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Lawmakers act on KING 5 investigation into ferry system spending spree

A close examination of five-years of Washington State Ferries financial data shows that budget savings claimed by agency leaders were not achieved.

Lawmakers are considering new legislation following the latest KING 5 investigation on Washington State Ferries (WSF).

On Wednesday the Senate Labor, Commerce and Sports Committee held a fact finding hearing in Olympia in response to the report based on an analysis of five years of WSF financial data obtained through a request for public records.

Despite pledges from transportation officials that the cash-strapped ferry system was cutting out excessive forms of compensation for many of its workers and saving millions of tax dollars in the process, the KING investigation showed WSF has been spending more on labor costs every year since 2012.

Sen. Michael Baumgartner, R-Spokane, is chair of the committee and called for the hearing. Baumgartner said the most troubling portion of the report centered on how types of compensation that were eliminated by the legislature and WSF management were quietly added back on, which led to the soaring labor costs.

"When we saw the information (on TV) there were a lot of people saying 'Wow, this is concerning. Let's see what's going on here,'" said Baumgartner.

The benefits were tacked back on through collective bargaining between labor unions and the state, led by representatives of the governor's office. In the state of Washington the governor's Labor Relations Office (LRO) is charged with leading the talks.

Two former WSF negotiators told KING the process was "frustrating" because LRO negotiators didn't seem interested in protecting the interests of the taxpayer, but rather the unions.

"It was so frustrating because we would actually have more dispute within our team of LRO and Washington state ferries management at the time trying to make the changes than we actually did with the unions at the table. LRO in my opinion was running interference with the unions," said former WSF operations director Steve Rodgers, who testified at the fact finding hearing.

Baumgartner said he plans to introduce legislation that would make negotiating contracts more of an open process in the future. He cited a conflict of interest in the current protocol as labor unions are perennial supporters of the governor.

"I would like to see the legislature involved as the people's elected representatives involved in the negotiating process. It shouldn't be just about the governor and the unions. It should be part of the legislative process," said Baumgartner. "Doing that would increase transparency and take away the perception of a conflict of interest."

Read Susannah Frame's story from last week:

A close examination of five-years of Washington State Ferries financial data shows that budget savings claimed by agency leaders were not achieved.

Last fall, in the course of reporting on WSF’s proposal for pay hikes of 25 and 28 percent for some skilled ferry workers, WSF Director Lynne Griffith and her team of managers touted the successes of ferry system reforms implemented in the wake of KING’s 2010 “Waste on the Water” series. Griffith said WSF is now a more efficient agency that had saved millions of dollars in labor costs and that system leadership was dedicated to “managing the overtime.”

An analysis of collective bargaining agreements and financial documents generated by the governor’s budget office, Washington State Office of Financial Management (OFM), found promised reforms did not materialize.

But an analysis of WSF’s budget found few real reforms were implemented and little or no savings accrued. WSF data showed labor costs soared from a total of $95 million in 2012 to $113 million in 2015.

“When you have a public agency saying they’re going to reform the agency and save money and then they find ways to pay themselves back, that is dishonest, and it makes it very difficult for the public to trust officials,” said Mariya Frost, director of the Coles Center for Transportation at the Washington Policy Center, a conservative think tank based in Olympia. “This information comes to us (from KING) at a time when we are told every year that we are in a funding transportation crisis."

Washington State Department of Transportation leaders declared a new way of doing business in 2011, after suffering a public bruising the year prior, when the KING 5 Investigators aired a multi-part series, “Waste on the Water." The series exposed millions of wasted tax dollars, mostly by management sanctioned perks such as paying some office workers to drive to and from work and employees gaming the system to pad their paychecks while managers looked the other way.

“By God the ferry system needs help. It can’t operate on the funding it has. We must all do everything we can, and yes that means employees giving up on some of the benefits and compensation they have,” said Paula Hammond, Secretary of the Washington State Dept. of Transportation in 2010 in response to “Waste on the Water” reports. Hammond has since retired.

An analysis of collective bargaining agreements and financial documents generated by the governor’s budget office (the Washington State Office of Financial Management, or OFM), found promised reforms did not materialize.

WSF did implement changes it said would eliminate the excessive payments to employees, but in the years since, the state quietly tacked on additional forms of compensation that boosted ferry workers’ pay, leading to the multi-million dollar increase in labor compensation.

“They kept that in the dark,” said Frost.

How did the expenses skyrocket when Washington State Ferries was supposed to be cutting back? For example, ferry workers historically earned double-time for overtime hours. After “Waste on the Water,” the legislature lowered that rate to time-and-a-half to achieve parity with other state employees.

In 2011 the Legislature’s Joint Transportation Committee sought reforms to “eliminate waste, improve efficiency and establish parity with other state employee contracts,” wrote members of the committee in an overview fact sheet.

Behind closed doors in contract negotiations, ferry workers got that money right back with something new: call-back pay. A better name for it would be “double time,” and records show it has cost taxpayers over $3 million in the last five years.

Steve Rodgers, the former WSF director of operations, sat on the bargaining team for the ferries for ten years. Now retired, he said it was “frustrating” and difficult to negotiate in the best interest of the citizens of the state of Washington with representatives from the governor’s office and the OFM Office of Labor Relations leading the bargaining sessions. Rodgers and another WSF employee with firsthand knowledge of the talks said the governor’s representatives seemed most interested in currying favor with unions, perennial political donors to politicians like Gregoire and Inslee.

