More than 700 city of Houston employees are set to retire May 1 after accepting voluntary buyouts, city officials said Thursday.
Many of the positions will have to be backfilled, but Whitmire administration officials said they anticipate saving more than $24 million annually in general fund dollars – and $48 million total – from the reduced staff.
Those savings could balloon to $189 million if all 3,000 civilian employees eligible for retirement accept the buyouts, according to a presentation from the mayor’s deputy chief of staff and finance director.
That would not be enough to cover the projected $330 million general fund budget shortfall in the fiscal year that begins July 1, but it will help directors restructure their departments ahead of budget hearings, said Steven David, the mayor’s deputy chief of staff.
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The city normally sees about 400 retirements a year, David said.
“The expectation is we are going to have to do drastic changes in the way we run the city,” David told City Council members at a Thursday committee meeting.
The city has never faced such a budget deficit, he said. The administration chose to offer the buyouts and institute a hiring freeze for all departments, except police and fire, following the results of an efficiency study into city operations.
Mayor John Whitmire sent a letter offering a buyout to approximately 3,000 employees eligible for retirement on March 14.
If employees accept, they will retire normally, with an additional lump payment of 25 percent of their annual salary and an extension of their existing benefits for up to five years.
The administration outlined four scenarios to project potential savings depending on the percentage of eligible employees to accept the buyouts. Of those paid through the general fund, the city will save about $26 million annually if 25 percent accept the buyout; $52 million if 50 percent take it; $78 million if 75 percent agree, and $104 million if all eligible employees accept.
The savings increase when considering employees funded through enterprise funds and grants, but reducing those expenditures would not directly affect the deficit, which concerns the city’s general fund.
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Of the eligible employees, 15 percent are supervisors. David said a main concern of department directors has been a disruption of city services, but the extended time for the buyout will allow them to plan accordingly. He said he did not think any specific departments would be more affected than the others.
Sonia Rico, president of the Houston municipal workers union, said there was some confusion among workers when the city first offered the buyouts. Some directors presented the option as a layoff, she told committee members.
However, Rico said employees became more comfortable with the buyouts when they learned more. The members that have accepted are pleased to have the option, but others are not yet ready for retirement, she said.
Though the city has not offered buyouts before, Rico has advised union members that the mayor’s administration is not looking to make layoffs.
Instead, they are expecting demotions and changes in employee titles, Rico said.
David said during his presentation that after the restructuring, employees would be expected to work more efficiently. Some employees, he said, would be taking on more work without raises.
The Ernst and Young study confirmed the union’s suspicions that the city was “top heavy” with middle managers, Rico said.
The study found that approximately 40 percent of department managers supervise three or fewer employees because there was no existing path for high-performing workers to earn raises or promotions without taking on a managerial role.
Rico anticipated changes in responsibility predominantly would affect those managers with few direct reports, not the majority of workers.
“To be honest, we’re already overworked, so how much more work can we possibly do?” Rico said. “We’re short staffed already. So, at some point, something’s gonna have to give.”
Employees have until April 28 to accept the buyout.
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