Nine months into new software system, Anchorage city government’s payroll problems persist

When the city of Anchorage began using a troubled, contentious new business software system last fall, employees flooded the payroll office with complaints about paycheck errors.

Nine months later, some employees are still missing pay — a situation that has led to mounting frustration among workers and labor unions, as well as breach-of-contract complaints that could result in hefty penalties. City officials blamed the delays in part on system defects.

The system, called SAP, has also accidentally overpaid roughly $1.8 million to employes since October, according to the latest data compiled by the administration of Mayor Ethan Berkowitz. The city has not yet recouped the money and doing so will be complicated, officials say.

The protracted issues with payroll are the most recent woes for SAP, an ambitious and massively complex project that began in 2012 under the administration of Mayor Dan Sullivan.

[Anchorage's new $80M software system still routinely screws up paychecks, unions say]

SAP was meant to be a sophisticated upgrade to the city's aging software for handling invoices, paychecks, budget and labor contracts and tax information. So far, however, the project has cost eight times the original budget and absorbed a stunning amount of city time and resources.

Union leaders say that while SAP was pitched as a way to improve efficiency, it's cumbersome and distracting from the actual work of the city since the city began using it last year.

Berkowitz, after taking office in mid-2015, decided not to abandon the project. His administration conducted a review and determined it was salvageable. By October 2017, the administration decided the system was ready to use, and SAP began issuing paychecks for the first time.

In the first month, the payroll office received more than 1,200 reports of errors, with some employees submitting more than one. The volume of corrections hovered around 1,000 in each of the next four months before dropping significantly in February, records show. Before the launch, the city was averaging roughly 60 pay corrections a month.

In May, the number of reported errors was 252, according to a presentation from city manager Bill Falsey at a recent Anchorage Assembly budget and finance committee meeting. That's still well above what it was before SAP was turned on, but Falsey said it's now more manageable.

"It cements that the worst is behind us," Falsey said. "The system is largely functioning, and we can deal with this level of corrections."

Falsey said payroll errors have affected only a small fraction of the $133 million paid out to employees since October. The city has very complicated pay rules, he said, which all have to be configured properly within the system.

Brandon Fifer, the vice president of the Anchorage Municipal Employees Union, said the city has made good progress working through the backlog of pay issues.

But he said there is increasing frustration that some union members still have not been paid properly. The fixes should have happened by now, Fifer said.

"We have a lot of people who live close to paycheck to paycheck," Fifer said. "Getting $200 left off their check by accident can cause severe damage to their economic wellbeing."

So far, the city has documented a total of about $2.8 million in underpayments to employees.

The union that is by far the most affected by paycheck errors is the Anchorage Police Department Employees Union, which represents roughly 500 police employees.

The union president, Brian Wilson, said he suspected that's because police have highly irregular schedules, such as responding to SWAT calls or homicides, which may be making it more complicated for the system to keep up.

Wilson said he expected problems after the launch. But he said he thought it would be mostly fixed by now.

The delays are a problem because of union contracts. The contracts have specific provisions to guard members from persistent paycheck problems. That includes penalties for every day a pay error isn't fixed.

So far, Falsey said the city has received 35 breach-of-contract complaints, known as "grievances," related to SAP. Some have been resolved, Falsey said, but others are still active.

The grievances could lead to giant penalties for the city. But union leaders say they want to be reasonable.

"AMEA is not interested in damaging the city — we love the city, we work here," Fifer said.

Fifter said the contract rules are meant to give the city motivation to fix problems quickly. In the end, he said the union would seek compensation or other concessions for employees who encountered problems because they weren't fully paid.

Wilson, the police union president, said his union is similarly focused on paying people what they're owed. He said he couldn't predict the extent of the penalties the city will have to pay his members later.

Meanwhile, the city is starting to recoup money that was accidentally overpaid to employees. The city is starting to work with 10 Anchorage police employees, Falsey said.

Getting back overpaid money isn't an easy thing. Money pools into different accounts, including retirement and pensions. Wilson, the head of the police union, said the union wants the city to provide explanations of how each employee was overpaid.

By August, Falsey said the city hopes the vast majority of pay corrections will be fully processed.

Editor's note: This story has been revised to clarify that while the city is expected to have to pay penalties to the Anchorage Police Department Employees Union as a result of SAP-related payroll errors, union president Brian Wilson said he couldn't yet predict the extent of the penalties.