“I told them basically this is hiding the ball from the public and it will end up costing us more, which it did,” said Rodgers. “The result was that we basically put some sand over it so it looks different.”

In a written statement, a representative of OFM said their work centers on providing the best service possible to the citizens.

“In negotiating on behalf of the state, the Office of Financial Management’s labor relations team strives to reach agreements that enable state agencies and employees to provide the best possible service to the citizens of Washington. At the same time, we recognize the importance of reaching agreements that use taxpayer dollars wisely,” said Franklin Plaistowe, assistant director, State Human Resources Division at OFM. “While many of the terms of current and past contracts with WSF bargaining units are the result of negotiated agreements, others are the result of decisions made by independent arbitrators.”

In 2014 the Washington State Department of Transportation (WSDOT) ushered in new ferry management. Asst. Secretary Lynne Griffith declared a new day on the water.

“A lot has changed, a significant amount has changed. We have new leadership in place. We are managing the overtime,” said Griffith in November.

But financial data obtained from WSDOT shows under Griffith’s leadership the overtime ballooned. In 2014 the total overtime expense was $6.6 million. The following year, on her watch, it increased to more than $8 million.

“It is totally acceptable for people to work hard and be compensated for their hard work. The issue here is how that compensation was acquired. That’s the issue,” said Frost of the Washington Policy Center.

Arguably the most controversial WSF policy revealed in “Waste on the Water” involved travel time pay, through which some fill-in (relief) workers were able to double their salaries by bidding jobs long distances from their home ports. Then the state paid them for driving to and from their personally chosen assignments.

Last November, Griffith said travel time was a thing of the past that resulted in millions of dollars in savings.

“From 2011 to 2017 travel time savings totaled approximately $10.3 million which has helped offset other expenses in newer contracts,” said WSF Communications Director Ian Sterling.

This is what ferries managers didn’t say. In union negotiations, travel time pay was replaced by a new form of compensation called assignment pay. Assignment pay results in a 20 percent pay boost for relief workers every day they work whether they drive 5 miles or 50 miles to report for duty. While travel time went down, assignment pay went up. An analysis of the records showed assignment pay cost $7 million between years 2011 and 2015.

The number is expected to increase significantly as the latest round of labor negotiations calls for awarding relief workers additional hours of assignment pay. Moving forward, relief workers will earn assignment pay while on sick leave, vacation, or during holidays – times when they are not working, let alone driving on behalf of the state.

When asked why ferry management reported a $10 million savings in travel time, State Ferries did not answer the question.

“Washington State Ferries is proud of our employees and of their hard work and dedication in the face of steadily growing ridership and an aging fleet. They safely moved 24 million passengers last year. Much like the rest of the maritime industry, we are faced with a shortage of qualified mariners who can generally earn more working for private maritime companies that also conduct business in Puget Sound,” wrote Sterling in a statement.

This week both State Ferries and OFM said assignment pay is not intended to make up for lost travel time pay, but to compensate relief workers for maintaining a host of specialized skills including, Sterling wrote, “familiarization on multiple classes of vessels and/or routes (and) knowledge of system waterways including currents, tides, weather conditions and the effects on routes.”

OFM’s Plaistowe told KING: “Relief employees are assigned throughout the system as needed and are therefore required to maintain expertise on multiple classes of vessels and routes. The assignment pay replaced the prior travel pay practices, which were widely believed to be subject to manipulation and abuse.”

One of Griffith’s final decisions before retiring in January was to propose wage increases of between 25 and 28 percent for approximately 50 ferry workers with job titles of staff chief engineer and staff master (captains). Those raises have been approved by the legislature and will cost the state an additional $1.2 million a year. They come at a time when the ferry system continues to face budget challenges, and riders are being asked to pay more. Peak season fares went into effect May 1.

Griffith appeared insulted when asked if it was responsible management to propose the hefty pay increases when the ferry system is consistently strapped for cash.

“Since I’ve been here, we’re not crying broke. I don’t know where that comes from,” said Griffith.

But Griffith’s argument was undermined by an internal WSF document obtained by the KING 5 Investigators dated July 13, 2016, in which the authors described the agency’s financial status as a “serious situation.”

The 2016 document outlines how State Ferries quietly asked the legislature for $6.6 million in additional funding because the agency had overspent its budget. The greatest expense projection was $2.2 million to add staff on several boats to help count passengers.

“This is a serious situation. WSF does not have the budget to sustain the operating program through the end of the biennium and deliver the services that the governor, Legislature and public expect,” wrote authors of the document.

Griffith agreed to the passenger counting staff additions before being granted the fiscal authority to do so. State Ferries said that happened because the Coast Guard had expressed concern about the accuracy of WSF passenger counts.

“In an effort to immediately comply with our federal regulator we added staff to our two multi-destination routes. This was not pre-approved as you note and WSF absorbed the cost. Leadership felt the situation warranted an immediate response to the Coast Guard’s concerns,” wrote Sterling.

The state granted WSF $1.2 million in additional funding. With a multi-million dollar shortfall still to be dealt with, the additional passenger counting activity was suspended. Other ideas to save money outlined in the document included reducing some terminal maintenance and a reduction in service on routes including Bremerton, Port Townsend, and Mukilteo. Service reductions were not implemented.

“Any of our available options have political and public consequences. The options outlined below can be taken independently or in combination with one another,” wrote authors of the budget document.

“It’s very easy to think that certain things are totally acceptable and affordable when it’s not your money,” said Frost.

Related: Read WSF entire statement to KING 5

Related: Read OFM entire statement to KING 5