Sizable sick leave payouts cost Minnesota county $2 million each year

(The Center Square) – Agreements that allow St. Louis County employees to accumulate and cash out their unused sick leave when they retire have led to several payments of more than $100,000 per person, according to The Center Square's review of those payments in recent years.

Combined with lesser payouts for unused vacation time, the northeast Minnesota county, which is among the geographically largest in the country and is the home of Duluth, has paid out more than $2 million to new retirees in each of the past four years.

The highest total was about $2.7 million in 2024. That year the county's total budget was about $500 million.

The high payouts are a vestige of past labor agreements with the handful of unions that represent the county's 1,850 employees.

"If you're maintaining an antiquated policy that's really kind of a leaky sieve in terms of generosity—and you're paying out some really excessive payouts in this kind of regard—that's by choice," said Leonard Gilroy, vice president of government reform for the Reason Foundation, a national Libertarian policy group.

More than a decade ago the county moved to curtail the amount of sick leave its employees can accumulate, said Jim Gottschald, the county's director of Human Resources.

"The accrual cap was 1,900 hours—almost a full year of employment," he said in an interview with The Center Square.

Sick leave payouts are common in Minnesota, whereas in other states the largest payouts are driven by accumulated vacation time, according to The Center Square's ongoing review of the payouts in all parts of the country.

In Wisconsin, for example, the state's vacation payouts to departing employees topped $6 million last year. The payouts have included $118,000 to a former prison warden who resigned amid death investigations at his prison that resulted in his criminal conviction.

Retirement payments are among the generous benefits public employers have historically used to compete with private companies that pay higher salaries, Gottschald said. But in the early 2010s the county moved to trim the sick leave payouts, which nearly led to a labor strike, he said.

The county wanted to reduce the 1,900-hour cap—which equals about 91 percent of a full year of work—to 1,350. A patchwork of labor agreements resulted. For instance, certain longtime employees kept the 1,900-hour limit whereas new hires were subject to the lower number. One union negotiated a 1,500-hour limit for all of its members.

Nearly all of the payouts are diverted into state-managed health savings accounts, where the money is earmarked for healthcare expenses. That has the benefit of eliminating payroll and income tax liabilities for the county and retiring employees.

"We are very thoughtful to the concessions our employees make to come to the public sector, because there's more money to be made in the private sector," Gottschald said. "St. Louis County is very sensitive to how all of this affects taxpayers of the county. ... One of the reasons we looked at reducing that cap is because of the expense of those payouts, from a property tax perspective."

Gilroy said the preferences of workers have shifted toward higher salaries and away from overly generous benefits, and that people seek government jobs "for a sense of purpose, not a pension."

The new lower payout limits have yet to take full effect because of the longtime employees who kept the 1,900-hour limit. More than two dozen retiring employees were paid for that amount in the past four years.

Had the lower limits been in effect for all employees, it would have reduced the county's payouts by at least $670,000 for those years, according to The Center Square's analysis.

Biggest payouts

More than 80 of the payouts to retiring St. Louis County employees topped $50,000 in the past four years, and more than a dozen eclipsed $100,000. Those were combined payments for unused sick leave and vacation time, which is often capped at 270 hours.

The hours are paid out at the hourly rate the employees earned at their retirement. That means that even though most of the hours were accumulated when the employees earned less earlier in their careers, they are often paid out at the highest wage the employee earned.

The top payouts in the past four years include:

- About $140,000 to John Ongaro in 2024. His annual pay as intergovernmental relations director was about $138,000.

- About $133,000 to Danny Bergerson in 2025. His annual pay as an information technology manager was about $127,000.

- About $128,000 to Todd Abernethy in 2025. His annual pay as lieutenant deputy sheriff was about $125,000.

- About $117,000 to Janet Nilsen in 2024. Her annual pay as business manager was about $121,000.

- About $116,000 to David Rolland in 2023. His annual pay as lieutenant deputy sheriff was about $114,000.

The payouts are meant to benefit retiring workers. Deborah Kramar, a social worker for the county for 23 years, did not get a sick-leave payout when she was fired in December 2024, county records show.

The records indicate her employment was terminated because she "failed to comply with (the) conditions of supervised probation and (a) last chance agreement concerning consumption of alcohol." No further details were immediately available.

The county paid her about $15,000 for unused vacation. She died in February 2025.