Payroll system part of city’s $229M deficit

News of The City’s projected $229 million deficit has made headlines, but less attention has been paid to a plan by city officials to spend $41 million for a new high-tech payroll system.

Although the cost will be spread out over several years, next fiscal year $15 million of the project’s total cost is slated to come out of the general fund.

“This is $15 million that I could use to keep critical units at San Francisco General Hospital open and a whole host of other things,” said Board of Supervisors President Aaron Peskin, who recently refused to release $5 million for the project out of this year’s budget and told recently appointed Director of Human Resources Micki Callahan to start cutting project costs.

Callahan responded by saying that an overhaul of the existing system was needed, adding that wrongful payments have resulted in litigation and interest paid on late compensation. System failure could result in “all kinds of penalties,” she said.

Only eight months ago the project, known as Project eMerge, was estimated to cost a total of $20 million, but has now ballooned to as much as $41.2 million, according to a report by budget analyst Harvey Rose. The cost increase is partly due to a decision to increase the number of new employees — almost 30 — to work on the project, the report says.

The expense is “the cost of doing business,” Callahan said.

The City has thousands of job classifications, 28,000 employees and a payroll totaling about $2.6 billion, she said.

Peskin compared the project with a “gold-plated Cadillac with a lot of doo-dads” and told Callahan to come back to the committee after looking at ways to cut millions out of the project. “If we end up with a Ford Taurus, that would be just fine for the next 25 years,” he said.

Callahan is scheduled to appear Wednesday before the board committee. Deputy City Controller Monique Zmuda, whose office handles payroll, said that given the projected deficit, “the timing is horrible,” but a system upgrade has been put off for years because of lean budget years. “We’re just lucky it hasn’t crashed and failed,” she said.

The project, scheduled to be completed by June 2010, would create one human-resources system that would handle such matters as payroll, attendance, time sheets, performance and a searchable database of disasterservice workers or volunteers, according to documents.

jsabatini@examiner.com

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