City Plan to Issue $1.1 Million in Employee Bonuses May Be Unlawful

Jul 28, 2017

Credit KBIA

A city of Columbia plan to hand all employees a bonus next year may violate the Missouri Constitution, according to information provided by the Missouri State Auditor's Office.

City Manager Mike Matthes announced last week he plans as part of the 2018 budget to give all city employees a $1,000 bonus, which would cost the local government $1.1 million. But those one-time incentive payments may run afoul of state law — mirroring a violation Missouri State Auditor Nicole Galloway uncovered during a University of Missouri System audit earlier this year.

When informed of the city plan, Gena Terlizzi, spokeswoman for the Auditor's Office, directed reporters to a PolitiFact fact check done by the Missourian on the issue. The fact check explains that only in rare situations are government bonus payments acceptable. Galloway is traveling this week and was unavailable for comment.

Bonus payments for government employees are allowed only if the bonus is specifically outlined in an employment contract and is contingent on the employee reaching a measurable goal, according to previous Missourian reporting. Furthermore, giving additional one-time compensation to all employees or rewarding employees merely for being on the payroll is not allowed.

Matthes proposed additional compensation not contingent on employees meeting any measurable goal. 

In a tweet on Thursday, Matthes said he would not call the one-time payment to employees a "bonus" because it is "not a reward for past work." In responses to reporters, city officials drew a distinction between whether the one-time payment is a reward for past work or incentive for future work.

Matthes' clarification on Thursday does not mesh with what he said during his budget announcement. Last week, he said the one-time payment was thanks for employees' past work.

"It is a one-time payment to really just say thank you for this work, and to recognize that we can't afford an actual raise but here is something," Matthes said when he announced the $1,000 payments.

Matthes said that when he made his comments at the budget address, he was "trying to point out we're asking folks to do more, with less staff and no raise." He said the one-time payment was "future focused."

City Counselor Nancy Thompson did not respond to messages earlier this week seeking comment.

Extra payment to government employees or contractors after a service is rendered is unlawful, according to Article III, Section 39 of the Missouri Constitution. Attorney General's Opinion No. 72-1955 further clarifies that the law applies to all government agencies in Missouri.

Terlizzi said bonus pay by municipal governments is a common problem and pointed to several audits the state performed the past few years as examples. The UM System audit uncovered roughly $2.3 million in inappropriate bonuses for top executives and administrators, according to the audit report released earlier this year.

In an email, city spokesman Steve Sapp pushed back against the notion the city may have proposed something unlawful. Sapp stressed that city employees work hard, but there is no money in the budget to give them permanent raises.

Sapp said the proposal doesn't call for bonuses; they are instead a “one-time salary enhancement.” The city gave similar one-time pay increases to employees in 2003, he said.

The city's full statement is as follows:

“City of Columbia employees go above and beyond each day to serve our community. Citizen satisfaction with the service provided by City employees is much higher than regional and national averages. Unfortunately, given the lack of revenue and cost increases in pensions and health care, funding is not available to offer a permanent pay raise to City employees in fiscal year (FY) 2018. Employee and dependent health care rates increased 13.8 percent in FY 2017 and are rising another 7 percent in FY 2018. These cost increases are shared by the City and its employees. It should be noted that pay increases have been small or non-existent since 2009.

"The lack of funding for ongoing employee salary increases in FY 2018 is discouraging when all service lines of City government are currently 30 percent understaffed while City employees continue to produce industry-leading service levels. The City grows more concerned each day with declining employee morale and rising turnover rates. For the FY 2018 budget, City Manager Mike Matthes has asked that City Council provide employees a one-time lump sum prospective salary enhancement of $1,000 gross (less normal payroll withholdings) to each permanent employee. This one-time salary enhancement is not a bonus — it is a one-time, across the board increase in compensation for FY 2018 which will not be carried over into future fiscal years. A similar program with a one-time payment was previously done by the City in November of 2003.”

Supervising editor is Elizabeth Brixey.