The city of New Orleans’ 2014 budget will include an $8 million increase for workers’ compensation to reflect a spike in claims since 2012, Budget Director Cary Grant told the City Council’s budget committee on Thursday. But he and Courtney Bagneris, the city’s interim risk manager, did not explain a reason for the sudden increase, saying an audit is still in process.
Prior to 2012, workers’ compensation claims were typically under $17 million per year and didn’t significantly exceed what was budgeted, Grant said. In 2012, however, claims spiked to $22 million, well above the $15.6 million budgeted.
This year, Grant and Bagneris told council members, costs are projected to go up to $24 million, $8 million above the $16 million budget.
Over the years, “if it’s 17, 17, 17, 22, there’s something wrong,” Councilwoman Stacy Head said. “This extra $5 million is a shock to our system. … That would be three to four new recruit classes to NOPD. That would be a 50 percent increase in the NORD budget.”
Head noted that the spike corresponds with the city’s hiring of a new workers’ compensation contractor, Hammerman and Gainer Inc., at the beginning of 2012.
“It doesn’t seem like they’re doing a good job because they’re costing us $5 million more,” she said.
Bagneris responded that a forensic audit commissioned by the city in September would not be complete until the middle of October. She said she wants to be able to explain “all the components that caused that increase rather than just throwing willy-nilly answers at you.”
Councilwoman Jackie Clarkson said the committee plans to hold a special meeting on workers’ compensation once the audit is complete.
To account for the increase in claims, some departments originally faced a nearly six-fold increase — from $300 to $1,700 — in their budgeted per-employee expenses. Instead, the city will leave the per-employee costs the same and account for the added expense elsewhere in the budget.
Grant would not elaborate on where he moved the expense in the city’s overall budget, saying only that it won’t be part of departmental personnel costs.
Mayor Mitch Landrieu has yet to present his 2014 budget to the City Council; his budget address is scheduled for Oct. 15.
Head characterized the move as “a little artificial” because the city still must fit the extra $8 million expense into the overall budget.
“It seems that way to me too,” Grant said. “It just seems like some people didn’t want it to be $1,700.”