Anchorage payroll error settlements cost the city an estimated $16 million

After 18 months of payroll errors, the Municipality of Anchorage estimates the 2017 rollout of a new payroll software program left it with a $2.7 billion liability.

That liability is five times the city’s $540 million operating budget for 2020. So the city negotiated settlements with the nine bargaining units worth a collective $16 million, the bulk coming from additional paid leave, according to Jason Bockenstedt, the mayor’s deputy chief of staff. Bockenstedt shared the figures with the Anchorage Assembly in a work session Tuesday.

Nearly a year after many of the deals were signed, the city hadn’t made them public. When the Anchorage Daily News asked for the settlements, the city initially said the information wasn’t public record. Pressed by an attorney for the newspaper, the city released the settlements this week.

The newly released documents shed light on how the city was able to pay millions to put the issue to rest. The impact of payroll errors and resulting settlements ranged widely, from one employee receiving $100 to a unit of more than 500 getting a combined 222,000 hours of paid leave.

Each of the unions had penalties in their collective bargaining agreements to protect them from unfixed pay errors. However, the city’s 2,162 unionized employees would likely be out of jobs — and the city would go bankrupt — if they tried to collect the money they were technically owed.

The negotiations started with each unit based on when they filed their grievances. While most of the $16 million in settlements is in paid leave, it also includes about $17,000 in cash payments, and other fees according to Bockenstedt.

The city also paid about $200,000 in legal and other fees to two of the unions, according to Bockenstedt. Nearly all of the leave is non-cashable, meaning employees cannot be paid out cash in lieu of vacation time, and it has to be used before other types of leave.

[Payroll software settlement with Anchorage firefighters union costs city an estimated $2 million]

The Anchorage Assembly was first briefed on the settlements in a Tuesday work session.

Mayor Ethan Berkowitz inherited the SAP software system from former Mayor Dan Sullivan. The city had spent $45 million buying and implementing the software when Berkowitz took over, and he decided to stay the course.

“This was a problem not of our own doing. Not of our own choice,” Berkowitz told the Assembly during the work session. “We are not at fault here, but we are responsible.”

The payroll portion launched on Sept. 11, 2017, and immediately the city was bombarded with payroll errors.

After Bockenstedt summarized the settlements at the work session, Assemblyman John Weddleton asked what employees thought of the outcome.

“Is the sense among the employees that they kind of got cheated?" he said. "Two-point-seven-billion, and they got chump change. Are they pissed?”

“I think it probably would depend on who you talk to," Bockenstedt replied.

Here’s a breakdown of the individual agreements:

Anchorage Police Department Employees Association

• Members hired before Dec. 1, 2017 received 400 hours of paid leave.

• Members hired between Dec. 1, 2017 and June 1, 2017 received 160 hours of paid leave.

• Members hired after June 1, 2017 received 80 hours of paid leave.

• The union was paid $163,000 to cover legal fees and a forensic accountant.

The city’s largest union was also the most impacted. The Anchorage Police Department was subject to 35% to 40% of the total errors, according to Bockenstedt. Overall, its members got a collective 222,000 hours of paid leave in the settlement. The union estimates it’s worth a collective $11.2 million.

Anchorage Police Department Employees Association President Sgt. Jeremy Conkling said some of his members received thousands of dollars less than they were owed during some pay periods, while others got no money at all.

“It’s a big deal to expect a paycheck and then not get a paycheck and wonder like, ‘Okay, what the heck am I going to do now? How am I going to pay my rent, is my car going to get taken away? How do I get to work? How do I take my kids to school? Can I afford to go to Costco?’" Conkling said. “It’s a massive, massive load of stress.”

Going by the letter of the bargaining agreement, the city owed police union members about $2 billion. That, Conkling said, was never a figure the union considered trying to recoup.

“We’re not interested in bankrupting the Municipality of Anchorage, because that’s not good for anybody,” he said. “We have a responsibility to our citizens to use that money wisely and effectively.”

Conkling praised Mayor Ethan Berkowitz and his administration for how it worked to resolve the issue.

“When somebody who’s in a leadership position comes and takes ownership of something that isn’t their fault, but then is committed to fixing it as well, that went a long way with our folks,” he said.

Anchorage Municipal Employees Association

• 7,500 total hours of leave. The union currently has 483 members.

• Thirty employees received additional leave ranging from two to 279 hours.

International Association of Firefighters Local 1264

• 66,000 total hours of leave plus about $40,000 for legal fees. The union currently has 368 members.

International Brotherhood of Electrical Workers Local 1547

• 46,000 total hours of leave.

• Roughly 200 employees who had been with the union for more than a year when the settlement was finalized received 180 hours of leave. Newer employees received 80 hours of leave.

International Brotherhood of Electrical Workers Technicians

• One employee received a $100 cash settlement

International Union of Operating Engineers Local 302

• Ten employees received $750 and 40 hours of leave, for a total of 400 hours.

• Four employees received cash settlements worth about $1,000.

Plumbers & Pipefitters Local 367

• The union collectively received 16,500 hours of leave.

• The 70 employees who experienced the most payroll errors received 170 hours of leave each. The remaining 40 employees received 40 hours of leave each.

Public Employees Local 71

• Four employees each received $1,000 cash payments and 40 hours of leave.

Teamsters Local 959

• The teamsters did not file their grievance in time, and an arbiter ruled the city did not need to pay out a settlement to the union, Bockenstedt said.