Settlements over payroll error cost Municipality of Anchorage $16 million
Settlements involving nine bargaining units will cost the Municipality of Anchorage an estimated $16 million — a fraction of the total $2.7 billion liability created by several months of payroll errors.
The problems started with the roll-out of the controversial and long-troubled SAP software project in September 2017. The municipality experienced roughly 1,200 pay errors during the first pay period after the new accounting program went live, and continued to see that level of error for multiple months after that.
The majority of the errors represented employees getting underpaid, according to Jason Bockenstedt, the mayor's deputy chief of staff. And some of those errors went unaddressed for as long as 18 months.
"One of the priorities that we had, instead of trying to fix each individual person's problem, what we went about doing was we wanted to fix the underlying problem, so that it fixed everything going forward as well," Bockenstedt explained. "And that was a challenge because of the number of errors. It took a little bit longer than I think everyone wanted or hoped for, but I think we’ve really turned a corner and we’re at a point where, when there are errors, we’re at a point now where we can actually fix those relatively quickly."
The municipality's collective bargaining agreements with each of the unions include a built-in penalty for payroll errors that are not remedied by the next pay period. Those penalties, Bockenstedt explained, range from $25 per day every day, to eight hours of straight time pay daily until the issue is fixed.
While the total liability is estimated at $2.7 billion, Bockenstedt said all parties agreed that was not feasible.
"There was just no way, and I think everyone understood that there was just no way that the municipality would ever be able to pay a liability like that. So we worked, I think very well, with all of the unions to find a reasonable and fair settlement to a lot of these issues and I think that was reflected in the resolutions," Bockenstedt said.
He said roughly $17,000 of the $16 million settlements was paid out in cash, with the rest of it being paid out in non-cashable paid leave, giving employees additional vacation time.
In order to use the time off, however, employees will have to coordinate with their supervisors.
"All of them, especially in the public safety sector, have minimum staffing levels, so both our chief of police and chief of our fire department do have some say in terms of the number of folks that are able to go on vacation at any one time," Bockenstedt said.
Former Anchorage Mayor Dan Sullivan proposed SAP to the Assembly in 2011. With a timeline of 18 months and price tag of just under $10 million, the project was expected to save millions by automating several government programs, including payroll.
When Mayor Ethan Berkowitz took office in 2015, SAP was years overdue and millions of taxpayer dollars over budget. He halted the project to study it, but ultimately decided too much money had been invested already to change course.
The total price tag would be tens of millions of dollars higher than what was originally proposed, accompanied by unforeseen, costly errors resulting in the latest settlement.
However, Bockenstedt said the number of errors per pay period is close to the number of errors that existed prior to use of SAP.
"It does seem that we have turned a real corner in terms of making sure that people are paid correctly and on time," he said.
The terms of each union's grievance resolution can be viewed here:
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