In 'retention bonuses,' Y2K bug still bites Monday, February 26, 2001

-------------------------------------------------------------------------------- By Harry Esteve of The Oregonian staff SALEM -- It was an obscure policy, tucked deep inside the state bureaucracy, but it paid hefty dividends to a select group of Oregon government agency managers.

Oregon Politics The latest news on political issues around Oregon. No one knows quite how much the state has paid in "retention bonuses" for managers who worked on fixing computer systems affected by the Y2K bug -- remember that scare? But the total goes well beyond $1 million in cash payouts.

In the Department of Human Services, 33 employees shared $853,828 in bonuses, ranging from $10,427 at the low end, to more than $40,000. The Department of Transportation gave a dozen managers just less than $300,000 in bonuses. The average was about $25,000.

Those were the two biggest departments to take advantage of the bonus policy. Others did as well, but no one has kept track of all the payments.

"Until we go back and do a review, I won't know how much was actually paid out," said Dan Kennedy, director of human resources for the Oregon Department of Administrative Services.

It was Kennedy's department that in 1998 came up with "Policy 20.005.30," which authorized the Y2K bonuses as a way to prevent employees with critical computer skills from bolting for better paying jobs in the private sector.

The payments, which were handed out at various times last year, weren't publicized. They came to light recently as other state employees learned of them and began questioning their size and those selected to get them.

According to the policy, department managers could give a bonus worth 20 percent of a manager's salary as long as the manager had a key role in a Y2K computer project and was considered at risk for leaving. The 20 percent could cover the life of the project, which typically exceeded one year.

Programmers left out Initially, the bonuses were to be offered to rank-and-file programmers as well as managers, but state administrators could not reach an agreement with the unions that covered the programmers. In the end, only management and exempt workers got bonuses.

"It's a little galling to hear the amount of money getting spent on managers when our people didn't get anything," said Paul McKenna, chief negotiator for the Oregon Public Employees Union. The union objected because there were no clear criteria for deciding who got a bonus and who didn't. Managers had too much discretion, he said.

He also questioned the need for the bonuses. Although there was some concern about a few people leaving, "public employees tend to stay put," McKenna said. "Retention problems were not as bad as they anticipated."

Kennedy and other state officials defended the bonuses as money well spent at a time when specific computer skills were in demand. The bonuses, they said, were only a small fraction of the $110 million the state paid to ensure its most important computer networks didn't go berserk when the calendar rolled over to 2000.

"It was a real open, pretty wild time," said John Cuddy, who oversaw Y2K projects for the Department of Human Services and received probably the largest bonus of $44,236. The press was full of stories about huge prices paid for computer de-buggers. The state didn't want to be left without skilled managers, he said.

"I avoid using the word 'bonus,' " Cuddy said. "This was to say to them, 'We realize your technical ability is at a premium during this period. If you'll stay with us and help us get past this thing, we'll pay you for it.' "

Rep. Jim Hill, R-Hillsboro, who chairs the House committee on Advancing E-Government, said he was in on the early discussions about the bonus policy. Hill said it was aimed at programmers with specific skills in COBOL computer code, who might leave, then return as private consultants for much higher rates of pay.

"This wasn't supposed to be just for managers," Hill said.

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-- Martin Thompson (mthom1927@aol.com), February 26, 2001