not have the power or authority to diminish retroactively any rights or privileges of any present city employee in his pension."

However, Kinder agreed that potential reductions in overtime would temper future earnings for current employees, perhaps lowering the ceiling for future pension payments. If paid leave were reduced, there would be less to cash in upon retirement.

Part-time police?

City police officers earned a combined $143,912.83 above their base salaries in 2013, a figure that includes overtime and compensatory time, raising the average pay from $52,596.35 to $65,679.33.

Nearly half of the $68,246.73 spent on police overtime last year was reimbursed to the city through various law enforcement grants. That eases the burden in a single year's budget, but the overtime - whether it's reimbursed or not - is used in pension calculations.

The average base officer salary in 2014 is $52,232.94, a figure that dropped with the retirement of Griffiths.

Overtime paid to public works employees in 2013 totaled $11,013.22, raising last year's average AFSCME union salary to $40,282.89. The average base salary in 2014 is $43,718.38, attributed to contracted raises. The AFSCME contract expires at year's end.

Collective bargaining prevents part-timers from being hired for the police department, but Mayor William D. Milbrand wants that to change when a new contract is ratified. He believes it would not only reduce single-year expenses in salary, but prevent added spending on employee health care and, in the long run, pensions.

"The way to eliminate the overtime at this point is not to hire someone that we're going to have to spend more money on; it's going to be to hire part-time people," Milbrand said.

Kinder said he supports the mayor on the issue of part-time police officers.

The police contract expired on New Year's Day and negotiations have reached arbitration. A hearing was expected by Milbrand to be held May 1, but that didn't happen. He wasn't aware if any other hearings have been scheduled.

There are no plans to replace Griffiths with a full-timer. That drops to 10 the number of full-time police officers, including the new police chief, two of whom live within city limits. They have a combined 140 years on the job. A special officer is also on the payroll, but he is not a patrol officer with power of arrest.

The department had 14 full-time officers in 2008 before four retirements thinned the roster. Decreases in manpower have led to increases in officer overtime.

Newly promoted police chief Darwin Tobias III is hopeful a full-timer will be hired. The police union contract mandates a minimum of two officers each shift, and Tobias said "ideally on some shifts there should be three guys."

"They haven't replaced the last three officers who retired and I don't know what their intent is now that Griffiths retired," Tobias said.

He withheld comment on the issue of part-timers, citing the arbitration process.

'We can't afford it'

With a new contract pending, the union and the city are operating under terms of the old pact.

Those terms call for officers to be given compensatory time as follows for court appearances or in cases where an off-duty officer is required to be in court: two hours for district court hearings and eight hours when they're "on-call" for court appearance. One full vacation day is granted to an officer required to be in court on a scheduled vacation day.

Eight hours is given for a regular county court appearance, Tobias said.

Compensatory time can be used for time off work, but can also be cashed in at any time.

An arbitration ruling in 2002 upheld that unused compensatory time can be used when calculating employee pension upon retirement, Kinder said. He said the city is hoping through the current arbitration process to end that practice for all new hires.

"It has to be," he said of tossing compensatory time from pension calculations for new hires. "We can't afford it."

Other factors that impact employee pension funds include deaths, withdrawal and the aforementioned investment activity. Back-loaded income, however, continues to be a major factor on the city's pension plans, especially the police plan.